When finance minister P Chidambaram met the top honchos of the 26 public sector banks (PSBs) for a quarterly performance review meeting in New Delhi October 22, they discussed a whole range of concerns of the sector, like the growing non-performing assets (NPAs), but a crucial item was missing from the agenda: the wage revision for about eight lakh bank employees that has been pending for a year.

While the red carpet was rolled out to receive the minister at the SBI office on the Sansad Marg, a few metres away from it the scene was quite different. Bank employees gathered at the nearby Allahabad Bank to stage demonstrations in the afternoon against the delay of wage revision announcement. The protest held under the banner of the United Forum of Bank Unions (UFBU), a conglomeration of nine unions of PSB employees, was to remind the FM about the impending wage revision (See box on the composition of unions).

“The government has already formed the seventh pay commission for the central government employees two years ahead of schedule, but there is no forward movement for the wage revision of banking staff,” says Sunil Bansal, who heads the Delhi chapter of the All India Bank Officers’ Confederation (AIBOC), the body representing officers of PSB.

On the same day, the bank staff also held demonstrations in different cities across the nation, against “delaying tactics” of the Indian Bank Association (IBA), the Mumbai-based management body of all banks. Unlike the central government where a pay commission deliberates on wage revision, in banks it is done through bipartite negotiations between the employees’ unions and the IBA (see box on evolution of bipartite negotiations).

The last time the bank employees’ wages were revised was in August 2010, following the ninth bipartite negotiations (implemented with retrospective effect from November 2007). Given its five-year cycle, the next revision is due from November 2012, and to decide on it, the new round, the 10th, of bipartite negotiations started late last year. There have been four meetings between the unions and the IBA, but the employees are now impatient. So on November 21, nine unions under the banner of UFBU is sitting once again to decide the future course of action.

The UFBU submitted its charter of demand on October 30, 2012 – a day before a new bipartite settlement due for implementation. But it was only six months (April 22, 2013) hence that the IBA held first meeting with unions on wage revision. 

The October 22 protests came after the fourth meeting, on October 11 in Mumbai, remained inconclusive. The bipartite talks have now meandered for a year and seem heading towards yet another protracted negotiation, like the ninth bipartite negotiations for the period 2007-12 that took roughly two and half years.

“Since there was no satisfactory progress towards wage revision and it is unduly delayed, the constituents of UFBU decided to express their dissatisfaction,” says MV Murali, convenor of UFBU, an umbrella body of all nine unions representing bank employees of 26 public sector banks.
Adds Bansal: “Against the backdrop of high inflation and astronomical price rise in the last few years, the bank employees were hoping and even promised of quick negotiations and settlement of a new pay structure. Sadly, the promise has not been fulfilled.”

The timely increase in bankers’ salaries has become an imperative also because of human resource concerns of PSBs. To take stock of these concerns, the government constituted a committee under the chairmanship of AK Khandelwal (former chairman and managing director of Bank of Baroda) in 2010, which submitted its report in 2012, flagging an acute shortage of talent in PSBs. It noted, “The fresh graduates are reluctant to join a government bank as they failed [sic] to provide concrete career growth path to their employees.” At a time when the government has pushing banks to open more branches in rural and semi-rural areas to fulfill its social objectives like financial inclusion, the PSBs are also hit by an attrition rate that has increased significantly in the last few years.

“With the advent of new private sector banks and foreign banks, the creamy layer of employees will leave PSBs to work for them. We are facing shortage. We are urging the government for an early settlement of wage revision,” says Harvinder Singh, general secretary of AIBOC. He says that in India, the new recruits generally use the PSBs as a launch pad for their career to move on to more lucrative jobs with private banks.

Reminiscing about the good old days when a job in a bank was a matter of status, Singh says the salary of the junior most bank officer was equivalent to class-1 officer of the central government till the early 1980s. “Now he gets Rs 8,000 less than the class-I officer in terms of the basic pay,” he adds.

After the first round of bank nationalisation in 1969, the government set up the Pillai committee in 1973 to standardise the pay scales, allowances and perks of employees of different banks. The committee submitted its report next year, and it was accepted in 1979, taking on board the suggestions made by a Study Group of Bankers. On the basis of the report, the government put the salaries of the bank employees on par with those of the central government staff. However, over the next decade, while the salaries of the central government staff went up thanks to pay commissions, the bank employees did not benefit as much from bipartite negotiations.

Prolonged talks: sticking points

As the negotiations went on for two and a half years last time, the current round might seem at only an early stage. “It has become a tradition to extend the discussion,” says Harvinder Singh of AIBOC. Bank employees fear that the current negotiations are likely to go the way of the previous ones. And the lurking danger for them is the upcoming general elections. “Given the complexities involved and the political scenario in the country, I don’t see the wage revision happening any time before the general elections,” says Yogesh Kumar, chief manager of Syndicate Bank.

“Wage revision is a complex process and involves discussions at various levels. It generally takes around a year or a year-and-a-half to take a final call and we'll have completed a year of discussions this month (November). We should just give it a few more months and things will be finalised,” clarifies Shubhalakshmi Panse, chairman and managing director (CMD) of Allahabad Bank who as a CMD of a PSB is a member of the IBA.

The bank unions blame the government and IBA for the protracted negotiations.

After the unions submitted a charter of demands to IBA on October 30, 2012, the two sides have been striving for collective bargaining. Union leaders point out that during their first meeting in late 2012, IBA had promised to settle the matter by August 2013. “While various other issues were taken up and discussed, IBA did not come up with any concrete proposal on our main demand for wage revision,” alleges SP Sharma, general secretary of All India Dena Bank Employees’ Co-ordination Committee.

The last meeting between the IBA and UFBU took place on October 11 in Mumbai, represented by the IBA core committee, RK Dubey, CMD of Canara Bank.
During the latest talks of October 11, the IBA side was led the head of its negotiations team, RK Dubey, CMD of Canara Bank. “In that meeting, we discussed some of the pending issues. We have requested the IBA to revise our dearness allowance (DA) compiled under 2001-series with the existing basic pay and revision of DA on monthly basis. The consumer price index (CPI) points under 1960-series are no longer compiled. Not a single issue has been resolved by the IBA. They (IBA) said that they don’t have the mandate to provide the quantum of wage revision. They will come back on the issues after talking to the government. It has only a postman-like authority,” accuses Singh of AIBOC.

The All India Consumer Price Index was 1st taken in the year 1960. Percentage of average price is taken as Consumer Price Index. As 1960 being the base year, CPI will be 100 on that year. Labour Department of India releases All-India Average Consumer Price Index Numbers for Industrial Workers every month (Base 2001=100). Bank employees D.A is calculated on CPI based on year 1960. The Linking Factor between 1982 and 2001 Series for the All-India is 4.63 & the Linking Factor between 1960 and 1982 Series for the All-India is 4.93. Difference between average CPI over average of previous quarter is called increase. AND for every increase of 4 points 1 slab at the rate of 0.15% is given as D.A)--- taken from website.

Previous to that, the meeting in August settled only two minor issues. Firstly, the latest wage revision will come into effect from November 1, 2012.

Secondly, there was an understanding on merger of DA at 4440 consumer price index (CPI) with the basic pay that is 401 slabs and construct new pay scales accordingly.

“These issues would have been settled on the submission of the charter of demand but it got delayed till August. It was obvious that the new wage revision will start from November 1, 2012, but it took nine months of the IBA to decide this. This is ridiculous,” complains Singh.

Second, on the merger of DA, Singh recounts that the IBA wanted to merge DA from November 2010. “If we had agreed to their version, there wouldn’t have any salary revision virtually,” he says. However, with much persuasion, the IBA has come in understanding to merge DA to November 2011, when the CPI was 4,440 with the existing basic pay.

The talks have been going so slow that “it has made bank employees suspicious of the IBA’s intentions”, says SS Shishodia, president of All India Bank Officers Association (AIBOA).

However, senior bank officials say that the wage revision process is not that easy either. “It is time-taking and discussions have been going on. Hopefully, a decision will be taken soon,” says PS Rawat, executive director of Canara Bank.

But how soon will a decision arrive, when another senior officer claims that banks are not in a good shape? “Yes, it (wage revision) is a lengthy process. And as of now the banks are not in a very sound financial condition. Hence, until and unless there is an improvement in the banks’ NPA levels, loan recoveries and profit margins, wage revision is unlikely to take place,” says S Raghu Vatsa Chari, chief regional manager of Indian Overseas Bank.

“In the very first meeting for negotiations, IBA chairman KR Kamath [who is also CMD of Punjab National Bank] came out with the condition that the salary structure can be best settled only on the basis of net profit of the banks,” recalls Shishodia, who was present in the talks. The unions rejected Kamath’s proposal. “Profit for me is gross profit. If banks are making good profits but net profits are less because of the government's policies, why hold employees responsible for NPAs? If we are responsible, we should be charge-sheeted,” says Shishodia.

In the last few years, there has been a substantial increase of bank NPAs. Chidambaram has blamed it on the economic downturn. “It is a function of the slowdown in the economy... In the year 2000, NPA was 14 percent... gross NPAs came down to a low of 2.09 percent in 2008-09. Since then, it was flat for two years and then the slowdown pinched and it slowly started creeping up. It is not a sharp rise — it is a rise still and this is what is a matter of concern,” he told the top banking officials on October 22.

The Khandelwal committee had been critical of wage negotiations. It said, “The Committee strongly feels that the present arrangement of industry level wage negotiations needs immediate review as wage payment in banking industry today has no relation to 'capacity to pay' of individual banks and further, individual banks do not have an opportunity to negotiate on such crucial issues as productivity, redeployment of staff, quality of discipline, trade union in practices, some unique problems of individual banks, etc. under the present arrangement.”

The committee also recommended considering cost-to-company (CTC) and variable pay structures in the banking industry on the lines of the private sector. When the IBA sought to broach the topic the unions opposed the concept of CTC and variable pay. “The existence of PSBs is not meant for commercial motive. The banks were nationalised to meet social objectives like poverty alleviation, green revolution, White Revolution and now financial inclusion and secure direct cash benefit transfer. How can banks earn profit when such social tasks have been entrusted? If a branch is opened in a village with a population of 2,000, you can’t expect to earn profit," says Harvinder Singh of AIBOC.

The unions for the first time have also demanded a revision of pension of retired bank employees – not revised since 1986. “A general manager of a bank who retired 10 to 15 years ago is drawing much lesser pension that any of his junior-most subordinate who retired in subsequent years. The pension of retired central government employees automatically gets revised while this doesn’t happen in banks,” says KV Acharya, president of All India Bank Pensioners and Retirees Confederation (AIBPARC).

After the October talks, there is no announcement of the further talks. Prior to 1992, the negotiations for wage revision used to start every four years. In the early 1990s, IBA and UFBU agreed to a new arrangement, in which the wage settlement is to be done every five years, devoting the one extra year to negotiations. “We agreed to the proposal but it has been the same story – it still takes two and half years to settle the issue,” says Singh of AIBOC.
A delegation of the UFBU also met Chidambaram on August 6, 2012, and apprised him of the increasing delay in wage negotiations. The FM promised to speed up the exercise, according to UFBU delegation, which was led by member of parliament, Basudev Acharia.

“The IBA delays the wage revision because after two years of talks, bank employees almost settle on whatever minimum they get in negotiations. Also, once the pay is increased, the employees get their arrears from the due date without interest. By delaying the wage revision, the banks save money the tune to crores in interest,” says Rajesh Goyal, former assistant general manager of Punjab National Bank.

“If nothing comes out in next few months, we will decide our concrete course of action, including a strike,” says Harvinder Singh.

Yet, from the IBA side, Canara Bank CMD RK Dubey maintains, “There is no deadlock. We have forwarded the demands of the unions to the government. The government has to formalize and indicate [its stance].”

(With inputs from Srishti Pandey)