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Remuneration is not the sole decider of management behaviour at banks


The RBI issued guidelines last week on compensation packages of private sector banks’ material risk-takers. But there are other, greater deterrents that need attention

Ever since the global financial crisis threw up instances of untrammelled risk-taking by top executives in big banks which put the entire financial system at risk, regulators have been grappling with executive compensation structures that remove such perverse incentives for risk-taking. The Reserve Bank of India’s guidelines last week, specifying how private sector banks in India must design the compensation packages of their CEOs, whole-time directors and material risk-takers, are part of this effort. The ...


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