Finance companies bear brunt of CEO salary cap
KATHMANDU, May 3:
In a typical case, Unique Finance on Monday lodged an application at Nepal Rastra Bank (NRB), requesting it to remove difficulties that it faced while adjusting perks of senior staffers due to the central bank´s cap on salary and benefits of chief executives.
The company said it faced difficulty, mainly as NRB cap did not allow it to raise the salary of its chief executive, making it difficult to adjust salary of its second man. The situation is such that if the company made due adjustment in salary of the second man, his salary and benefits will be more than what its chief executive has been enjoying.
“We are facing a typical problem,” said Raj Mohan Karmacharya, chief executive of Unique Finance, adding that the situation surfaced mainly as he had been serving the institution at low remuneration and the gap between his and his second man´s salary was pretty narrow. Karmacharya refused to elaborate further.
Knowledgeable sources said the finance company decided to seek guidance of central bank after its second man resigned from the post, expressing dissent for not getting due pay hike.
“Resignation of the second man has created serious problem in Unique Finance,” Rajendra Man Shakya, president of Nepal Finance Companies´ Association, told Republica. He even argued that the problem faced by Unique Finance was just a tip of an iceberg in the financial sector, particularly financial institutions of Category B, C and D.
“The salary cap, which the central bank enforced keeping in mind the top brass of commercial banks, is so impractical. All financial institutions will face the same problem sooner or later,” he stated.
NRB imposed the cap on November 26 last year, asking BFIs to limit annual salary and allowances of chief executives to less than 5 percent of the employees´ pay bills of the last three fiscal years or less than 0.015 percent of the their total assets, whichever is lower.
Although the rule did not affect salary and benefits CEOs were already enjoying, BFIs had complained that it could affect them while appointing competent professional in case serving CEO quits.
“Our fear has already turned real in case of Patan and Paschimanchal Finance companies,” said Shakya.
Chief executives of these finance companies had resigned about a month ago and both the institutions are facing problems in hiring new chief executives.
“The salary issue has become major impediment in both the cases,” said Shakya.
According to industry sources, the cap does not allow the board of Patan and Paschimanchal finance companies to pay new CEOs the same salary that past chief executives used to draw, and new professionals are not eager to join the company with salary that their predecessors used to draw.
“Given the myopic vision of NRB, such problems were bound to come,” Shakya said and urged the central bank to review the cap for chief executives of financial institutions, adopting rational and practical approach.
NRB Spokesperson Bhaskar Mani Gyawali said the central bank was aware of the problems that some of the financial institutions were facing due to salary cap.
“We have already initiated exercises to revise it for financial institutions of different categories,” he stated. As difficulties faced by the financial institutions were unintended, Gyawali also said that the central bank will take urgent steps to help them resolve their problems as well.
Source: Republica
In a typical case, Unique Finance on Monday lodged an application at Nepal Rastra Bank (NRB), requesting it to remove difficulties that it faced while adjusting perks of senior staffers due to the central bank´s cap on salary and benefits of chief executives.
The company said it faced difficulty, mainly as NRB cap did not allow it to raise the salary of its chief executive, making it difficult to adjust salary of its second man. The situation is such that if the company made due adjustment in salary of the second man, his salary and benefits will be more than what its chief executive has been enjoying.
“We are facing a typical problem,” said Raj Mohan Karmacharya, chief executive of Unique Finance, adding that the situation surfaced mainly as he had been serving the institution at low remuneration and the gap between his and his second man´s salary was pretty narrow. Karmacharya refused to elaborate further.
Knowledgeable sources said the finance company decided to seek guidance of central bank after its second man resigned from the post, expressing dissent for not getting due pay hike.
“Resignation of the second man has created serious problem in Unique Finance,” Rajendra Man Shakya, president of Nepal Finance Companies´ Association, told Republica. He even argued that the problem faced by Unique Finance was just a tip of an iceberg in the financial sector, particularly financial institutions of Category B, C and D.
“The salary cap, which the central bank enforced keeping in mind the top brass of commercial banks, is so impractical. All financial institutions will face the same problem sooner or later,” he stated.
NRB imposed the cap on November 26 last year, asking BFIs to limit annual salary and allowances of chief executives to less than 5 percent of the employees´ pay bills of the last three fiscal years or less than 0.015 percent of the their total assets, whichever is lower.
Although the rule did not affect salary and benefits CEOs were already enjoying, BFIs had complained that it could affect them while appointing competent professional in case serving CEO quits.
“Our fear has already turned real in case of Patan and Paschimanchal Finance companies,” said Shakya.
Chief executives of these finance companies had resigned about a month ago and both the institutions are facing problems in hiring new chief executives.
“The salary issue has become major impediment in both the cases,” said Shakya.
According to industry sources, the cap does not allow the board of Patan and Paschimanchal finance companies to pay new CEOs the same salary that past chief executives used to draw, and new professionals are not eager to join the company with salary that their predecessors used to draw.
“Given the myopic vision of NRB, such problems were bound to come,” Shakya said and urged the central bank to review the cap for chief executives of financial institutions, adopting rational and practical approach.
NRB Spokesperson Bhaskar Mani Gyawali said the central bank was aware of the problems that some of the financial institutions were facing due to salary cap.
“We have already initiated exercises to revise it for financial institutions of different categories,” he stated. As difficulties faced by the financial institutions were unintended, Gyawali also said that the central bank will take urgent steps to help them resolve their problems as well.
Source: Republica
