Wednesday, March 22, 2017

Bank Officers’ Unions want pay at par with the Central Government Officers

Demands include 5-day banking, PF to be calculated
on total salary and allowances, not only on basic pay

Mumbai, March 21: At a time when the government is contemplating cutting employee benefits to 10 laggard public sector banks, bank officers have demanded that they should be given revised basic pay at par with central government officers on the same principles of 7th Pay Commission.

The negotiations have not started yet, as not all banks have given the mandate to Indian Banks Association (IBA) to negotiate on their behalf.

Meanwhile, United Forum of Bank Unions, the umbrella organisation of bank unions, is yet to appoint coordinator for negotiations. But unions on a standalone basis have started to demand high emoluments. At the end of December 2016, the gross bad debt of the banking system crossed Rs. 6 lakh crore and the total stressed assets is estimated to be more than Rs. 9.5 lakh crore.

The government on March 16 shot a letter to 10 banks stating that capital infusion in these banks would depend upon quarterly milestones and only after these banks sign a memorandum of understanding with unions to sacrifice employee benefits should there be a need.

The 7th Pay Commission had recommended overall 23.55% hike in basic plus allowances. The government had accepted 14.27% hike in basics, while the allowanced would have to be decided later. According to reports, allowances could be decided in this month itself.

The current wage pact comes to an end in October. The last wage negotiation, pending since 2012, was settled in May 2015 at 15% hike. This time the government wanted to finish the process early and so it prodding banks to start the negotiation process, starting January of 2016, but banks dilly-dallied. Finally, in December 2016, the government shot its fourth letter to banks to start the process with the unions. Still, not all banks have given the mandate to the IBA. The State Bank of India (SBI), for example, will give the mandate to unions only after the merger process is over in April.

According to sources, 16 banks – all from the public sector - have given a mandate to the IBA to negotiate on behalf of banks. Five banks, including the SBI, Dena Bank and Bank of Baroda are yet to send mandate. The SBI will perhaps send in April after integration with associate banks, sources said.

The IBA will form panel and can start the negotiation with unions only after its gets all the mandate, an official at the IBA said.

The letter has gone to the IBA from by a joint committee of All India Bank Officers’ Confederation, All India Bank Officers’ Association, Indian National Bank Officers’ Congress and National Organisation of Bank Officers.

In their demand letter, these organisations have also demanded very steep hikes in dearness allowances (DA) and wage increases, for example, merger of special allowances with dearness allowance as on 31 October 2017, with existing basic pay. And have asked for a revised DA formula “with provision for automatic merger and improvement in compensation against price rise.”

Besides, an allowance “equal to amount of last drawn increment should be granted every year after reaching a maximum in the scale,” and “date of sanction of annual increments should be on January 1 and July 1 every year,” are also in the demand letter.

There are also such demands as two months’ salary to compensate expenses on transfer and payment of lump sum amount of transfer to meet the education expenses of children.

Out of 34 demands, there are provisions for improvement in leave travel concession and making the mode of entitlement as “air travel to all the officers, and executive class for senior executives.”

Also, the unions are back in their demand of five-day banking and Provident Fund calculation at the rate of 12% of the total salary and allowances. Plus gratuity at the rate of one month salary and allowances, without any ceiling. According to the income tax rules, provident fund is calculated only on the basic salary. Gratuity is calculated on 15 dayss. Besides, the unions want abolishment of new pension scheme and roll back to the old pension system.

“Unions always demand the moon and scale down to a laughable level,” said a senior officer who is part of a union. “Bank books have deteriorated since 2012 (when the last wage pact got implemented) and banks can’t do deficit budget like the government. What will happen is that government will refer the wage structure to the Pay Commission and unions will have absolutely no role in the process,” said the senior executive, who did not wish to be named.

If the commission gets to decide on bank pay, the chances of any hike will go for good, fear some union members.

Charter of Demands - Highlights: 
  1. Revised basic pay at par with central govt officers
  2. Revised DA formula automatically adjusting price rise
  3. Allowance equal to last drawn increment to be granted every year after reaching maximum in scale
  4. Two months’ salary to cover incidental expenses on transfer
  5. Payment of lump sum amount on transfer to meet education expense of children
  6. Leave fare compensation with entitlement of air travel for all officers and executive class for seniors
  7. Provision for crèche facility/flexi timings/work from home for women employees
  8. Five-day banking
  9. Family should include father in law and mother in law, brothers and sisters (divorced or deserted)
  10. PF to be calculated on total salary and allowances, not only on basic pay

Wage Revision- Broad Summery of the Charter of Demands by Officers' Unions

Wage Revision- Broad Summery of the Charter of Demands by Officers' Unions

Arundhati Bhattacharya: Why should there be different set of rules for public sector banks?

Mumbai, March 20:  Arundhati Bhattacharya, chairman, State Bank of India (SBI), will create history on April 1 when all five associate banks will merge with itself — in the largest such exercise in the banking sector — to blossom out as a single entity. She created history in 2013 when she rose from the ranks and took over as the first woman chairman of the 211-year old bank.

In an exclusive interview, she tells Manju AB that her life’s journeys are never with a complete roadmap but with a conviction that challenges can be tackled and goal post is never too far.

Is it necessary for SBI to demand a high monthly minimum average balance (MAB) of Rs 5,000 in savings accounts?

Arundhati Bhattacharya: There is an interest of 4% paid on savings bank account. Suppose someone is earning a salary of Rs 15,000, then for three days his account can fall below Rs 5,000. If you have Rs 60,000 in your account, you can fall below Rs 5,000 for many days, so it is the average of all the days in a month. In the urban areas, it is Rs 3,000, and in semi-urban areas, it is Rs 2,000. In rural areas, it is Rs 1,000. The Jan Dhan is zero balance.

According to RBI data, the Jan Dhan accounts have deposits of Rs 74,600 crore giving banks a free float?

Arundhati Bhattacharya: Yes, these accounts have money, but there are no restrictions on withdrawing the money. We pay 4% interest on these deposits. Every account is accompanied by a RuPay card which cost the bank about Rs 68 and the ATM infrastructure has to be built where every transaction costs Rs 18 to be paid to the card companies. We allow five free ATM transactions to our customers if they are using other bank ATMs.

Was the cost of running the demonetisation too expensive? Some private banks had shut their ATMs after the government waived off all transaction charges?

Arundhati Bhattacharya: The cost of demonetisation is pretty large. During the time of the demonetisation, it was the PSU banks which served the people. In many places, only the SBI ATMs were open. We refilled the ATMs regularly. Though the government waived off transaction charges on ATMs, we had to pay the card companies. The sheer logistics of transporting so much cash was quite large. Why should there be extraordinary expectations from the public sector when we are in the forefront of nation building?

HDFC Bank recently claimed that they offer five-star services...

Arundhati Bhattacharya: I don't accept that the private sector services are five-star and our services are not. I do not accept that at all. No one complains when the private banks charge high rates. Penalty for not maintaining minimum balance in a private sector bank is anywhere between Rs 450 to Rs 790 per month while for us it is Rs 20 to Rs 100. Why should there be a different set of rules for the public sector banks? Our internet banking site is by far superior to the others. It is the fifth most visited financial site globally. You don't achieve this by running shoddy services.

What will be the role of SBI’s subsidiary, Infra Management Solutions (SBIIMS)? What is SBI’s real estate valued at? Are you open to selling a part of this?

Arundhati Bhattacharya: The real estate is valued at Rs 35,000 crore excluding the assets of the associate banks and about Rs 15,000 crore is added to our tier 1 capital. We are also open to selling our real estate in areas where it is in excess and unutilised. This company will be manned by engineers and construction specialists who will negotiate on our behalf and also look after the upkeep of these premises.

Are you worried for your loans to the telecom sector? Reliance Jio, for instance, is running the longest promotional scheme to capture customers. Have you spoken to the government?

Arundhati Bhattacharya: Not just for us, it should be a matter of concern for the government as well as they are also loosing revenue because of these schemes. We have not exactly spoken to the government in so many words. But we have flagged it off at various quarters that banks have a substantial exposure to the sector. When you have such schemes, there is an impact on competition. Quarterly results of major telcos are pretty impaired. So, it depends on how long these schemes will run. If it is for a short period of time, these people can surely weather the storm.

Any anxieties about the mega merger?

Arundhati Bhattacharya: We are all set for the merger. We already had a template as two banks were merged. So, we worked on the template left behind by our predecessors. Our books of accounts are merged. Relocation of banks and ATMs will happen as we expand our foot print into new areas. We may take some branches a few kilometers away from where they are now. Branches which are set up in clusters in the older part of the cities may be repositioned in the newer parts of the cities. I feel the younger people in the associate banks will be happier to be part of a bigger bank like SBI. The older lot may find it difficult to relocate, and so, we have a Voluntary Retirement Scheme (VRS). But, we are not forcing anyone.

The total NPA pile is likely to cross Rs 9 lakh crore at the end of March 31, and SBI has more than Rs 1.5 lakh crore...

Arundhati Bhattacharya: Post the merger, SBI may end up with Rs 1.6 lakh crore gross NPAs, according to the consolidated figures, we have up to December 31, 2016. We will meet the RBI deadline of March 31, 2017, to clean up our balance sheet. Resolutions will also happen.

But isn’t the issue about over-leverage? Bhushan Steel and Essar Steel would have about Rs 1 lakh crore of loans taken together, almost equivalent to the total stressed debt in the sector?

Arundhati Bhattacharya: Yes, which is why we are saying that there should be a valuation of these assets. We should take some pain. We should take some write-downs and also some conversion of debt to equity. Reduce the debt burden. There is no point running these accounts to the ground.

In the restructuring schemes like Scheme for Sustainable Structuring of Stressed Assets (S4A) and Special Drawing Right (SDR), the share prices soar initially, when the schemes are getting approved by banks and then plummet when banks take over part of the shares?

Arundhati Bhattacharya: If you look at the SDR scheme closely, the Securities and Exchange Board of India (Sebi) has already given an exception. The conversion of debt to equity is allowed at par value and it will not trigger an open offer if we go beyond a certain limit. We have requested these provisions to be provided for in corporate debt restructuring (CDR) and S4A. The 10% conversion of debt into equity in a CDR is too less.

You want the CDR terms to be diluted?

Arundhati Bhattacharya: Yes. Not necessarily be diluted but changed if you allow the Sebi formula for conversion to be allowed into SDR to CDR. It is not dilution. If bankers have the right kind of mechanisms, we will be able to turn around these units. What is the basis of seven-year turnaround in CDR? It should be more like the time given under 5/25 scheme