The top bosses of at least two financial institutions have announced their decision to take voluntary pay cuts amid the spread of coronavirus, which has hit businesses hard.

Indiabulls Housing Finance, a non-banking finance company, today announced that the senior management of the company has decided to take voluntary pay cuts of an average 35 percent for the current financial year. According to its exchange release, the decision was taken to “lead the efforts on expense control” by volunteering these cuts.

Its Chairman, Sameer Gehlaut will not be drawing any salary for the current financial year, and MD & CEO Gagan Banga will take a steep 75 percent cut in his salary as well.

Banga told CNBC-TV18, "Members of leadership teams have to step up to minimise the impact on other internal and external stakeholders in these very peculiar times."

This is the second such instance of a financial service provider announcing a voluntary salary cut at the top management.

Earlier last week, private sector lender Kotak Mahindra Bank also announced that its leadership team had decided to voluntarily take a 15 percent salary cut for the current year, 2020-2021.

Its Chief Executive Officer Uday Kotak, who is counted among the richest bank bosses in the country, also opted to forgo his entire salary for FY21 and will take a token Re 1 pay instead.

“We are in the midst of a battle to protect both lives and livelihoods. The revival of the economy will depend on a healthy and robust financial sector. The bank is committed to work alongside the government, private enterprise, civil society and individuals in the tough times that lie ahead,” Kotak Mahindra Bank said in its statement.

Kotak Mahindra Bank had also announced that Uday Kotak would personally be contributing Rs 25 cr to the PM CARES Fund to fight COVID-19, and the bank would be contributing another Rs 10 crores to the fund separately.

These pay cuts come amid the spread of the pandemic, and a resultant lockdown to contain its spread, which has caused massive losses to businesses. For financial institutions with substantial exposure to vulnerable sectors- including MSME, travel & tourism, aviation, non-banking finance companies- the impact will be felt for many quarters to come.

Moody’s recently downgraded the entire Indian banking sector outlook to negative because of the disruptions to economic activity, which it believes will hurt asset quality of banks, impact credit growth and erode profitability.

"We have changed the outlook for the Indian banking system to negative from stable. Disruptions to economic activity from the coronavirus outbreak will exacerbate a slowdown in India's economic growth," Moody's said.

If anything, these pay cuts are an early warning signal as financial institutions brace themselves for the next wave of stress that will likely hit them, sooner than later.

First Published:Apr 12, 2020 6:06 PM IST