Tuesday, January 18, 2011

NRB working to relax salary cap provisions

REPUBLICA

KATHMANDU, Jan 18: Nepal Rastra Bank (NRB) has initiated exercises to revise guidelines that capped salary of chief executives of banks and financial institutions (BFIs), aiming to relax provisions for financial institutions of B, C and D categories.

“We are working on different possible indicators to create a new base for salary cap for BFIs of different scale,” a senior NRB official told Republica on Monday.

The official, who disclosed that NRB was mulling over announcing the revision during the mid-term evaluation of this year´s Monetary Policy, stated that the new amendment will set different parameters to cap salary of chief executives, particularly of financial institutions operating at national, regional and district level.

The official stated that the new amendment will mainly relax the provisions for district and regional-level development banks and finance companies. CEOs of banks and national-level development banks, however, might find the provisions remaining the same for them.

NRB had imposed cap on perks and benefits for CEOs on Nov 27. The central bank has asked BFIs to limit the annual salary and allowances of CEOs to less than 5 percent of the average staff expenses incurred over the previous three fiscal years or less than 0.025 percent of their total assets at the end of the previous fiscal year, whichever is lower.

Likewise, BFIs have been allowed to cover the bill of just one telephone or cell phone of CEOs. It has also set a cap on the cost of vehicles that BFIs provide to their chief executives at 50 percent or less than that of their annual salary. The guidelines also bar BFIs from providing another vehicle to a CEO throughout his term, even in case of renewal of his or her term.

The central bank had issued the guidelines mainly because bank promoters, lawmakers as well as experts asked it to check the current practice of paying huge amount in perks and benefits to the head honchos even if the financial condition of the BFI concerned is not very sound.

The announcement had drawn instant flak from the bankers and associations of bankers, development bankers and finance companies.

The revision was mooted mainly as the guidelines forced finance companies to cap the salary of their new CEOs at as low at Rs 12,500 per month. In case of district-level development banks too, the guidelines capped the salary of the new CEOs at as low as Rs 20,000 per month.

“The blanket imposition of same bases to all BFIs was a mistake. We will now revise it,” the official said, referring to unintended panic the guidelines created in the smaller financial institutions.

As for the possible new indicators, the central bank officials are discussing on inclusion of profit for creating a new base.

No comments:

Post a Comment