The top brass at India?s largest private sector bank is set to shoulder responsibility for its exposure to subprime-hit international securities?ICICI Bank CEO & managing director KV Kamath and his senior colleagues may decide to take huge cuts in increments and bonuses this year.
Though the bank is yet to announce its financial results for 2007-08, rough estimates suggest that it could take a hit of about Rs 1,050 crore on account of the subprime securities crisis in the US.
Increments for high performers in past years had gone up by as much as 100% of their basic salaries. This year, however, there would be no promotions for employees across the board and even middle-and junior-level executives may get much lower increments and bonuses than before.
An official spokesperson of the bank told FE that talks on the issue are on and that a final decision is yet to be taken on the matter. The bank?s board is meeting later this month, on April 26, following which the message would be officially conveyed to all employees.
?Given the current circumstances of high interest rates, slowing credit off-take as well as a slowing economy, we have to keep wage costs under control. It has nothing to do with the subprime crisis or the performance of employees,? the official said.
ICICI Bank joins the growing league of domestic companies, including major players in the IT sector, which have indicated not only a slowdown in job creation, but have also raised the spectre of possible job losses.
ICICI Bank has extensive operations outside the country, especially in the US and UK. Among the Indian banks, ICICI Bank has one of the largest exposures to overseas assets. According to statements tabled in Parliament, ICICI Bank suffered mark-to-market losses of $264 million in the credit derivatives segment.
The bank had about $2.2 billion worth of exposure to credit derivatives, while the largest bank in the country, State Bank of India, has an exposure of about $1.1 billion. Though the bank has not directly invested in the US market, it has taken a beating due to the depreciation in the value of securities witnessed in global markets.
The annual remuneration of Kamath is approximately Rs 3 crore. Chanda Kochhar, joint managing director of the bank, draws an annual pay package of about Rs 1.20 crore.