Mumbai: Bank unions are demanding wage hike settlement for around 850,000 employees of public sector banks to be expedited by December-end, a deadline which is unlikely to be met as discussions on the core issue of the extent of hike is yet to start.

“There are too many moving parts and capital is a major constraint. Now with the recapitalisation announcement, each bank will plan for growth and subsequently the expenses, depending on the amount of funds it get. Lenders will then give proposal to IBA, who will negotiate with unions. This exercise will take at least a month or two," said a senior banker aware of the talks, on condition of anonymity.

V.G. Kannan, chief executive at Indian Banks’ Association (IBA), said that talks are on-going and so far discussions on financial matter has not started.

These talks under 11th bipartite settlement as previous agreement expired on 31 October. However, banks have agreed that settlement will be effective from 1 November 2017, irrespective of the date of signing of the pact, said C.H. Venkatachalam, general secretary of All India Bank Employees’ Association, a leading union under United Forum of Bank Unions.

The previous wage agreement was signed in May 2015 with retrospective effect from November 2012 till October 2017.

Venkatachalam said that so far peripheral issues pertaining service condition such as travel and leave allowances have been discussed.

“Unions and the management are negotiating for the past five-six months but no clear headway has been made. This time bank managements are also asking for variable-, performance-related pay. Looking at inflation and changing work profile in the bank, burden on bank employees, we are expecting a fair and reasonable increase in wages," he said.

Banks are proposing entity-wise negotiation depending on the capital position as balance sheets of most lenders are stressed because of bad loan issues.

According to Karthik Srinivasan, group head for financial sector ratings at ICRA Ltd, bank-wise wage revision is worth considering given that varying impact of asset quality stress on the capital position of state-owned banks. “However, unions accepting this would be challenging because traditionally wage hikes have been industry-wide. Also, one can argue that since banks are getting capital and cleaning-up of stressed loans is underway, then why differentiate in the wage revision," he said.