Key points from the central bank's notification:
- A minimum of 50 percent of the salary of a chief executive officer (CEO) must be variable pay that is linked to performance.
- If the variable pay exceeds 200 percent, then 67 percent of the compensation will have to be in the form of non-cash instruments. If the figure is up to 200 percent, then the requirement is 50 percent.
- The total variable pay for bank chiefs is now capped at 300 percent of the fixed salary.
- In case of “subdued or negative financial performance of the bank”, deferred compensation must be subject to malus/clawback arrangements
- The clawback clause will also apply if the provision for non-performing assets or divergence in bad loan classification exceeds the stipulated threshold
- For senior executives including WTDs, at least 60 percent of the total variable pay must be under deferral arrangements.
- Guaranteed bonus should not be a part of the compensation plan and should only be given in the context of joining/sign-on bonus.
