Mumbai: In a bid to attract professional talent, the RBI Monday allowed private sector banks to pay up to Rs 10 lakh per annum as compensation to non-executive directors besides sitting fee for attending board meetings.
It has asked private banks to prepare a comprehensive compensation policy for non-executive directors other than part-time non-executive chairman.
"Such compensation, however, shall not exceed Rs 1 million (Rs 10 lakh) per annum for each director," RBI said in its guidelines on compensation of non-executive directors of private sector banks.
"The board may, at its discretion, provide for in the policy, payment of compensation in the form of profit related commission to the non-executive directors (other than the part-time chairman), subject to the bank making profits," it said.
The guidelines noted that there is a need to bring in professionalism to the boards of banks.
"In order to enable banks to attract and retain professional directors, it is essential that such directors are appropriately compensated.
At present, banks in private sector pay only sitting fees to non-executive directors, and no other remuneration is paid to them," it said.
The part-time chairman, however, is being paid a fixed remuneration with the approval of RBI, it added.
"Banks are required to make disclosure on remuneration paid to the directors on an annual basis at the minimum, in their annual financial statements," it said.
