Mumbai: Around 775,000 bank employees are set to receive a 17.5% hike in wages as unions signed a five-year agreement with the Indian Banks’ Association (IBA) on Tuesday, ending two years of negotiations.
This will raise the wage bill for the banking industry by Rs5,200 crore every year—Rs4,816 crore for public sector banks and around Rs400 crore for private and foreign banks, according to a statement by the All India Bank Employees’ Association. All private and foreign banks are not covered by the pact.
The new wage pact is effective from November 2007.
IBA has also agreed to the union’s demand to offer the option of a pension to employees. This will benefit around 260,000 existing employees and officers, besides around 50,000 retired workers.
Apart from two retirement benefits—provident fund and gratuity—they will receive a pension, if they opt for it. Typically, the employer and the employee make an equal contribution to the provident fund. The employer’s contribution to the provident fund will be used to create the pension corpus for those who choose this option. The industry first offered a pension in the 1990s, but not all employees accepted it.
Wage talks: M.V. Nair, chairman of the Indian Banks’ Association. Abhijit Bhatlekar/Mint
The employees received a 13.5% hike in the last wage pact that expired in October 2007.
The agreement between the apex bankers’ lobby and nine bank unions covers all 26 public sector banks, including the State Bank of India (SBI), as well as 12 private sector banks and eight foreign banks.
The SBI unions had earlier walked away from the negotiations, demanding a greater raise in wages.
According to analysts, the additional cost will not hurt the profitability of banks as they have already provided for such a hike in their balance sheet.
IBA was led by chairman M.V. Nair, also chairman and managing director (CMD) of Union Bank of India, and the unions were led by C.H. Venkatachalam, convenor of the United Forum of Bank Unions, an umbrella organization of nine bank unions.
As per the agreement, employees joining banks from April 2010 would be governed by the new pension scheme introduced by the government that does not offer assured benefits to employees. The new scheme will be applicable to bank employees as they are to any other government employee. The bank unions have been opposing this, which is why it took so long to ink the agreement.