**Summary:**
The Reserve Bank of India (RBI) has revised the ceiling on fixed remuneration for Non-Executive Directors (NEDs) of private sector banks, including Small Finance Banks (SFBs), Payment Banks (PBs), and wholly-owned subsidiaries of Foreign Banks, from ₹20 lakh to ₹30 lakh per annum. This decision, outlined in circular DoR.HGG.GOV.REC.7529/67.001/2023-24 dated February 9, 2024, aims to enable banks to attract qualified and competent individuals to their Boards, recognizing the crucial role NEDs play in efficient bank governance.
Banks are required to establish suitable criteria for granting fixed remuneration to NEDs, subject to Board approval, before reviewing existing remuneration structures. While the ceiling is ₹30 lakh, individual banks may fix a lower amount based on 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 remuneration paid to directors annually in their financial statements.
These instructions, issued under the powers conferred by Section 35B of the Banking Regulation Act, 1949, take effect immediately. Circular DBR.No.BC.9729/67.001/2014-15 dated June 1, 2015, pertaining to compensation guidelines for NEDs of private sector banks, stands repealed.
For further information, contact the Department of Regulation, Central Office, Reserve Bank of India 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 primary regulator mentioned in the document.
Non-Executive Directors: The subject of the policy review, specifically regarding their fixed remuneration.
Corporate Governance in Banks Appointment of Directors and Constitution of Committees of the Board: A circular issued by the Reserve Bank of India on April 26, 2021, regarding corporate governance in banks.
Banking Regulation Act, 1949: An act of Parliament in India that regulates the banking industry.
Private Sector Banks: A category of banks to which specific remuneration regulations apply, including the requirement to obtain regulatory approval for Part-time Chairman remuneration.
Small Finance Banks: A type of bank to which the instructions in the document are applicable.
Payment Banks: A type of bank to which the instructions in the document are applicable.
Mumbai, Maharashtra: Location of the Central Office of the Department of Regulation, 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