Mr Modi, forget about reforming PSBs unless trade unionism is addressed

Unless the governments steps into the picture and take meaningful steps to address the concerns of employees in state-run banks, the present scenario will continue

Dinesh Unnikrishnan January 07, 2015 14:00:54 IST
Mr Modi, forget about reforming PSBs unless trade unionism is addressed

Trade unions in public sector banks have deferred their one-day strike planned for today (Wednesday) following negotiations with Indian Banks’ Association (IBA), the management lobby of Indian banks, on the wage revision issue. The trade unions, however, have again threatened to go on strike for four days later this month if their demands are not met.

The truce came after IBA improved their offer of wage revision from 11 percent to 12.5 percent even as the trade unions have come down to 19.5 percent from 23 percent earlier. The negotiations will continue today in Mumbai to arrive at a consensus and break the deadlock.

This is not the first time trade unions, which claim support of about 10 lakh employees, majority of them from 27 public sector banks, are striking work demanding wage increase since the last five-year bilateral contract between UFBU and IBA expired in October 2012.

“Wage revision is not the only matter we are concerned about,” C H Venkatachalam, General Secretary of All India Bank Employees Association (AIBEA) told Firstpost. AIBEA is one of the nine unions that form the umbrella body, United Forum of Bank Unions (UFBU), which is currently negotiating employees’ demands with the IBA.

“If the IBA is willing to consider all our major demands, including the work hours, and act appropriately, there is a possibility for a consensus,” Venkatachalam said.

Besides the wage revision, other demands of unions include regulated working hours, five-day a week and filling up of the vacant posts in the banks.

This would mean that trade unions have taken a relatively soft stance on the negotiations if bank managements are willing to offer a holistic package not just dealing with the wage revision percentage but other incentives such as pensions etc.

But here is what the real deadlock is:

Managements in state-run banks are not in a position to fork out any more money for a substantial increase in the compensation levels of employees since these banks are severely constrained with capital.

Also, these banks, being listed entities, can convince their shareholders on the additional capital burden arising out of rising stressed assets on their books or the advent of Basel-III compliance but not the rising staff cost.

Mr Modi forget about reforming PSBs unless trade unionism is addressed

Besides the wage revision, other demands of unions include regulated working hours, five-day a week and filling up of the vacant posts in the banks. Reuters

Even at 12.5 percent, the burden of wage increase on PSU banks is an estimated Rs 4,000 crore, according o IBA officials. The figure will rise to almost Rs 8,000 crore if arrears of pension and other perks are included. The new contract will come into effect from November 2012 for a five year-period.

Till the 12.5 per cent level, banks may be comfortable to pay since they have been making provisions on wage since November 2012 after the expiry of the last contract. Beyond that, banks will have to take a hit on their earnings.

“We want to avoid a strike since that will impact the business and services of all banks. That is the reason we improved on our offer,” said a top IBA official.

According to the official, the IBA is likely to make a proposal to the finance ministry to make the work hours of staff in public sector banks five days a week.

“We are fairly convinced that this change will not have any major impact on the work since the electronic mode of payments systems are fairly well established in most part of the country,” said the official.

The critical point is that IBA can do very little to resolve this impasse beyond continuing negotiations. The actual decision should come from the government, the owner of state-run banks, be it the decision to cut short the work hours for staff or the additional capital burden arising out of enhanced pay-incentives.

The Modi government, which has promised major reforms in state-run banks, has so far remained silent on the trade union issues faced by these banks.

There can’t be any significant reforms in the public sector banking industry unless the government addresses this part. Trade unions still have considerable say in the operations of public banks.

To be sure, these unions, which have acted in the past as a corrective force against the excesses by bank managements, have somewhat lost steam in the recent years with the newly joined young officers and employees showing no active interest union activities, even though most of them religiously contribute to the monthly subscription fees.

Banks have made serious efforts to break the back of trade unions without success. For instance, in September 2013, the country's largest lender State Bank of India had unleashed a severe attack on its trade unions by discontinuing the check off facility for unions (which they use to collect monthly contributions from members) and taking punitive actions against union leaders.

But, SBI later had to take a U-turn and restored the facility following a court directive. Even today, PSU bank unions manage to mobilise mass support from employees to carry out strike and bring banking services to a standstill.

The short message is this: Unless the governments steps into the picture and take meaningful steps to address the concerns of employees in state-run banks, the present scenario will continue. It will be unwise for Modi, who harps on increasing the efficiency of public banks, to ignore the frequent strike calls by trade unions.

Not at least until the government choose to remain as the owner of these entities.

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