MUMBAI: Reserve Bank of India Governor, Dr D Subbarao on Tuesday made out a strong case for revisiting the compensation of chief executive officers and top executives of the Public Sector Banks to avoid the flight of talent towards the private sector.

In his inaugural address to the FICCI-IBA banking conference ‘Global Banking: Paradigm Shift’, Dr Subbarao said “there is a good reason to revisit the compensation of the PSU executives on a comprehensive basis.”
If not, the PSUs might lose talent to the private sector banks, he added.
He said compensation of nearly 70 per cent of the top executives comes under the public sector banks and they were governed by the rules and procedures laid down by the government which held majority stake.
RBI need to tackle the compensation issues of the private sector and other foreign banks and local areas banks which account for 30 per cent, he said, adding that while for the private banks are guided by the size of the bank, for foreign banks most of the time the central bank relied on the guidance of their multinational banks.
Referring to the implementation of Basel III norms in India, he said though it will be a challenge, public sector banks should not anticipate any problem in building capital buffers as they would be adequately capitalised by the government which held majority stake. Impact of Basel II will be different on different banks.  He said calibration of the standards and their phasing in so as not to impede recovery was the main concern of the international banking sector. Banks apprehend that they could not use capital buffers in the event of a downturn.
He said challenge on delivering on the promise for the next decade for Indian banks would be “think global and act local”.