Government Banks paying more to fresher than private sector

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The recent advertisement of the SBI which is one of the largest lending bank in India have offered over 2000 posts of probationary officers, an entry-level job at the whopping package of 8.55 Lakh per year. Government jobs, generally associated with employment security, are often less rewarding in terms of monetary benefits as compared to private sector jobs but in front of this offer that proves to be myth.

The previous attempt of the SBI to fill in 1500 vacancies across the country attracted more than 17 lakh applications, SBI’s generous entry-level compensation makes the lender a big draw among Indian graduates. While SBI is a better paymaster when it comes to fresher, employees up the value chain get a pittance as compared to their private sector counterparts. ICICI Bank’s CEO and MD Chanda Kochhar received a total compensation of Rs 5.23 crore in 2013-14, more than 40 times what SBI’s Chairman and MD Arundhati Bhattacharya made that year. This shows that SBI pays more to the entry level people while they are unable to match the top notch private sector banks like ICICI.

Ms Bhattacharya became SBI’s chairman and MD in October 2013, so full year compensation details are not comparable. But, her predecessor Pratip Chaudhuri earned Rs 23 lakh (excluding lease rental and other benefits) as SBI’s chairman and MD the previous fiscal year, which is just 5 per cent of what his counterpart at ICICI Bank made a year later.

India has more than 2 dozon state run lenders but nobody can even come close to the private lenders in terms of CEO compensation. According to a Reserve Bank report, the average CEO monetary compensation for new private sector banks in 2012-13 was Rs 3.21 crore as compared to public sector banks’ average CEO compensation of Rs 18.66 lakh. Private sector CEOs also get stock options, whose monetary value is dependent on the bank’s stock price. “It is unsustainable for such differentials to continue without a major adverse impact on the recruitment and retention of talented managers in public sector banks,” said former Axis Bank CEO P J Nayak, who headed an RBI committee to review governance of boards of banks in India.

[pullquote-right]Compare that to ICICI Bank, India’s biggest private sector lender, which will pay its probationary officers a CTC of just Rs 4 lakh this year.[/pullquote-right]

This scenario leads towards the downfall of government undertaking banks compared to the private sectors. Low salaries, especially for top management, has also been resulted in weak performance of state-run lenders that dominate India’s banking sector with more than 70 per cent share of loan assets, but account for only a third of profits. Bad loan ratios are on average more than double those at private sector counterparts which is but obvious.

PSU lenders will be able to pay attractive salaries to their CEOs if the government accepts Mr Nayak’s recommendations calling for higher compensation for PSU bank chiefs. Lets see how far that gets achieved by the government sector in the due course of time, but meanwhile the present offer is one of the best which perhaps will pour in lots of young talents in one of the India’s largest government sector bank.

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