<div><em>To protest at North Block during Parliament’s Winter Session, writes <strong>Raghu Mohan</strong></em></div><div> </div><div>By the end of this fiscal, bank unions would have fine-tuned their strategy to take on North Block and its high priest, Arun Jaitely, on what they consider to be “no-go zones”. The first flash point -- the privatisation of IDBI Bank -- is well upon us; it’s also a forerunner of what’s in store.</div><div> </div><div>Did you know that IDBI Bank staffers held nation-wide protests the week gone by? The bank has about 30,000 plus staffers, but over a lakh from other banks – state-run and private banks – joined in to show solidarity. It was not captured in the media as it was held after office hours and did not affect banking transactions. IDBI Bank staffers (each one of them) are now to write to Jaitley that what’s being sought to be done to the bank is unfair. Silly, you might say.</div><div> </div><div>Okay, get this now. Bang during the Winter Session of Parliament, a demonstration is to be held before North Block (the unions are working on a suitable date!). After that, it’s anybody’s guess how it’s going to escalate; and you anyway have an alphabetic soup of unions to deal with.</div><div> </div><div>Says S Nagarajan, general secretary of the All India Bank Officers’ Association (AIBOA): “In the larger interest of the industrial development of the nation, the All India IDBI Officers’ Association (AIIDBIOA) and All India Industrial Development Bank Employees’ Association (AIIDBEA) under the banner of United Forum of IDBI Officers and Employees have embarked upon organisational forms of action to ventilate our categorical opposition over the contemplated move of the Government of India to privatise IDBI bank by dilution of its share-holding to below 51 per cent”.</div><div> </div><div>It will lead to the inter-twined -- mergers of state-run banks, transfer of Centre’s stake to a Bank Investment Company (BIC), and bank-wise wage settlements. Simply put, from here on, it’s only a matter of time before the powder keg explodes. You can brace for a series of strikes, and long weekends!</div><div> </div><div>But before we proceed, let’s get this clear -- there is no way on earth that the Centre can continue to hold 51 per cent stake in state-run banks or what is called in bureaucratese as “public sector banks”. Even without the additional capital pressures due to Basel-III capital norms (which kick in from fiscal 2019), the Centre would have found it difficult to retain its 51 per cent stake in state-run banks given the state of the fisc and the competing demand for funds.</div><div> </div><div><strong>Not Just A Blast From The Past…</strong></div><div>Bank unions contend the move to privatise IDBI Bank – cut the Centre’s stake in it to under 51 per cent – is in violation of the assurance given during the debates on the IDBI (Transfer of Undertaking and Repeal) Bill (2002) in the Lok Sabha on 4th December 2003; it was passed four days later. In the Rajya Sabha (15th December 2003), then finance minister, Jaswant Singh, said: “When IDBI converts into a bank after the approval of Parliament today, it will immediately become subject to banking regulation… and there it is mandatory. Unless that is amended, how can IDBI shareholding be reduced below 51 per cent?</div><div> </div><div>You have another matter of detail the unions highlight. IDBI Ltd was set up in 1964 as a development finance institution, but functioned as a department of the Reserve Bank of India (RBI) till 1976; after that it became an undertaking of the Centre (public sector). When it reversed merged into its offspring IDBI Bank (just like ICICI Ltd did into ICICI Bank in December 2001), Mint Road classified it as “other public sector banks” – a brand new category. Banks under this category (there is only IDBI Bank under it as on date) were to receive the same benefits under Section 10(23D) of the Income Tax Act (1961) as was made clear in the Explanatory Circular for Finance (No 2) Act (2009) dated 3rd June 2010. The unions’ stress all this to prove that what applies to other public sector banks (or state-run banks) holds true for IDBI Bank also. Why then the rush to dilute stake to under 51 per cent in IDBI Bank even as the Centre says it will not do so in other banks owned by it?</div><div> </div><div> </div><div><strong>It Is Potent Too</strong></div><div>IDBI Bank is a test case for all major issues in banking, especially in state-run banks. The call for mergers among these banks, and, in particular, the move on the part of a few of them to offer stock-options will only make matters worse. Bank unions see this as an attempt to dilute their bargaining power. Mergers and new-age banking based on technology will lead to large scale redundancies as it will call for a different kind of staffing; stock-options will render collective bargaining (in which the unions play a key role) to the dustbin of history.</div><div> </div><div>Let’s take mergers first. We are sometime away from mergers between state-run banks, but you can get a sense of what’s set to unfold. The new generation, Kotak Mahindra Bank (KMB; set up in 2003) had no union problem, but ever since it took over ING Vysya Bank last year, it’s reared its head. That’s because ING Vysya (an old private sector bank) had one; they have now migrated to KMB. Worse, for the first time after the new private banking licensing policy of 1993, unionisation is all over the place in these banks.</div><div> </div><div>On 17th August 2015, AIBOA -- the second largest union of bank officers' -- launched the Private Sector Bank Officer' Forum (PSBOF) in Bengaluru.</div><div> </div><div>“The growing concern of the existing workforce is hovering round a host of issues like contractualisation of permanent jobs, compulsory conversion of Scale-III officers under the C2C (cost-to-company) concept, outsourcing of banking functions, discrimination in performance-linked bonuses, and non-recruitment of staff against permanent vacancies”, says S Nagarajan, general secretary-AIBOA; he also looks after PSBOF.</div><div> </div><div>It’s reached proportions you could not have imagined. AIBOA has taken up the cause of some two dozen employees at Antwerp Diamond Bank’s operations in India – basically Mumbai. This follows its takeover last September by the Brussels-based KBC Group when it said it would wind down its loan portfolio and activities across the world. KBC decided to do so after it failed to sell ADB to the Shanghai-based Yinren Group. "Given that the sale of ADB to the Yinren Group could not be successfully completed, KBC has decided, in implementation of the agreement made with the European Commission, to run down the loan portfolio and activities of ADB in a gradual and orderly manner," ADB told the world in a release in September 2014.</div><div> </div><div>You may say the unions managed to ensure that ADB (read KBC Group) did not down shutters in India by end-December 2014 as threatened happened because its local management had no stomach for a fight with our bank unions. But when was the last time you heard of a union picking up cudgels on behalf of a small European bank, boutique at that?</div><div> </div><div>It can only get worse when state-run banks merge when issues more complex than in the case of KMB-ING Vysya Bank merger crop up. Now on to the question of compensation.</div><div> </div><div>The State Bank of India’s (SBI) move in July 2015 to seek the Centre’s nod to offer three per cent of its profits to its staffers will be the death knell for the four-decade old Bilateral Wage Settlements. Wages and terms of service in state-run banks have been based on uniformity from the days of The First Bipartite Wage Settlement (October 1966). This “collective bargaining” between unions and the Indian Banks’ Association (IBA) -- a club of predominantly state-run banks – has led to the comical: these bankers fix wages and then crib about poor pay.</div><div> </div><div>Now bank unions may say that the Bilateral Wage Settlement is fair; does not discriminate between staffers of different state-run banks, but the truth is all these banks are not of the same standard nor are their financials. Rather uniform wages have acted as a drain on several of the weaker state-run banks. In February 2015, the United Forum of Bank Unions (UBFU) wailed that “IBA is not giving any cognisance to the difficulties that are faced by the employees on account of high rate of inflation, which has eroded the salaries of the employees to a great extent and the wage increases considered in other similar public sector undertakings despite their low profits”.</div><div> </div><div>Yet when SBI made public what it intends to do this July, the very same unions had a different, but rather ingenious take -- that all state-run banks should also do the same, but with IBA in the middle of it! Of course, you may reason that union power is on the wane and point to the fact that bank managements did not move a muscle earlier this year when UBFU gave a call for a four-day bank strike (from the 25th to 28th February 2015); or threatened an indefinite strike from 16th March onwards. All that will change in the days ahead.</div><div> </div><div>You also get to see strange bedfellows. Bank unions are being strategically sought to be used by private sector banks to recover non-performing assets – the more noise they make, the better for these banks; the bulk of this mess is after all in state-run banks. “This is a nonsensical attitude”, says Vishwas Utagi, general secretary-All India Bank Employees Federation (AIBEA). His point is state-run banks account for 76 per cent of all banking assets, so naturally, they will have more NPAs in absolute terms.</div><div> </div><div>“The private sector or India Inc as the media calls it, borrows from state-run banks, takes them for a ride, and now private banks bosses want to use unions to scare them. Wonderful! We also have a government that chastises state-run banks for NPAs, but not private borrowers, yet wants to privatise state-run banks. You think all this is very clever?” asks Utagi.</div><div> </div><div>The proposed protest before North Block during the upcoming Winter session of Parliament may see other comers join in. Recall that a week after Jaitley inaugurated a seminar in Mumbai in August on agrarian distress, there came a strike call from a clutch of banks which were set up to service rural India. Nearly 1.25 lakh employees and officers of 56 Regional Rural Banks (RRBs) spread over 20,000 bank branches want to stop their privatisation; they have threatened a two-day strike during the Monsoon Session of Parliament. There was a test-run strike on 30th June 2015 by the United Forum of RRB Unions.</div><div> </div><div>Connect the dots -- bank unions are going to play hard ball.</div><div> </div>
BW Reporters
Raghu Mohan is an award-winning senior journalist with 22 years of experience. He has worked for BW Businessworld since December 2006, and is currently its Deputy Editor. His area of expertise is banking – commercial, investment, and the regulatory. Previous stints include those at The Financial Express and Business India.
