Column: Paying RBI governor his due

Mar 27 2014, 15:31 IST
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SummaryThere is a need to revise compensation packages of the RBI governor and other senior bankers in the public sector

A significant achievement of Ben Bernanke after leaving the Federal Reserve was that he earned more in a 40-minute speech than he did while serving in the coveted position for a full year. He was paid around $250,000 for a speech in Abu Dhabi, which was at least 25% more than his Fed salary. This amount is also a reflection of the value of a central banker when he or she is out of the office.

The pay of a central banker has been controversial. Should the position be rewarded like that in the private sector or should it be aligned with any other public sector job? There are no answers here if one looks around the structures across countries. The US Fed post carries a salary of around $200,000 per annum. Now these figures are not fully transparent as the perks involved in terms of housing, cars, entertainment, travel, etc, may or may not be a part of the package. One can assume that the amount stated on the website is the cash component. Since such positions do not have bonuses as it is paid by the government directly or indirectly, there can only be tangibles that go with the job but cannot be carried after the tenure ends. Therefore, the incumbent has to think of the future based on this amount.

The Fed position is quite low down the echelon. Mark Carney of the Bank of England was higher with something close to $800,000 per annum that has been justified to an extent on the basis of high housing cost, which presumably is a part of the package. Haruhiko Kuroda of the Bank of Japan was quite low down with $235,000 in 2012, while Mario Draghi of the European Central Bank got $520,000, which again has been justified as being necessary as he serves interests of 17 nations. The highest paid governor was from Hong Kong in 2012 with a pay of $1.2 million. The Swiss National Bank chief was marginally below while the Italian head took in $700,000.

As against these numbers, the RBI governor is paid around R20 lakh (RBI website), which works out to a very low number of less than $35,000. The position is both important and critical as the entire economy functions on the basis of what this institution decides. And given the need to balance the interests of consumers (regulation & safety), banks (intermediation), corporates

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