Do You Know Which PSU Bank Chiefs Got the Biggest Pay Hike in FY25?

According to a report by Moneycontrol, in FY 2024-25, heads of public sector banks saw substantial hikes in their salaries. This surge in remuneration coincides with the rising profitability of these institutions, driven by higher lending income, treasury gains, and improved asset quality. The increase in earnings also reflects the banks' stronger financial standing compared to previous years.

A Substantial Rise in Bank Chiefs' Salaries

The managing directors (MDs) and chief executive officers (CEOs) of state-owned banks received salary increments ranging between 52% and 66% in FY25 compared to FY24. Their salaries now range from ₹42 lakh to ₹81 lakh annually.

Among the highest earners, Debadatta Chand, MD and CEO of Bank of Baroda, earned ₹74 lakh in FY25, marking one of the highest remunerations in the sector. Indian Overseas Bank's MD and CEO, Ajay Kumar Srivastava, earned ₹64.40 lakh, while State Bank of India (SBI) Chairman, Challa Sreenivasulu Setty, took home ₹63.87 lakh.

Setty’s pay package included ₹26.97 lakh as basic pay and ₹14.36 lakh in dearness allowance for FY25.

Why the Salary Hike?

The salary hikes for PSU bank chiefs are directly linked to the sharp rise in profitability these institutions reported in FY25. Factors such as:

• Higher lending income
   
• Treasury gains
   
• Lower provisioning for bad loans
   

Contributed significantly to the overall improved financial performance of the banks.

Moreover, as state-owned banks experienced significant improvements in asset quality, they faced lower provisions for non-performing assets (NPAs). The ability to manage NPAs better than their private-sector counterparts helped improve profitability, enabling higher pay for top executives.

Profitability and Asset Quality in Focus

State-owned banks have seen a notable improvement in their asset quality, particularly when it comes to managing non-performing assets (NPAs). 

This improved asset quality meant that state-owned banks needed to set aside fewer funds for bad loans, positively impacting their profitability and allowing them to reward their senior management with substantial pay rises.

Read More: ICICI Bank Offloads Entire 18.8% Stake in NIIT IFBI!

Public Sector Banks Outperforming Private Sector in Asset Quality

The financial year 2024-25 marked a significant shift in the performance of public sector banks. The rising asset quality among state-owned banks positioned them favourably compared to their private-sector peers. These banks managed to control their bad loan provisions much better, enabling them to increase profits despite the challenging economic environment.

Private banks, particularly in the microfinance and unsecured loan segments, faced growing stress, which contributed to a deterioration in their asset quality. While private-sector banks struggled with rising NPAs, public banks have maintained stronger fundamentals, reflected in their enhanced profitability and overall performance.

Conclusion

In FY 2024-25, state-owned banks have demonstrated significant financial strength, with improved asset quality and a marked rise in profitability. This, in turn, has translated into substantial salary hikes for their top executives. With better management of NPAs and higher lending income, PSU banks are set to continue their positive trajectory.

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