Come 19 July, Indian banking industry will have a historical landmark. Bank nationalisation by Prime Minister Indira Gandhi will hit half a century. And as this measure emanating out of Indira Gandhi’s “Garibi Hatao” slogan matures at 50, all is not well with the banking industry. While a substantial section of government banking and finance machinery is inclined towards privatisation of banks, and merger of multiple banks into one, the employees are on the streets often for ameliorating their terms of employment, the most recent one being the 30-31 March two-day-long national strike for respectable wage revision (they have been offered 2% increment valid for the next five years).
The one million strong employees of all government banks, through their nine trade unions have decided to “celebrate” this day to protest against the growing signs and plans of privatisation of banks and for a higher wage revision and five-days-a-week work-schedule.
WAGE REVISION MOVEMENT
On 12 June, the United Forum of Bank Unions (UFBU), representing these one million bank employees met at Chennai to decide their next course of action after the national strike on 30-31 May, and this time the Forum intends to carry out a phase of public sensitisation on the issues at hand and also keep putting pressure on the Indian Bank Association (IBA) and Department of Financial Services (DFS), Government of India, apart from various political parties. The initial response of the IBA and DFS has been cold.
On 30-31 May, the nine trade unions of government bank employees, four being of officers and five of others, went on a two-day strike after rejecting the IBA proposal for a 2% wage-hike. The salary-structure of bank employees is fixed through a bipartite settlement, unlike Central and State government employees. After every five years, the salary is hiked to protect the employees against inflation. The last settlement for the period of 2012-17 was of 15%, which did not match the then Sixth Pay Commission. But this time, with the increment for the period of 2017-2022, which came only a few weeks ago, seven months delayed, the employees expected a parity with the new Seventh Pay Commission of the Central government. But they were offered a 2% hike, on the plea of the low profitability of banks.
Twenty-one public sector banks have around 85,000 branches in the country, with a business share of about 70%. Industry chamber Assocham said that the bank strike in May affected customer transactions worth up to Rs 20,000 crore. It also urged the government to come up with a stimulus plan for restoring the health of PSU banks. State-owned lenders are grappling with high levels of bad loans and as per reports their losses for the quarter ended March 2018 are set to hit a record Rs 50,000 crore, which is more than double the losses of Rs 19,000 crore in the preceding quarter ended December 2017.
The Chief Labour Commissioner (CLC) supported the issues and asked the IBA to respond positively. The CLC said that officers and employees had to be paid for their hard work and not on the basis of profit. The IBA representative said they would consider the revised offer, but requested the UFBU to quantify the demand. UFBU leaders quoted figures to prove how operating profits had doubled, staff expenses had reduced and business more than doubled.
The 2% wage hike will cost the banks an approximately Rs 500 crore, while the proposal given by the unions will cost around Rs 12,000 crore—which is surely open to negotiation. The IBA and the Central government are linking the issue with profitability, but there has not been any hesitation to write off Rs 2.41 lakh crore in the last three years, and gross NPA (Non Performing Assets) stands at Rs 6.41 lakh crore today, according to RBI figures, which was around Rs 3 lakh crore in 2014. For the last four years, banks have been earning operating gross annual profits ranging from Rs 1.3 lakh crore to Rs 1.6 lakh crore, but the net profit is being wiped out due to the bad loans, given not at the whims of employees and the faulty provisioning norms, but through political decisions.
As per RBI data of 31 March 2018, NPAs of government banks amount to Rs 6.41 lakh crore, of which corporate industry NPA is around Rs 4.7 lakh crore (73%), agriculture sector NPA is Rs 57,000 crore (9%), services sector is Rs 85,000 crore (13%), and retail sector is around Rs 24,000 crore (4%). It is important to note that the corporate industry loans were sanctioned by government appointed board level executives to corporate bodies such as Bhushan Steel, Lanco Infra, Essar Steel, Amtek, Monnet Ispat, Reliance, Adani groups, and to people like Nirav Modi, Vijay Mallya, et al. Agricultural NPA is mostly due to farm loan waiver policies by elected governments just before or after elections, and so such borrowers misuse loans as they have a sense of political entitlement. Services NPA is mostly like MUDRA loans, where the current Central government bars banks to take collateral, and hence banks cannot recover and the borrowers happily default. Retail NPA, accounting for around 4% of all NPAs, is the only NPA where a common branch level banker makes a sanction in the form of housing, car, personal loan et al. Hence, the one million banking employees find cheated today to be punished for the crime done by political decisions.
Further, the bank employees are the architects for fulfilment of all government aspirations through successful implementation of Atal Pension Yojana, Pradhan Mantri Awaas Yojana, Aadhaar-bank account linking, Mudra loan, Stand Up and Start Up projects’ funding, Jan Dhan accounts and the herculean work following the ill-advised demonetisation, during which some 19 bank employees died on duty.
There indeed should be parity, co-relation, uniformity and relativity of their salary with others in insurance and other sectors of the government. Further, the dissenting employees’ charter of demands has asked for a five-day working week and more facilities for women employees.
In an economy which clocks around 6% to 8% annual inflation, there is no justification of a 2% salary increment for all bankers as a constant for half a decade.
BANK PENSIONERS’ PLIGHT
There is also the issue of 5 lakh plus bank pensioners who are reeling under financial distress due to non-revision of their pensions ever since it was introduced way back on 1 January 1986. The Bank Pension Scheme at the same rate, was formulated on the basis of the Central Government Pension Rules in 1993. As facts stand, Central Pension Rules underwent changes as per the Central Pay Commission Recommendations of 1996, 2006 and 2016. Bank employees’ wages and service conditions (barring pension) too were revised in 1987, 2002, 2007, 2012 and it has further become due, talks for which are going on. Bank pensioners were ignored by the UPA government and the same continues till date under the NDA government.
Interestingly, bank pension payments do not have any bearing on banks’ expenses. Pension is paid out of income generated from pension funds, created and contributed to by bank employees and officers, while working. These funds are managed by banks through trusts. The pension fund is invested in tax free bonds and government securities. The pension fund of the banks are generating a huge income and leaving huge surpluses after paying the pension. So, the pension fund itself is robust, but the bank management is just sitting on pension fund and is in a denial mode.
Ujjwal K. Chowdhury is School Head, School of Media, Pearl Academy, Delhi and Mumbai, and former Dean of Symbiosis and Amity Universities. He is a regular commentator on various issues of Indian political economy.