Banks, unions near deal on wage hikes – AIBEA
Mumbai: Anup Roy 26 1 2015
Tenth round of the negotiation process—which happens every five years—is now on; IBA has indicated that it will be closed by mid-February
Bank unions and the Indian Banks’ Association (IBA) are close to striking a wage deal that has been negotiated for the last 27 months, aided by emerging flexibility on both sides and pressure from bank workers. Bankers too are looking forward to a solution as repeated strikes affect banking activities.
The tenth round of the negotiation process—which happens every five years—is now on, and the IBA has indicated that it will be closed by mid-February. Such deadlines have been missed in the past, but this time the unions are facing pressure from employees.
While the IBA started the negotiation process with a pay hike proposal of 5%, unions demanded 25%. Negotiations largely stalled in 2014, and employees stayed off work several times. The IBA’s latest offer is 12.5%, while unions have come down to 19.5%. In 2010, the last time wages were settled, the hike was 17.5%. At that time, however, the hike included pension and gratuity, while this time the hike is being calculated only on the payslip component. Including pension and gratuity, the hike proposed now is above 12.5%. In absolute amount also, the proposed hike is bigger.
Excluding pension, the hike works out to Rs.3,938 crore for the banking industry. Including pension, the proposal will cost around Rs.7,000-7,500 crore, said C.H. Venkatachalam, general secretary of the All India Bank Employees’ Association (AIBEA). Including pension, the hike last time worked out to Rs. 4,816 crore for public sector banks. Excluding pension and gratuity, the hike on the payslip component was Rs. 2,980 crore.
The amount offered is indeed more, but the wage has to take into account future inflation also, Venkatachalam said.
Vishwas Utagi, Maharashtra convenor of United Forum of Bank Unions (UFBU), the umbrella organization that is heading the wage negotiation, however, said the increase is not much when compared with the increase in banks’ business and profitability.
IBA chairman T.M. Bhasin did not respond to Mint’s text message, or return calls, but some bankers aware of the talks said banks are not willing to make more concessions. People with knowledge of the matter said the government has also given instructions to settle the hike at around the present level offered by the IBA. Anything more will be hard to secure and the government will act tough if the unions resort to prolonged strikes, they said.
According to the people, the maximum the unions can win will be a 14% hike. Venkatachalam said the 12.5% offer is unacceptable, while Utagi said anything less than 19.5% will not be acceptable.
However, Venkatachalam said that if banks offer other benefits such as housing, regulated timing and higher transport allowance, the unions can dilute some of their demands.
Unions refuse to buy the argument that banks don’t have much money to spare. According to their leaders, the pension corpus of all nationalized banks and associate banks as on March 2014 was at Rs.1.14 trillion, and its interest earnings was about Rs.8,557 crore, against the pension outgo of about Rs. 7,235 crore. Hence, the surplus of Rs.1,322 crore can be included in the wages.
The operating profit of banks, too, has increased in the last five years. The 24 listed public sector banks had an operating profit of Rs.2.57 trillion in March 2010. It has increased to Rs. 4.72 trillion in fiscal 2014. Average business per employee in this period has also increased toRs.14.36 crore in fiscal 2014, from Rs.9.15 crore in fiscal 2010.
These factors are prompting the unions to demand a higher increase in wages, even as bankers say numbers don’t tell everything. No banker wanted to be identified for the story, but they pointed to the capital pressure on banks. Banks have barely managed to maintain capital specified under Basel III norms and with an expected credit pickup, they will need more capital, they say.
Bankers say demands such as five-day working week, housing for all or full rent reimbursement are unreasonable. However, IBA has agreed to provide full reimbursement on medical expenses.
Analysts say the bad debt situation in public sector banks and additional provisioning for pensions have tied banks’ hands.
According to Rakesh Shinde, analyst with Bonanza Portfolio Pvt. Ltd, the present wage offer is handsome given the current context. He expects the offer to be sweetened by a maximum of 1-1.5 percentage points.
“Public sector bankers do enjoy a number of facilities that their private sector counterparts don’t enjoy. The perks and job security offered to PSU bank employees don’t compare with private sector peers, who have a much higher productivity ratio when compared with public sector bankers,” Shinde said.
As per latest RBI data, profit per employee in private sector banks was Rs. 10.7 lakh in 2012-13, compared with Rs.6.3 lakh for public sector banks. Meanwhile, employees are getting restless.
“Given the kind of hours we put in, the pressure we handle, we deserve a hike of 25% and nothing less. But we know the hike will be a lot less,” said a mid-level manager with a public sector bank in Mumbai. The banker expects a hike of 15%.
“My take home is Rs. 55,000 per month in a city like Mumbai, where I am not able to save anything. People who work in the private sector in my level earn four times this,” said the manager.
Even though employees get all the arrears, it won’t carry interest. Employees participating in strikes also lose the day’s salary.
Venkatachalam acknowledged that the pressure is immense but added the negotiation cannot be settled at the IBA’s terms. “If they are unwilling to increase their offer, we will intensify our strikes,” he said.