The way has now been cleared for people joining the boards of various banks as non-executive directors to get higher payments. RBI has increased the limit of remuneration of non-executive directors of banks.
Earlier the limit was up to Rs 20 lakh
According to the latest update of the Reserve Bank, banks will now increase the limit of remuneration of their non-executive directors. Up to Rs 30 lakh can be given annually to the executive director. Earlier there was a limit of Rs 20 lakh for this. The Reserve Bank said that the boards of banks can fix remuneration in the range of up to Rs 30 lakh depending on the size of the bank, experience of the non-executive director and other factors.
Banks will have to adjust the remuneration. Disclosure
Banks will have to disclose the remuneration of their non-executive directors in their annual financial statements. Private sector banks will need to obtain regulatory approval for the remuneration of part-time chairman. All banks will set standards regarding remuneration of non-executive directors on their boards. If any change is made in the remuneration of an existing non-executive director, then the approval of the board will also be required.
Instructions will be applicable to such banks
Reserve Bank said. That these instructions will be applicable to all private sector banks including small finance banks (SFBs) and payments banks. Wholly owned subsidiaries of foreign banks will also have to follow these instructions. The Central Bank said that these instructions have come into effect with immediate effect.
Reserve Bank increased the limit for this reason
The role of non-executive directors is very important in all banks. . They are necessary for the proper functioning of various committees including the boards of banks. Non-executive directors also have an impact on the corporate governance of banks. The Reserve Bank said that considering their important role, it is necessary that talented people come forward, that is why it has been decided to increase the limit of remuneration.
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