State Bank of Pakistan (SBP) has asked microfinance banks to limit the maximum fee of independent directors at Rs. 200,000 for attending a board meeting.
Microfinance banks, having assets worth Rs. 25 billion or an annual profit of Rs. 250 million, can pay a fee of Rs. 50,000 for non-executive directors. Other than these banks, the fee of non-executive directors is set at Rs. 25,000 for attending a board meeting.
The central bank regularized the pay-scale of commercial and microfinance banks along with other incentives and facilities offered to board members of the bank including the chairman.
Microfinance banks will also need to ensure that no additional payments or perquisites are paid to the non-executive directors and chairman of the bank.
No consultancy or allied work shall be awarded to a director or to the firms, institutions or companies etc. in which he or she individually or in concert with other directors of the same MFB, holds a substantial interest.
Administrative expenses pertaining to the office, staff and security allocated to the Chairman, if so required, should be determined rationally.
The remuneration and other benefits provided to the board members, shall be disclosed in the annual financial statements in a proper and transparent manner.
Microfinance Banks may determine the remuneration of their board members (including the Chairman) taking into consideration their own governance structure, the level of responsibility and expertise of the concerned directors while remaining within the maximum limits as per their respective category and other instructions given in this circular. Further, the remuneration limits along with thresholds for assets size and profitability which will be reviewed by SBP after every three years.
Traveling, boarding and lodging expenses of a Director for attending Board meetings shall be paid by the MFB at actuals. In this regard, the remuneration policy shall clearly specify the parameters for such expenses whereby additional costs should be borne by the concerned director.
The remuneration policy shall ensure that remuneration to directors is commensurate with their qualification, experience besides the assigned responsibilities.
The remuneration policy should outline performance indicators to evaluate the performance of board members and adequately envisage provisions for accountability of Directors for their conduct according to the scope of their responsibilities and scale of remuneration.
Earlier, the central bank set a limit of Rs. 800,000 as a maximum meeting fee for board members for banks which make a profit of over Rs. 1 billion per annum. The banks with less than Rs. 1 billion annual profit can pay a sum of up to Rs. 500,000 to the board members of the bank.
Commercial and microfinance banks usually hold meetings of the board of directors four to six times a year. The members of the board are experienced bankers or C-level executives of corporate sector serving in different organizations on top positions.
