Can we have peaceful and undisruptive banking services in India?

The strike by bank employees causes innumerable difficulties not only to the customers of banks but also to the general public putting the entire economy in disarray. Can the RBI take an initiative to find permanent solution to this?

Last week on 10-11th February nearly a million employees of both the public and the private sector banks were on strike to press for their demands. Their earlier wage settlement had expired on 30 October, 2012. As new settlement was not agreed to even after a lapse of 15 months, the bank employees had observed a day’s strike on 18 December, 2013 demanding early settlement. Despite a day’s strike, no agreement was reached and the conciliation meeting held before the Chief Labour Commissioner, between the bank employee unions and the Indian Bank’s Association (IBA) again failed to arrive at any consensus. Hence two days’ strike was observed by employees earlier this month.   
 

Read:                                                                                                                
About 10 lakh bank employees to go on strike on 18th December

Bank employees’ two-day strike hit transactions across India

Bank unions call two days strike as ‘total success’

 

How did the strike affect the banking public?
 

The representatives of bank unions said that the two days’ strike was a ‘total success’. "All over the country about 10 crore cheques worth Rs7.40 lakh crore could not be cleared. In Chennai clearing house, about 90 lakh cheques worth about Rs64,000 crore could not be processed. Government transactions, foreign exchange transactions and money market operations were also affected.  In many places, ATMs did not function or were dried up," said CH Venkatachalam, general Secretary, All India Bank Employees Association (AIBEA) in a statement.
 

Apologising for the inconvenience caused to public due to the strike, Union representative Mr Venkatachalam said, "Since IBA and government did not settle our demands, the strike has been forced on us. We are sorry that the banking public would have been inconvenienced by this strike but that was unavoidable due to the non-serious approach of the IBA and government to avert the strike by improving their offer on wage increase and discussing our concerns on the banking sector reforms."
 

As per the PTI report, commenting on the strike, the Finance Minister said, “I will appeal to employees and officers of banks to recognise that banks’ profits, banks’ earnings have other claims. While claims of officers, staff and employees must be duly acknowledged, and a fair and just (wage) settlement is arrived at, there are other claimants to banks’ profit”.
 

“It cannot be that all profits are used to declare dividend and to provide enhanced wages and allowances to bank employees. A significant part of retained earnings must be used to infuse additional capital, otherwise banks will not find the amount of capital that is required over the next five, 10, or 20 years,” he said.
 

Chidambaram said, “The capital is to take care of a number of things. Firstly, banks are obliged to declare a dividend, both to the majority owner of the bank and the other shareholders. Another part of retained earnings has to be infused as capital in the bank for furthering its business”.
 

Responding to the finance minister's statement that entire profits of banks cannot be utilised for enhancing wages of employees, Mr Venkatachalam said, "That is not our demand also. We are only asking for a reasonable increase in wages that too when banks are making good profits."
 

Reiterating that bank employee unions are ready to resolve the issues by discussions, he said, "The United Forum of Bank Unions (UFBU) is always open to resolve the demands by discussions and negotiations but IBA and the government should also be forthcoming. If the same negative attitude will continue, we will be left with no alternative than to further intensify the agitation. UFBU will be meeting shortly for this purpose."
 

Who is the ultimate sufferer in the bargain?
 

All said and done, there does not appear to be a solution in sight in the immediate future. Bank employee unions say that they are ready to resolve their demands through discussions and negotiations and the finance minister says that claims of officers, staff and employees must be duly acknowledged and a fair and just wage settlement should be arrived at. But what comes in the way for an early settlement is not clear to the banking public, who are at the receiving end of all the problems caused by the strike with none to save them from this chaotic situation.
 

Because of the strike by bank employees, it is possible that many depositors would have not received the interest on their fixed deposit on the due date, many would not have received the pension or annuity due to them, and many borrowers would have failed to get their loans disbursed when they needed the money badly, and many businesses would have suffered on account non-receipt of documents of title to goods or failed to dispatch the documents through the bank in time to their customers. One can go on and on to list the problems encountered by people due to the strike, which has been a recurring feature every five years. In short, the strike by bank employees causes innumerable difficulties not only to the customers of banks but also to the general public putting the entire economy in disarray.
 

RBI should take the initiative to change the way banks function today:
 

Unfortunately, Reserve Bank of India (RBI) has not got involved in this imbroglio and is a silent spectator to this happening so far. RBI, as the protector of the banking system and as the central bank vitally interested in the orderly functioning of banks in our country, should suo motu take the initiative to work out a system of putting in place. RBI should not only put out alternative channels for delivery of banking services but also automatic route of salary revision for employees without bilateral talks as stated below, by constituting a high level committee immediately to go into this entire aspect of wage negotiations in banking sector with a view to minimize the impact of such strikes on the society and the public at large. In order to follow the consultative process generally followed by RBI, the committee should be headed by the deputy governor of RBI and should consist of representatives of bank management, bank employees, bank customers from trade and industry and bank depositors and borrowers with the following terms of reference:
 

1.To identify various problems encountered by the public when the majority of bank employees go on strike and suggest remedial measures to minimize the inconvenience caused to the bank customers by making available essential services through alternate channels or through banks who are not part of the strike called by employees. Since the new generation banks are not a party to these settlements, possibility of routing some of the essential services through these banks to minimize hardships to the banking public can also be explored.
 

2. To suggest an out-of-the box solution to eliminate the confrontation between the employees and the management of banks by introducing an automatic route of salary revision for bank employees once every five years. For example, this can be done by a built in system of linking the rise in wages to the average of CPI/WPI/Core inflation index of the previous five years and with such other parameters as relevant for the banking industry, so as to give up the present system of lengthy bilateral negotiations which has been the root cause of recurring strikes and strife between the parties during more than last two decades. This could serve as a novel experiment in bringing down industrial strife in a country, where labour, one of the largest and important factors of production, can live in peace and harmony.   
 

Need for a quick resolution of imbroglio to save the economy from chaos:
 

Once the committee gives its report, RBI in co-ordination with the central government should quickly formulate appropriate guidelines for all to follow and drastically curtail the need for employees to go on strike and thus bring to an end the disruption in banking services happening today.
 

The banking industry today is under tremendous strain affecting their health due to a variety of factors and they certainly need a quick resolution of the dispute with their employees. The employees too are restless as their real wages have been eroded due to the rising inflation in the economy during the last couple of years and deserve quick settlement of their demands without any further sacrifice on their part. And the bank customers, who are the innocent victims of this industrial dispute and suffer for no fault of theirs, too deserve better deal.
 

Therefore, in the interest of all concerned and in its own enlightened self interest, RBI should not only come out with guidelines to minimize the inconvenience caused to bank customers in the unlikely event of bank employees observing strike again in the future, but also explore the possibility of avoiding the employer-employee conflict in the banking industry, which is taking an ugly turn every five years, causing immeasurable damage to the economy and inconvenience to the general public.  
 

Will the new young and dynamic Governor of RBI take up this unenviable task of putting a lid on this archaic system of dispute resolution in the banking industry by introducing radical changes in the way in which banks function today and lay a strong permanent foundation for undisruptive banking services in our country for the greater good of our economy and its people?   This will certainly herald a new era of peace and prosperity for all the stake holders in the banking industry, giving a boost to the struggling economy as well during this critical period in the banking history of our country.
 

 (The author is banking analyst and he writes for Moneylife under the pen name ‘Gurpur’  )

Comments
Simple Indian
8 years ago
The Govt should have enforced ESMA on Banking sector to prevent such mass strikes affecting not just the Banking customers, but the economy losing out heavily in the process. None of the essential services should be allowed to hold the entire economy to ransom like this. Besides, PSU Banks' staff are already well paid, considering their lack of accountability to customers and inefficiencies built into the system over decades since Banks were nationalized. Private sector Banks are far more efficient and accountable to customers, as they have to remain competitive and profitable - something PSU Banks aren't burdened with as such.
Vinay Joshi
8 years ago
Mr, Gurpur,

[By the way i’m no bank employee justifying it, in fact deploring it, make it known.]

Answer me how many strikes, ROUTINE, 25/30 yrs there?
Periodical, analyze. Cause, or even prior to that.
Most part of the time may be you were not in India, nor me earlier.

I’m reminded by a trade unionist tirade against the judges in the labour court asking them can you read Co.balance sheets? [who incidentally was responsible for closure of B’bay mills], which was a political aspect - ‘match fixing’!

In one way the Bank Unionists – apart from pay rise- MAY, may be justified as the Indian Corporate overleveraged, debt hangovers, banks dole out, [internal & external can be a risk to the economy] but their demands not met! Why IBA shy on getting a permanent solution on this aspect as well FinMin? 30/35 yrs scenario. WHAT’s NEW IN IT? ANYTHING TO BE TALKED?!?

Why Bank Unionists not talk of deterioration of Banks asset quality, 10% equivalent of INR58/60trn banking industry, NO WAGE RISE!?

When politics decide lending, so does ‘strikes’, decide political submission to suit all!

Why PSU banks not downsized? Analyse the strength prior to computerization & post.

SBI, biggest [-]34% earnings Q3FY14, apart SBI B/S, accrued interest from stressed sectors, only to SME exposure of bad / restructured loans 9%, if further provisioning done of Corporate sector, in international norms it can be a failed bank, as standalone. Govt. backed, sovereign diff.

Then in that case why QIP's least interested, not subscribed & LIC forced to by into SBI?

So in a way I ask you Mr.Gurpur, what’s wrong for agitation apart from other demands.

Mr. Sanjay Arya, Exect.Dir, United Bank [UBI under forensic scanner of RBI] has explicitly stated in an interview - quote ‘ Political interference a challenge for recovery..’ unquote.

If PC, says profits to be ploughed back, THEN WHY HE HAD ENVISAGED CAPITAL INFUSION OF 14KCr-FY13-14, not done, YET INTERIM BUDGET STATES 11.2KCR!?
[interim budget valid only till June 30,2014.]

WHEN WILL BASEL III norms be fulfilled?

Actually just announced merger of basic & DA by center can make the central govt. employees richer by 30-35% p.m!

When CM’s can agitate as activists, be it in Delhi or WB, trade unions have their right BUT NO VISION!

Today first three PSU banks – SBI –BOB- PNB or any other combination should amalgamate & make a highest capital adequate bank – as per int’l strength.

Today none of the respective trade unionist will allow ruling their fiefdom. This is a sorry state of affairs.

Finally Mr.Gurpur, UNDER WHICH PROVISIONS CAN RBI INITIATE ANY ACTION?
IN RBI GOVERNED BANKS, ALL ARE IN INDIA, SUO-MOTU- WHAT ACTION CAN IT TAKE AGAINST BANKS/ IBA FOR THEIR EMPLOYEES DELINQUENCY?
EXPLICIT LET IT BE KNOWN TO ME!

Mr. Gurpur, what is the mandate of RBI? I’m getting Banking Regulation Act.

MR.GURPUR HOPE YOU ANSWER ME.

Regards,
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