Page 9 - Banking Finance December 2019

RBI CORNER

RESERVE BANK

NEWS
NEWS
NEWS
NEWS
NEWS

Bank executives’ bo- RBI experiences fall in consumption
nuses capped by RBI A survey by RBI has sharply cut the forecast of real private final consumption
expenditure (PFCE) growth, reflecting lower house-
As per RBI’s new rule, top executives hold demand as indicated by moderation in the pro-
in banks will have to receive half duction of consumer durables. The forecast of real
their salary in the form of variable
PFCE growth has been revised sharply down by 250
pay which will be linked to their basis points from 8% in the May 2019 round of the
bank’s performance. The variable RBI’s survey of professional forecasters to 5.5% in
pay itself will be capped at 300% of the September 2019 round.
the fixed pay and will include equity
compensation. The inclusion of equity In this regard, the RBI’s latest monthly bulletin also referred to capital goods
in variable pay and the cap on vari- production declining by around 8% in the April-August 2019 period. PFCE, how-
able pay would mean that bonuses ever, is expected to improve to 7% during 2020-21, per the latest survey. The
will be limited, and will include non- PFCE growth forecast has been pared from 8.1% in the March 2019 survey to
cash compensation. 8% in the May 2019 survey to 7.6% in the July 2019 survey.
The new guidelines announced by PFCE, according to the Ministry of Statistics and Programme Implementation,
the central bank will be effective includes final consumption expenditure of households and non-profit institutions
from April 1, 2020. These guidelines serving households like temples and gurdwaras.
apply to private sector banks, local
area banks, small finance banks and RBI charged SBM Bank's India branch for non-compli-
payment banks. They will also apply ance
to multinational banks that have in-
The RBI has recently levied a Rs 3 crore penalty on SBM Bank(India) for non-
corporated locally as wholly owned
subsidiaries. compliance of regulatory norms by SBM Bank (Mauritius),
which amalgamated with the former in November 2018.
Besides chief executives, the restric-
tion on salaries will apply to senior The penalty has been imposed for non-compliance by
executives, including whole-time di- SBM Bank (Mauritius) with certain provisions of direc-
rectors, and other employees who tions issued by the central bank on 'Time-bound imple-
are risk-takers such as bond traders. mentation and strengthening of SWIFT - related operational controls' and 'Cyber
RBI has said that if bonuses are paid Security Framework in Banks', according to RBI’s statement.
in cash, at least half of the cash bo- A scrutiny was carried out by RBI to examine the implementation of SWIFT re-
nus should be deferred if the total lated operational controls in SBM Bank (Mauritius) at its Indian operations, and
amount is over Rs 25 lakh. it was observed that it failed to comply with certain provisions, the RBI stated.

BANKING FINANCE | DECEMBER | 2019 | 9