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PNB, Bank of Baroda break rank with industry on wage settlements

PNB, Bank of Baroda break rank with industry on wage settlements
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First Published: Thu, Mar 13 2008. 12 14 AM IST

The decision of PNB and Bank of Baroda to break away from the industry wage pact has drawn flak from union leaders, who have threatened to go on strike if the two banks don’t return to the IBA fold
The decision of PNB and Bank of Baroda to break away from the industry wage pact has drawn flak from union leaders, who have threatened to go on strike if the two banks don’t return to the IBA fold
Updated: Thu, Mar 13 2008. 12 14 AM IST
At least two public sector banks, Punjab National Bank (PNB) and Bank of Baroda, have decided to opt out of the more than four-decade-old industry-wide wage settlement, brokered by the Indian Banks’ Association (IBA), the country’s premier bankers body, in a move that some analysts say is prompted by the desire to retain talent and increase competitiveness.
According to an IBA official, who did not wish to be identified, Delhi-based Punjab and Sind Bank, too, has not yet given the mandate to the bankers’ body to negotiate on behalf of the bank. This could not be independently confirmed by the bank concerned.
The decision of PNB and Bank of Baroda to break away from the industry wage pact has drawn flak from union leaders, who have threatened to go on strike if the two banks don’t return to the IBA fold
Banking sector analysts say this move is significant as finally some of the banks are taking initiatives to retain talent. The banks that are not part of the IBA-brokered wage settlement are free to fix the salary for their own employees.
Until now, all public sector, and even some private, banks offered the same pay scale to their employees, irrespective of the size and profitability of banks. The government has recently allowed public sector banks to offer performance-linked incentives to their employees, but this has not helped the cause of retaining talent as the amount to be disbursed under the scheme is capped at 1% of a bank’s net profit.
While Bank of Baroda has reserved the right of fixing its officers’ salaries itself, PNB has opted for fixing the wages of all of its employees without the help of IBA. “Our employees wanted to keep the issue (of fixing wage) within the bank,” PNB chairman and managing director K.C. Chakraborty said. Bank of Baroda officials could not be immediately reached for their comment.
So far, IBA has always negotiated with the trade unions for fixing the bank employees’ salaries, starting from 1966. The last agreement, signed between IBA and the unions in November 2002, ended in October 2007.
IBA starts negotiating with the unions after it gets the mandate from all banks. This means that individual banks have the choice to break away from the industry. Until now, not a single bank had done so.
Normally, once the existing settlement expires, protracted negotiations follow for years before a new one is reached. Six workers unions and four officers bodies participate in the negotiations. The latest wage negotiation is expected to start within the next three months.
Last time, the unions had demanded a 40% wage hike, but settled for a 13.3% raise at the bipartite settlement.
PNB and Bank of Baroda’s reluctance to give IBA the mandate to negotiate on their behalf has drawn flak from union leaders and they have threatened to go on a strike if the two banks don’t return to the IBA fold for the wage negotiation. “The finance minister assured us that none of the public sector banks could opt out of the current industry-level wage negotiation by IBA,” said R.J. Sridharan, general secretary of All India Bank Officers’ Association, the strongest among officers’ bodies.
Sridharan didn’t rule out indefinite strikes if PNB and Bank of Baroda go ahead with their decisions to break away from the industry wage pact.
“For being competitive, if some banks try to adopt a separate salary structure that is very different from the industry, it will affect morale of bank employees across the sector. We won’t allow that,” Sridharan said.
A Mumbai-based HR consultant, who did not want to be named, however, said this is the “right thing” and more banks should leave the IBA fold and negotiate “directly” with their employees.
Apart from the public sector banks, 13 old private banks and more than half-a-dozen foreign banks in India are also covered by this wage pact. However, unlike the state-run banks whose officers, too, are part of the wage agreement, old private and foreign banks have only the salaries of their clerks covered by this pact, which lasts for five years.
At Bancon, the annual bankers’ conference in November in Mumbai, leading bankers had said that talent retention is a major problem for public sector banks.
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First Published: Thu, Mar 13 2008. 12 14 AM IST