Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff - RBI

RBI/2021-22/95
DOR.GOV.REC.44/29.67.001/2021-22

August 30, 2021

All Private Sector Banks (including Local Area Banks, Small Finance
Banks, Payments Banks) and Foreign Banks operating in India

Dear Sir/Madam,

Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff - Clarification

Please refer to para 2.1.2 (f) of our circular DOR.Appt.BC.No.23/29.67.001/2019-20 dated November 04, 2019 on the captioned subject. In terms of the extant guidelines, share-linked instruments are required to be fair valued on the date of grant using Black-Scholes model. However, it has been observed that banks do not recognise grant of the share-linked compensation as an expense in their books of account concurrently. Therefore, in the interest of better clarity, the following sentence is being added to the extant instructions contained in the said paragraph:

“The fair value thus arrived at should be recognised as expense beginning with the accounting period for which approval has been granted”.

2. Banks should ensure compliance to above instructions for all share-linked instruments granted after the accounting period ending March 31, 2021.

Yours faithfully,

(Shrimohan Yadav)
Chief General Manager