Mumbai: About 800,000 employees of state-run banks are set to get a 17.5% increase in their wages. The Indian Banks’ Association (IBA), the premier bankers’ body, is close to signing an agreement with trade unions after protracted negotiations that have lasted one-and-a-half-years.
The last wage agreement, that offered a 13.3% hike to bank employees, expired on 31 October 2007. Wage agreements in the banking industry last for five years.
A 1% hike in wages translates into a Rs275 crore expenditure for public sector banks, which account for about 80% of the Indian banking industry.
An IBA committee met in New Delhi on Wednesday to give final touches to the agreement and discuss it with finance minister Pranab Mukherjee.
The wage negotiations have also been able to break the stalemate on bank employees’ demand for pension.
In 1995, such a scheme was offered, but not too many employees opted for pension at that time. They were happy with provident fund and gratuity, and thought they would benefit by opting for lump sum statutory retirement benefits as the banking system was offering very high interest at that time, following the Reserve Bank of India’s tight monetary policy to tame a high inflation rate.
Opting for pension would have meant a defined sum after the end of every month.
Bank employees have been demanding one more option to switch to pension for the past one decade, but IBA has been opposing it as banks are not willing to share the burden. The burden on the industry will be around Rs4,200 crore on account of the pension scheme if all bank employees opt for it and surrender their provident fund money.
“Although we are fighting for the second option on pension, we have told IBA not to force those who are willing to continue with the provident fund scheme,” said G.D. Nadaf, general secretary, All India Bank Officers’ Confederation.
Public sector bank provides 13-17% of their profits under their pension corpus for their employees to take care of the existing pension liability as well as the additional load that they would have to carry when more employees opt for pension.
Trade unions want new employees joining banks till March 2012 to be offered the pension option, but IBA wants to fix the deadline as 31 March 2010.
The government has already offered a new pension scheme to all public sector employees. Under this scheme, a pension corpus is managed by professional fund managers and pension will fluctuate depending upon the performance of the pension fund.
The unions are not comfortable with this. “Under the new pension scheme, you might not even get a pension if the fund performs badly,” said T.N. Goel, president of the State Bank Officers Union and part of United Forum of Bank Unions (UFBU), that is negotiating with IBA.
The pension funds are run by professional fund managers from a number of banks, including State Bank of India, HDFC Bank Ltd, Kotak Mahindra Bank Ltd, etc.
Goel said the officers would not accept even 20% wage hike that UFBU was pushing for. “We will need a separate agreement for officers and at least a 30% hike,” he said.
A finance ministry official said even a 17.5% raise is too high and the ministry is not comfortable with this. “Unlike other public sector undertakings where employees’ wages are revised every 10 years, bank employees’ wages are revised every five years. We need to take that into account,” he said on condition of anonymity.
UFBU convener C.H. Venkatachalam said he wants the wage negotiation process to be over “as soon as possible”.
Bank unions started demanding an at least 50% hike over the present salary, following the 40% wage hike of public sector employees as recommended by the Sixth Pay Commission, which were accepted by the government.
The unions had demanded a 40% wage hike, but settled for a 13.3% raise at the last bipartite settlement, brokered in November 2005. Following this, the industry’s annual wage bill rose by Rs2,200 crore.
The bank managements, on their part, had last time demanded two “concessions” from the unions. One, a blanket permission by the unions for computerization—a move that the unions had been resisting for long—and, two, acceptance of transfer of employees.
This time around, the unions have agreed that they will not oppose the bank managements’ move to outsource any activity, said an IBA representative.
Normally, once the existing settlement expires, protracted negotiations follow for years to arrive at a new one. Apart from public sector banks, 13 old private banks and at least 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.