Do Government Banks Share Profits with Employees?

SBI has already sent the written proposal to Ministry of Finance to introduce a profit sharing scheme with its employees.  The proposal is still pending with the Ministry.

Created On: Dec 6, 2017 12:02 IST
Do Government Banks Share Profits with Employees
Do Government Banks Share Profits with Employees

As of now, the Public Sector banks do not share the profits with their employees as there is generally no component named performance incentives in the salary slips of the employees of public sector banks. The public sector bank employees get the total salary in the following heads:

  • Basic Salary
  • Dearness Allowance
  • House Rent Allowance (If an officer is availing of the lease facility provided by the banks, the HRA component is not payable by the banks)
  • Compensatory City Allowance

Apart from these components, there are various perks such as newspaper allowances, petrol allowances, entertainment allowances etc given to the public sector banks employees. But as of now, there is no fixed component of performance related pay in the salary calculations of these bankers in the government banking sector.

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Profit Sharing Proposed by SBI

However, time is changing and along with that, banking is also undergoing a sea change and the salary structure of the bankers is also bound to change. A step has already been taken by the largest lender of the country, State Bank of India as it has already placed a proposal with the Finance Ministry to consider sharing 3-5% of its net profit with the staff in the senior management and middle management grades.

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Overall Scenario at Public Sector Banks

Other lenders such as Bank of Baroda, Bank of India etc are about to follow the footsteps. If this kicks in, the public banking sector will be able to retain talent as talent retention has been a major cause of concern for these banks these days especially after the Private Banks have stepped into the market with attractive salary package and professionalism. It has been an issue in the recent days to retain experienced and talented people in the banking sector because of unattractive salary packages and absence of professionalism in the public sector banks as can be observed from the rising percentage of Non-Performing Assets in the Public Banks as an example.

Present Status of the SBI Proposal

Nothing has been finalized yet regarding the proposal of SBI but the government is seriously thinking of introducing this scheme to all public sector banks and has also sought the opinion of Indian Banks’ Association in this regard. It is yet to be seen how far the initiative by SBI bears fruit in the near future but it is confirmed that the need of bringing a positive change has been recognized in order to be acknowledged as well in the near future.

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