It Pays to Be a Fresher at This Government Bank But Not a CEO

Government jobs, generally associated with employment security, are often less rewarding in terms of monetary benefits as compared to private sector jobs.

The widely held notion is true for most state-run jobs until one stumbles across State Bank of India's latest job advertisement. The country's biggest lender is accepting applications for over 2,000 posts of probationary officers, an entry-level job, at an eye-popping salary (cost to company) of Rs 8.55 lakh per year.

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.

SBI's generous entry-level compensation makes the lender a big draw among Indian graduates; its previous attempt to fill 1,500 vacancies in 2013 attracted more than 17 lakh applications.

While SBI is a better paymaster when it comes to freshers, 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.

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.

None of India's nearly two dozen state-run lenders come close to 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 PJ Nayak, who headed an RBI committee to review governance of boards of banks in India.

Low salaries, especially for top management, has also been linked to 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.

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.