Opening up the corner office is fine, but will the government be able to attract talent without giving a market-rate salary?, asks Tamal Bandyopadhyay.
In April 2015, the Department of Financial Services (DFS), ministry of finance, invited applications for the post of managing director and chief operating officer (MD & CEO) for five large public sector banks (PSBs): Bank of Baroda, Bank of India, Canara Bank, IDBI Bank Ltd, and Punjab National Bank.
The eligibility criteria included 'ability, integrity and standing with knowledge and experience in banking', 'proven management, leadership and innovative skills to build and inspire team' and 'experience in institutional development in banking sector'.
The candidates, in the 45 to 57 age group, needed to have at least 15 years of banking experience with a minimum one-year of exposure to the board. They were offered a three-year tenure, subject to 'normal age of superannuation of 60 years'.
This is the first instance of the finance ministry opening the door for the top jobs in PSBs to the private sector.
On August 24, 2015, the names of the successful candidates were announced after a three-stage screening and a series of final interviews by three different panels.
Two of them were picked up from the private sector: P S Jayakumar for Bank of Baroda, and Rakesh Sharma for Canara Bank.
Jayakumar had worked at Citibank NA and also served as MD & CEO of VBHC Value Home Pvt Ltd. Sharma, originally from the State Bank of India (SBI), had served as CEO & MD of the erstwhile Lakshmi Vilas Bank Ltd before taking up this assignment.
Sharma joined Canara Bank on September 11, 2015 and called it a day on July 31, 2018. Jayakumar joined Bank of Baroda on October 13, 2015. His three-year term was extended by another year, till October 12, 2019.
Incidentally, the 'open' appointment experiment was shut after one round.
Just two days after announcing the appointments, on August 16, 2015, then financial services secretary Hasmukh Adhia told PTI, 'For five large banks, we had different procedures. For the remaining banks, we are going to hire from the pool of executive directors of the public sector banks itself ...
'The eligibility criteria for the remaining bank vacancies have been approved and that is only for competition within the system. For remaining banks, there would be a normal procedure of selection from among the pool of executive directors.'
Also, although the advertisement had mentioned that 'the salary package payment to the appointees will be flexible', that never happened.
Fast forward to October 4, 2025. The Appointments Committee of the Cabinet revised the guidelines for the selections of wholetime directors of public sector banks, superseding all earlier norms.
Under the new guidelines, private sector candidates can apply for one of the four MD positions at SBI.
For the other three, only public sector bankers can apply. They could be internal candidates or executive directors (EDs) and MD & CEO of nationalised banks.
After a decade, the government has also opened the doors to the private sector for the top jobs in PSBs.
The candidates must have 21 years of experience with at least 15 years in banking, of which two have to be at the board level or three at just below that level.
The selection process will involve 'open' advertisement, both from private and public sector candidates.
What's more, the government is opening up at least one ED position at large nationalised banks with at least Rs 10 trillion worth of business for the private sector.
Bank of Baroda, Punjab National Bank, Bank of India, Union Bank of India, and Canara Bank belong to this category.
Each of them can have four EDs, of which one can now be from the private sector.
This time, the notification has made it clear that all terms and conditions, including the 'salary package' for such positions, will be decided by the central government, from time to time.
This is the most critical part of liberalisation in the appointment process for the top jobs in PSBs which have, of late, been outpacing their private peers in business growth.
Opening up the corner office is fine, but will the government be able to attract talent without giving a market-rate salary?
Pride and purpose drive the homegrown leaders in PSBs, but are these enough to draw top banking professionals to such jobs?
Historically, there have been many instances of public sector bankers heading private banks - from setting them up (when India opened up the sector in the 1990s) to managing crises (there are many recent instances), but so far there are just two examples of private sector professionals leading public sector banks.
Compensation apart, another critical aspect is culture -- which, at times, assumes more importance than money.
It's not easy for an outsider to embrace it.
Why would a banker's payscale be linked to that of a bureaucrat? After all, their jobs are very different.
A bureaucrat is involved in making policies for the public, while a banker deals with public money.
There is something called risk-reward ratio. It's just not a trading term; compensations for professionals also factor this in.
The SBI chairman is entitled to level 17 payscale -- equivalent to an IAS officer of the rank of secretary in a ministry.
On the basis of the Seventh Pay Commission, level 17 has a fixed pay of Rs 2.25 lakh per month, with a few other benefits.
The chairman of Life Insurance Corporation of India also earns the same salary.
The salary of MD & CEO of other banks and MDs of SBI belong to level 16 -- equivalent to an additional secretary's.
Here, the salary is Rs 205,400-Rs 224,400 per month plus all other allowances and perquisites.
On top of their salary, senior PSB executives get bonuses on the basis of performance.
Earlier, each bank used to sign a memorandum of understanding with the DFS, making certain commitments on performance; their bonus was based on their performance.
In November 2014, the DFS introduced a new performance-linked incentive (PLI) for wholetime directors and senior executives of PSBs.
The maximum PLI is fixed at 100 per cent of the basic pay.
I understand that bank unions have strong reservations about the latest PLI, meant for senior bank officers (Scale IV or chief manager and above).
They argue that the scheme deviates from the bilaterally agreed-upon PLI framework that applies to all bank employees and officers.
The conciliation proceedings with the Chief Labour Commissioner (Central) is still on, and the government has not implemented it yet.
Yes, most top public sector bankers live in lovely houses and have chauffeur-driven cars at their disposal, but can such perks be a substitute for money?
Even if we assess their perks and other benefits, the overall cost to the company is far lower than what the MD & CEO of a private bank earns, even if their business is much smaller.
Most private bankers deserve that. And, all PSB chiefs deserve more.
Opening the top jobs for private candidates is the beginning of reforms. Delinking bankers' salary from the IAS should be the next logical step.
PS: Incidentally, there is another set of institutions such as National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, Exim Bank, National Housing Bank, Infrastructure Finance Company Ltd and National Bank for Financing Infrastructure and Development.
They are engaged in the development and financing of agriculture, micro, small and medium enterprises, exports, housing, and infrastructure.
The guidelines for the selection of whole-time directors are different for different entities. For some institutions, the maximum entry age is 57, for others 55.
Shouldn't these be uniform on the lines of public sector banks?
Feature Presentation: Aslam Hunani/Rediff
