Bank unions agree to govt’s financial goals to recapitalize weak banks

The employee unions and Uco Bank management have signed an MoU for a turnaround plan, which will decide the future course of action in the bank’s recapitalization


A Uco Bank branch in Kolkata. Photo: Indranil Bhoumik/Mint
A Uco Bank branch in Kolkata. Photo: Indranil Bhoumik/Mint

Kolkata/Mumbai: State-owned bank employee unions have signed a memorandum of understanding (MoU) with managements, agreeing to stringent financial targets that the government has set for recapitalizing 10 weak lenders.

They did manage to extract a promise that employee benefits will not be cut.

The unions signed the agreement on Wednesday setting the stage for the infusion of Rs8,586 crore of government capital into 10 banks before 31 March, according to a senior union leader. Separately, Mint has reviewed a copy of the MoU signed between Kolkata-based UCO Bank and its unions.

Under the MoU, both the management and unions have agreed to work towards the implementation of a turnaround plan for the bank, which will decide the future course of recapitalization by the government. The management has also promised that there will not be any cut in employee benefits, which was one of the conditions set by the government.

“In the original MoU proposed by the banks and government, it was provided that the bank and SBI Caps will finalize the turnaround strategy and unions should agree to implement it. We opposed this. After our discussion with the government, the MoU has been changed, providing for consultation with the unions before finalizing the strategy,” said C.H. Venkatachalam, general secretary of the All-India Bank Employees’ Association.

A top official at Kolkata-based United Bank of India said on condition of anonymity that negotiations with the unions will continue and that for now, the management has only accepted the demand that there will no reduction in employee benefits.

Unions fear that under the turnaround plan, the government might force them into accepting “unrealistic” productivity targets measured in terms of business per employee or profit per employee, said an officer at UCO Bank, who asked not to be named.

That, in turn, will force unions to accept early retirement and other means of reducing manpower such as outsourcing, he explained.

The MoU is part of the new framework for future capital infusion by the centre. In its letter to heads of these weak public sector banks, the government listed five quarterly milestones to be met in agreement with the employees. These milestones include active bad loan management, arranging capital from the market, a continuing plan for selling non-core assets, shutting money-losing branches and temporarily paring staff benefits, if necessary.

The details of the turnaround plan are currently being worked out and a final MoU will be signed after it is finalised next month, Venkatachalam added.

ALSO READ | Govt lays down strict conditions for capital infusion in PSU banks

Under its so-called Indradhanush programme, the government will infuse Rs70,000 crore in state banks over four years while they will have to raise a further Rs1.1 trillion from the markets to meet their capital requirements in line with global Basel III risk norms.

Public sector banks are to get an infusion of Rs25,000 crore each in 2015-16 and 2016-17. Besides, Rs10,000 crore each would be infused in 2017-18 and 2018-19. In his budget speech on 1 February, finance minister Arun Jaitley announced a capital infusion of Rs10,000 crore for the next fiscal.*

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