Marking a departure from the past, Reserve Bank of India [Get Quote] Governor Yaga Venugopal Reddy addressed his senior colleagues (read regional directors and chief general managers) spread across the country through a video-conference on January 1.

His New Year message spoke of the need to put in place strategies to manage change in the economy in view of the rapid global changes and the need to "constantly benchmark with the best in the world and reinvent ourselves to meet the dynamics of new roles and functions".

Benchmarking with the best in the world and reinventing the RBI, of course, could be Reddy's toughest challenge considering that 80 per cent of its employees belong to Class III (clerks) and Class IV (sub-staff), and the executives who run the bank do not get either market-related remuneration or performance-linked pay. This is at a time when even the PSU banks regulated by the RBI have cut their flab and found ways to incentivise their employees.

With around 22,500 employees, the RBI is certainly not the most populated central bank in the world, especially given its mandate extends to rural credit, deposit insurance and public debt management among others. The central bank of China and the US Federal Reserve have more employees. However, the structure is lop-sided in favour of non-officers.

The RBI has only 5,000 officers and 3,500 of them are of the base level (grade A and B). Another 900 belong to grade C. In other words, about 600 executives (of the rank of deputy general manager and above) run the show at the RBI.

The Indian central bank is a perfect pyramid. On top, there are four deputy governors below the governor, six executive directors and about 50 chief general managers. Till about a decade ago, the ratio of officers, sub-staff and clerks was 1:2:3. Now, it is 1:1.6:1.8 or so. Globally, central banks are run by officers.

Till the mid-1980s, the RBI used to have a 37,000-strong workforce. A ban on recruiting non-officers, a VRS (4,500 people accepted it but none from the clerk and sub-staff grades were interested), and promoting eligible clerks to Grade A has helped, somewhat. At the same time, the RBI is finding it difficult at getting executives at the senior level.

Apart from the poor compensation package, the RBI's pace of promotion is also quite slow -- it doesn't help that there are very few vacancies at the top. For instance, there can only be 23 regional directors and another 23 department heads (all of chief general manager rank). One way to introduce a fast-track promotion system could be to increase the number of senior executives.

For instance, some of the regions can have more than one director. Even all metros and big centres can have RBI directors. Once upon a time, Uttar Pradesh used to have one director general of police. Now, India's largest state boasts of over three dozens DGs. This has been done to meet the aspiration level of efficient police officers. Why can't the Indian central bank follow this model?

Similarly, there is an urgent need to take a close look at the compensation package of the RBI-tes. Unlike some of the central banks across the globe, their salary is not market related. What is worse, the RBI employees' pay packets are even less than those of government employees -- this was not so earlier, but following the implementation of the Fourth and Fifth Pay Commissions' recommendations, this has happened.

The RBI Governor's monthly gross salary is about Rs 54,000 -- some of the CEOs of small private banks earn crores (millions) of rupees in the form of annual salary and performance-linked bonuses with the RBI approval.

The governor lives in his bungalow in Mumbai and, hence, he does not get house rent in his monthly salary package.

But for their stints at places like the International Monetary Fund and World Bank, most RBI governors would have found it difficult to make both ends meet with their salary!

If the RBI wants to attract talent and expertise to monitor the highly complex and sophisticated financial sector, it is high time the government looked into the HR issues on Mint Road.