
The Reserve Bank of India (RBI) has raised the maximum limit for the remuneration of Non-Executive Directors (NEDs) in banks. The revised ceiling is now set at ₹30 lakh per annum, an increase from the previous limit of ₹20 lakh. This change applies to NEDs in private sector banks, including Small Finance Banks (SFBs), Payment Banks (PBs), and wholly owned subsidiaries of Foreign Banks. The new instructions are effective immediately.
The RBI acknowledged the crucial role played by NEDs in the efficient functioning of bank Boards and their various Committees. In light of this, the decision was made to revise the ceiling to ₹30 lakh per annum. Banks are now required to establish appropriate criteria for determining fixed remuneration for NEDs, subject to approval by their Board, before any review of the existing remuneration. Within the new ceiling limit, the bank’s Board may set a lower amount based on factors such as the bank’s size, the NED’s experience, and other relevant considerations.
Private sector banks will still need to seek regulatory approval for the remuneration of Part-time Chairmen, as was the case previously. Additionally, banks are obligated to disclose the remuneration paid to directors annually, at a minimum, in their Annual Financial Statements.
This revision by the RBI aims to enable banks to attract qualified and competent individuals to serve on their Boards, ensuring effective governance and decision-making processes.