The guidelines are intended only for providing broad guidance to NBFCs and their NRCs in formulating their compensation policy. While formulating the compensation policy, it has to be ensured that all statutory mandates and the rules and directions issued under them are fully complied with.
These guidelines will be applicable for fixing the compensation policy of Key Managerial Personnel and members of senior management of all Non-Banking Financial Companies under SBR framework, except those categorised under ‘Base Layer’and Government owned NBFCs.
These guidelines shall come into effect from April 01, 2023.
As per the guidelines, the compensation packages will comprise of fixed and variable pay components aligned effectively with prudent risk taking to ensure that compensation is adjusted for all types of risks. Further, the compensation outcomes should be symmetric with risk outcomes and compensation pay-outs have to be sensitive to the time horizon of the risks.
All the fixed items of compensation, including the perquisites and contributions towards superannuation/retiral benefits, may be treated as part of fixed pay.
The proportion of variable pay in total compensation of the management of the NBFCs should be commensurate with their role and prudent risk taking profile and at higher level of responsibility the proportion of variable pay should be higher. Variable pay can be even be reduced to zero based on performance at an individual, business unit and company wide level.
The board of NBFCs may not offer guaranteed bonuses to the senior management and key managerial personnel. ” However, in the context of new hiring,joining/sign on bonus could be considered. such bonus will neither be considered part of fixed pay nor of variable pay.
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