The Indian Banks’ Association (IBA) headquarters at Cuff Parade in south Mumbai wears a busy look these days. Trade union leaders of all hues are crowding at the lobby of the premier bankers’ body almost every day. Its chief executive officer H.N. Sinor and chief adviser, personnel, G. Sankaranarayanan are spending most of their time calculating various components of salary and wages of more than 700,000 employees of public sector banks. The union leaders, too, are burning the midnight oil to prepare their charter of demands for a new wage agreement. The last agreement expired on 31 October.
Normally, once the existing settlement expires, protracted negotiations follow for years to reach a new one. 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 last for five years.
The first such settlement was signed in October 1966. Apart from IBA, the Bombay Exchange Banks’ Association, representing foreign banks in India, was involved in the first pact that had a tenure of three years. The Bombay association does not exist any more and foreign banks operating in India have joined IBA.
Six workers unions and four officers bodies participate in the negotiations.
The All India Bank Employees Association, owing allegiance to the Communist Party of India, is the strongest of all employee unions. The National Confederation of Bank Employees rules State Bank of India, Bank of Baroda, Indian Overseas Bank and State Bank of Saurashtra.
Yet another bank trade union that has influence in Kolkata and Kerala is the CPI (Marxist) outfit Bank Employees Federation of India. The latest entrant to the negotiation table is the Shiv Sena’s trade union outfit Bank Karmachari Sena Mahasangh. The All India Bank Officers’ Confederation, the largest officers’ body, does not have any political affiliation.
The unions had demanded a 40% wage hike, but settled for a 13.3% raise at the last bipartite settlement, brokered in November 2002. Following this, the industry’s annual wage bill rose by Rs2,200 crore. The bank managements, on their part, demanded two “concessions” from the unions. One, a blanket go-ahead by the unions to computerization—a move that the unions had been resisting for long—and, two, acceptance of transfer of employees. Theoretically, all bank employees can be transferred within a zone where the same language is spoken (for instance, the entire Hindi belt in north India), but in reality, this does not happen. Employees even refuse to move from one branch to another in the same city. While banks have been able to computerize more branches, their plan of “redeployment” of people has still been facing resistance from the unions.
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 and have their own settlement. Till now, not a single bank has done so. Officially, bank CEOs will say they do not have the negotiating skill, but the real reason behind shying away from bank-specific settlement is that the managements do not want to confront the trade unions.
Indeed, the size of balance sheets of banks is varied and, in accordance with their financial strength, they should spend on their employees. The two crucial parameters to check the financial health of banks are return on assets (RoA) and return on equity (RoE). When it comes to RoA, Indian Bank tops the list last year with 1.46% RoA, followed by Indian Overseas Bank (1.36%) and Andhra Bank (1.31%). At the bottom of the ladder are Uco Bank (0.47%), Central Bank of India (0.62%) and Dena Bank (0.71%). Indian Overseas Bank heads the RoE list ( 29.11%), followed by Indian Bank (26.52%) and Syndicate Bank (24.60%). At the bottom are Bank of Baroda (12.45%), Uco Bank (13.16%) and Oriental Bank of Commerce (13.55%).
Let’s look at the employee productivity. Oriental Bank of Commerce has Rs7.43 crore business per employee and Rs5.61 lakh profit per employee. Corporation Bank’s business per employee is Rs6.37 crore and profit per employee Rs4.79 lakh. In contrast, Central Bank of India’s business per employee is Rs3.04 crore and profit per employee Rs1.35 lakh. Uco bank’s business per employee is Rs4.64 crore and profit per employee Rs1.30 lakh.
Why should the employees of Oriental Bank of Commerce and Corporation Bank earn the same salary than their counterparts in Central Bank and Uco earn? They should because they are brothers-in-arm with the same union holding sway in these banks. The agenda of the union leaders is not to reward the more productive employees but to ensure that all employees are treated uniformly when it comes to wages as otherwise they will lose their stronghold. Bank managements are familiar with this design, but they do not dare to challenge this for fear of strikes. The best way of making a beginning could be to stick to a broad industry framework for the main components of the salary such as basic and dearness allowance, leaving all other allowances to individual banks.
Trade unions will fret and fume, but productive employees will be happy and banks will gain. The managements are, after all, answerable to their shareholders and not the unions.
Tamal Bandyopadhyay keeps a close eye on all things banking from his perch as the Mumbai Bureau Chief of Mint. Please email comments to firstname.lastname@example.org