The Hindu Business Line : Dialogue between banks and unions: Issues and non-issues

The provocation for the bank unions’ threat of strike in the recent past appears to be the proposed merger of the associates with State Bank of India, but pressure was sought to be built for a speedy and favourable wage settlement.

The issues listed for the dialogue are mergers of banks, outsourcing of banks’ work, a second option for pension, compassionate appointments and government’s stake in public sector banksThe unspoken apprehensions are, however, rationalisation of branches and consequential re-deployment or reduction of employees and loss of positions and power for some leaders.

Mergers

If Indian banks have to be strong, it is not merely to compete with the foreign banks which don’t have the inherent strengths and infrastructure or resources of the local banks. With the bruises of the sub-prime crisis still hurting biggies such as the Citi, Northern Rock or Societe Genarale, not many may troop in.

With the government’s control over the PSBs and curbs on share holdings in banks continuing, even after mergers, the fear of handing over the banks to the foreign investors appears to be far-fetched. The recent contribution of the government to the SBI’s rights issue should put such fears at rest for the time being. In fact, many small and weak banks are targeted for takeover or mergers. The government too desires to privatise the weak and the loss-making units. It is, therefore prudent to make the PSBs strong enough to ward off such threats.

In the context of market dynamics, growth will come through elimination of in-efficiencies, redundancies and wastages in utilising resources. The classic example is that of the SBI and its associates. Eight members of the same family fight for business, cutting each other’s throat in the process. And what a duplication and waste of efforts and resources

Outsourcing

No doubt outsourcing will bring down employment and promotional opportunities. But outsourcing too creates jobs and wealth, though not on the same terms or of the same magnitude. Banks seem to have overdone entrusting jobs connected with core responsibilities of credit management, such as evaluation of projects, credit rating, scrutiny of documents and valuation of properties, stock inspection and valuation, recovery etc. Banks are comfortable and it suits the unions too, but even the wage settlement itself is outsourced to IBA!

Introspection would reveal that outsourcing is an off-shoot of the restrictive practices and unreasonable demands that prevailed in banks. Technology had been resisted for long, recruitment of skilled and knowledgeable persons at market rates had not been allowed and horizontal intake at middle and senior levels is a taboo. There is a radical shift in the customer demands and preferences and banks can’t afford to remain archaic and get reduced to the status of a piece in a museum. But for the government support and recapitalisation in a big way, many PSBs would have been in deep trouble.

Pension

A large number of employees who opted for Provident Fund would now be happy to opt for pension. The decline in interest rates and the longevity factor have influenced the thinking of many. In reality banks have not been able to provide for even the existing liabilities. Despite the leeway given by the RBI to provide for the liabilities over a period, if the actuaries and auditors rebel, many banks can’t even publish their balance sheets. Down the line, banks will be left with no resources to meet the obligations of future pensioners. A committee of actuaries is reportedly looking in to this issue.

Government’s stake

Irrespective of the ownership, the banks which deliver cost-effective services would survive. Mere branding as public sector or private doesn’t add to their safety or efficiency. Employees too are aware that service, and not the tag, would save the day for them. The story of Indian Bank and Punjab and Sind Bank can’t be forgotten easily. To survive, the banks need to be strong and healthy.

Compassionate appointments

The concept of compassionate appointment was purely sentimental, emotional and of assumed moral responsibilities. In the highly competitive environment banks can’t be compelled to appoint persons who may not fulfil the requirements. Specially qualified and skilled persons are required for supervisory posts. Compelling the banks to appoint an unsuitable dependent for life, because of the unfortunate death of an employee on the verge of retirement, is not justified.

Even the Supreme Court, on more than one occasion, made it clear that compassionate appointment is not a matter of right, and in genuine cases where the family is in distress and in penury, banks may help.

It is a good augury that IBA and the unions have agreed for a dialogue on all these issues. There has to be appreciation of ground realities and decisions would have to be arrived at with pragmatism. Besides the ability to pay, the wage settlement has to take into account the market conditions and the need to retain talent. An early settlement would mean resumption of harmonious relations and readiness to face competition on the horizon. Employees’ interest is not divorced from that of the organizations they serve. They must strengthen the banks for their own future and prosperity.

(The author is a former Managing Director of State Bank of Mysore and is accessible at: murthy@mandavilli.com)