Why it pays to not perform in government banks

Bad loans in Indian banks, especially the government owned-ones has been a bone of contention for the country's economy for quite some time now. Losses of public sector banks (PSBs) add up to over Rs 79,000 crore and bad loans to a whopping Rs 8.6 lakh crore for the fiscal year 2017-18 -- both highest ever in the country's banking history.

Despite the poor show, PSBs appear to have rewarded their employees far more handsomely than their private sector counterparts, with a year-on-year increase of 9.7 per cent to Rs 11.48 lakh per employee at PSBs, vis-a-vis an increase of 2.6 per cent to Rs 7.7 lakh for private sector banks, in the year ended March 2018. 

Ironically, employees of the scam-tainted Punjab National Bank (PNB), got the steepest pay hike of 64.5 per cent in the last fiscal, to Rs 12.32 lakh per year.

Picture this in contrast of the fact that World Bank data on NPAs as a percentage of total bank loans in 150 countries puts India in 3rd place among major economies.   

The increase in cost per employee for PSBs is largely due to greater retirement benefits and higher average age of employees, which is around 40 years for PSBs compared to about 30 years for private banks, while nearly 25 percent to 30 percent of the reported costs pertain to retirement benefits for PSBs.

Source- Times of India