Axis Bank joins top private lenders to offer pay hikes

India’s third-largest private lender is joining its larger rivals in offering pay hikes to staff even as the economic fallout of the coronavirus pandemic threatens profit growth.

Axis Bank will increase staff salaries between 4 per cent and 12 per cent from October 1 based on performance, according to people with knowledge of the plans. The Mumbai-based lender, which has about 76,000 employees, also paid bonuses to its staff, the people said, asking not to be identified because the matter is private.

HDFC Bank, the country’s largest private lender by assets, boosted salaries in April based on performance and also paid bonuses, other people with knowledge of the matter said. ICICI Bank, the second-biggest privately-held lender, gave about 80 per cent of its 100,000 employees a bonus and pay rise from July, according to different people aware of the plans.

The pay rises come as the coronavirus pandemic forces some local and global peers to cut jobs and pay. Many Indian lenders are seeking to save costs as the coronavirus is expected to push soured assets to a two-decade high.

Executives earning more than ~2.5 million ($34,109) at India’s fourth-largest private lender, Kotak Mahindra Bank, will take a 10 per cent salary cut, while senior management will take a 15 per cent reduction.

Capital raising

S&P Global Ratings lowered Axis Bank’s credit rating to below investment grade in June, citing concerns that the Covid-19 pandemic would challenge the lender ’s asset quality and profitability.

The Reserve Bank of India forecasts that the capital-adequacy ratio for lenders — a measure of available capital meant to ensure the bank can absorb a loss — could fall to as low as 11.8 per cent by March from 14.6 per cent a year earlier, close to the minimum requirement of 9 per cent.

Still, Axis Bank, Kotak Mahindra Bank and ICICI Bank are among private lenders that have raised $9 billion by tapping equity markets to protect themselves and prepare for future business. The capital raising will also give them a greater ability to cope with bad loans even as they extend credit. Representatives for Axis Bank, HDFC Bank, ICICI Bank didn’t immediately respond to emails seeking comments.