Bank’s Non-Executive Directors Remuneration Increased by RBI

The Reserve Bank of India (RBI) has raised the remuneration ceiling for Non-Executive Directors of banks up to 30 lakh rupees per year from 20 lakh annually previously. Revisions to the cap will become effective immediately. These norms apply to private banks, as well as small finance banks, payment banks, and wholly owned subsidiaries of foreign banks.

As the RBI announced on Friday, the revision was made to take into account the importance of Non-Executive Directors to the efficiency of bank boards. Furthermore, it is intended to enable banks to recruit competent and qualified individuals to their Boards.

A bank’s Non-Executive Directors must be paid based on appropriate criteria with the Board’s approval before any changes are made to the current compensation. Depending on the size of the bank and the experience of the Non-Executive Directors, the Board of Directors may set a lower amount within the Rs 30 lakh limit per year. According to bank regulation norms, a part-time chairman’s compensation needs to be approved by regulatory authorities.

The notification mandates that banks must annually disclose remuneration payments to Directors at a minimum in their annual financial statements.