New Delhi: The finance ministry has directed all 12 public sector banks (PSBs) to institutionalize quarterly meetings with recognized employee unions and officers’ associations, instead of engaging only when disputes arise, as it seeks to strengthen dialogue between management and staff, according to two government officials aware of the development and a communication reviewed by Mint.
However, the move, which comes amid increasing concerns over employee workload and mental well-being in PSBs, has drawn objections from major banking unions, which argue it could trigger disputes over which unions are legally entitled to negotiate with management.
In a 10 July communication, the Department of Financial Services (DFS) said interactions between PSB managements and recognized unions and associations were “not being held regularly and in a structured manner”, necessitating a uniform mechanism for periodic engagement.
The communication described industrial relations as a “critical pillar” for organizational stability, saying structured dialogue would strengthen consultation, build trust and help resolve workplace issues before they escalate.
“The objective is to institutionalize engagement rather than hold meetings only when disputes arise,” one of the two government officials cited above said, requesting anonymity. “The idea is to create a structured platform where management and employees engage regularly on workplace issues.”
The directive, which covers about 640,000 employees across India's state-run banks, requires lenders to prepare annual meeting calendars. Banks have been asked to issue the calendar for the remaining six months of 2026 by 15 July.
The communication also requires each meeting to be attended on behalf of the bank by an officer of at least general manager rank heading human resources (HR) or industrial relations (IR).
Mint earlier reported that the Union finance ministry was working on a series of HR reforms across the 12 PSBs, aimed at reducing human interface and automating seniority-based promotion and transfer processes to improve transparency and workplace culture.
Queries emailed to the spokespersons of the DFS, Indian Banks’ Association, and the 12 public sector banks on late Tuesday evening remained unanswered till press time.
Increasing concerns
Banking unions have repeatedly flagged staff shortages, rising business targets, expanding compliance responsibilities, digital performance monitoring, frequent transfers, and growing customer-facing obligations as key contributors to workplace stress.
Employee organisations have also highlighted reported cases of suicides and stress-related deaths in recent years, urging banks and the government to strengthen employee welfare mechanisms.
Experts say that retirements, persistent vacancies and expanding business targets have created a talent challenge in many PSBs.
“Talent at leadership levels has been a significant challenge in the banking space over the past few years,” said Vivek Iyer, partner and regulatory ecosystem leader Grant Thornton Bharat LLP. “We expect this challenge to get addressed over the next 5-7 years, as the talent from the middle management levels matures to take leadership positions. In the meanwhile, the banks would need to relook at their compensation structures to incentivise talent.”
Jaideep Kewalramani, chief operating officer and head of employability business of TeamLease EdTech said the government's move is pragmatic, and the sessions must focus on measurable outcomes—like building talent supply chains, industry academia linkages, and driving talent mobility.
“PSBs must be equipped to compete effectively in a rapidly digitizing industry,” said Kewalramani.
Opposition from unions
The new directive has drawn objections from the All India Bank Employees’ Association (AIBEA), All India Bank Officers’ Confederation (AIBOC) and the National Confederation of Bank Employees (NCBE).
The three unions—which claim to represent more than 80% of the PSB workforce—have written to the DFS seeking a review of the instructions, arguing that they are inconsistent with the Industrial Relations Code, 2020 and could create confusion over which unions are legally entitled to negotiate with bank managements.
“The DFS communication has created avoidable apprehensions and may lead to serious industrial disputes and conflicts,” the three organisations said in the letter, urging the ministry to revisit and revise its instructions.
In a joint representation dated 14 July to the DFS Secretary, the unions sought clarification that the expression “recognized unions/associations” should refer only to bodies recognized under the Industrial Relations Code, 2020 or under existing bank-specific recognition arrangements.
The unions argued that the DFS communication should not be interpreted as conferring negotiating or recognition status on every registered trade union operating in a bank.
According to the representation, Section 14 of the Industrial Relations Code provides for recognition of either a Sole Negotiating Union, where one union enjoys at least 51% verified support, or a Negotiating Council comprising unions with at least 20% verified support where no union crosses the majority threshold.
The unions contended that registration of a trade union alone does not confer negotiating rights, and that existing recognition arrangements evolved through bipartite settlements, membership verification exercises and recognition agreements should continue.
They also argued that the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 already provide a framework for recognition of majority unions in public sector banks, and warned that extending structured meetings to all unions could create overlapping claims and lead to industrial disputes.
To be sure, the banking sector has one of India’s strongest organised labour ecosystems. Employee service conditions are negotiated through industry-wide bipartite settlements between the Indian Banks’ Association (IBA) and workmen unions, while officers’ service conditions are settled separately through Joint Notes.
The umbrella United Forum of Bank Unions (UFBU) has historically led industry-wide agitations on recruitment, wage revisions, pension, outsourcing, privatisation, staffing shortages and the demand for a five-day banking week.