Unconfirmed reports indicate that the finance ministry may incentivise top officials of state-run banks to recover bad loans.

In this regard, the ministry may give more weightage to bad loan recovery for giving incentives to bank officials.

It may be recalled that a sub-committee of the bank's board of directors evaluates the performance of banks.  The sub-committee comprises nominees of the government and the Reserve Bank, and two other directors. A bank chairman or executive director could lose his performance incentive if he scores less than 80 percent on the appraisal matrix.

Through a statement of intent (SoI), the performance of a state-run bank and its executives is evaluated. The SoI is signed by the lender with the government. It lists annual goals for the bank and its executives and sets parameters such as credit growth, net profit, priority sector lending and NPA reduction.

In March 2013, the ratio of non-performing assets (NPA) to total credit of state-run banks rose to 3.78 percent from 3.17 percent a year ago.

At present, a bank chairman can claim up to Rs lakh as incentive if he scores a perfect 100 on the appraisal matrix. The performance incentive for executive director is Rs 6.5 lakh.