**Policy Summary:**
The Reserve Bank of India (RBI) has issued a circular (RBI/2023-24/121 DoR.HGG.GOV.REC.7529/67.001/2023-24) on February 9, 2024, revising the ceiling on fixed remuneration for Non-Executive Directors (NEDs) of banks. This circular supersedes previous instructions issued on June 1, 2015 (DBR.No.BC.9729/67.001/2014-15).
The key change is an increase in the maximum permissible fixed remuneration for NEDs (excluding the Chair of the Board) from ₹20 lakh per annum to ₹30 lakh per annum. Banks must establish suitable criteria, approved by their Board, for determining the fixed remuneration of NEDs before any review of the existing remuneration structure. The Board can fix a lower amount within the ₹30 lakh ceiling, considering factors such as the bank's size and the NED's experience.
Private sector banks must continue to seek regulatory approval for the remuneration of Part-time Chairmen, as per Sections 10B(1A)(i) and 35B of the Banking Regulation Act, 1949. Banks are required to disclose the remuneration paid to directors annually in their Annual Financial Statements.
These instructions are applicable to all Private Sector Banks (including Small Finance Banks and Payment Banks) and wholly-owned subsidiaries of Foreign Banks, and are effective immediately. The circular is issued under the authority of Section 35B of the Banking Regulation Act, 1949.
For further information, contact the Department of Regulation, Central Office, RBI at 12th/13th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai - 400001. Phone: 22661602, 22601000. Fax: 022-2270 5691. Email: govbanksdor@rbi.org.in.
Key Entities Referenced
Reserve Bank of India: The central bank of India, the publisher of the policy document.
Non-Executive Directors (NEDs): Members of a bank's board who are not part of the executive management team; the policy concerns their remuneration.
Corporate Governance in Banks – Appointment of Directors and Constitution of Committees of the Board: RBI Circular dated April 26, 2021, which initially set the remuneration ceiling for Non-Executive Directors.
Banking Regulation Act, 1949: An act of the Parliament of India that regulates the Indian banking sector.
Private Sector Banks: Banks in India that are not owned by the government; the policy revisions apply to these banks.
Small Finance Banks (SFBs): A type of niche bank in India; the policy revisions apply to these banks.
Payment Banks (PBs): A type of niche bank in India; the policy revisions apply to these banks.
Mumbai, Maharashtra: City in India. Location of the Central Office of the Department of Regulation of the Reserve Bank of India
बेट� बचाओ
भारतीय �रज़व र् बक�
बेट � पढ़ाओ
________________________RESERVE BANK OF INDIA________________________
www.rbi.org.in
RBI/2023-24/121
DoR.HGG.GOV.REC.75/29.67.001/2023-24 February 9, 2024
Dear Sir/ Madam
Review of Fixed Remuneration granted to Non-Executive Directors (NEDs)
Please refer to paragraph 9 of circular dated April 26, 2021 (Corporate Governance in
Banks - Appointment of Directors and Constitution of Committees of the Board) as per
which ceiling of ₹20 lakh per annum was specified in respect of remuneration of Non-
Executive Directors (NEDs), other than the Chair of the Board.
2. Considering the crucial role of NEDs in efficient functioning of bank Boards and its
various Committees and in order to further enable the banks to sufficiently attract
qualified competent individuals on their Boards, it has been decided to revise the
aforementioned ceiling to ₹30 lakh per annum.
3. The banks are required to have suitable criteria for granting fixed remuneration to
its NEDs, with the approval of its Board before any review of the extant remuneration.
The Board of the bank may fix a lower amount within the ceiling limit of ₹30 lakh per
annum depending upon the size of the bank, experience of the NED and other relevant
factors.
4. As hitherto, private sector banks would be required to obtain regulatory approval
regarding remuneration to Part-time Chairman in terms of Section 10B(1A)(i) and 35B
of the Banking Regulation Act, 1949.
5. Banks are required to make disclosure on remuneration paid to the directors on an
annual basis at a minimum, in their Annual Financial Statements.
Applicability and Commencement
6. The instructions would be applicable to all the Private Sector Banks including Small
Finance Banks (SFBs) and Payment Banks (PBs) as also the wholly owned
_________________________________________________________________________________________________
�व�नयमन �वभाग, क�द्र�य कायार्लय, 12वीं और 13वीं मंिज़ल, क�द्र�य कायार्लय भवन, शह�द भगत �सहं माग,र् फोटर्, मुंबई - 400001
Department of Regulation, Central Office, 12th & 13th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001
टेल�फोन/ Tel No: 22661602, 22601000 फैक्स/ Fax No: 022-2270 5691 ई-मैल / E-mail: govbanksdor@rbi.org.in
�हदं � आसान है, इसका प्रयोग बढ़ाइएsubsidiaries of Foreign Banks. The instructions would come into force with immediate
effect.
Power exercised
7. The instructions have been issued in exercise of powers conferred by Section 35B
of the Banking Regulation Act, 1949.
Repeal
8. The instructions on Guidelines on Compensation of Non-executive Directors of
Private Sector Banks issued vide circular DBR.No.BC.97/29.67.001/2014-15 dated
June 1, 2015 stand repealed.
Yours faithfully
(Scenta Joy)
Chief General Manager