The Indian Finance Ministry plans tougher targets for bad loans, Casa and others in performance-linked pay for senior management. India currently has problem with growing non-performing assets (NPA) on the books of its state banks, and with the new RBI guidelines in place, state banks have to shape up.
The senior management of state-owned banks might get less of performance-linked pay this year than in the past, if they fail to bring down bad loans and high-cost deposits.
To improve the asset quality of government-owned banks, the finance ministry is planning to raise the bar for meeting targets set under the Statement of Intent (SoI), an agreement that describes in detail a company's intention to execute a corporate action.
"Stiff targets will be assigned in terms of level of gross non-performing assets (NPAs) and their recovery. Besides, current & savings accounts (Casa) as a percentage of total deposits range between 25 per cent and 43 per cent. High-cost deposits should come down and these low-cost deposits should gear up towards 40 per cent," a ministry official told Business Standard, requesting anonymity.