Confusion & consolidation

September 17, 2019, was no ordinary day for India's bank employees. All bank employees were waiting with bated breath for the outcome of the negotiations on eleventh bipartite wage settlement, plus an additional charter of demands between Indian Banks Association (IBA) and the United Forum of Bank Unions (UFBU), a forum of nine bank unions. Expectations were running high that a settlement would be reached on that day as the differences in the wage talks had considerably narrowed down with UFBU making a climbdown from 20 per cent wage hike to 15 per cent and IBA increasing its initial offer of 8 per cent to 10 per cent. It was widely hoped that the two sides would reach a deal at the midpoint of 15 per cent. But no deal was reached. The IBA increased its offer to 12 per cent but the UFBU rejected it saying that they would not settle at anything below 15 per cent hike.

Meanwhile, four bank officers' associations – All-India Bank Officers' Confederation (AIBOC), All-India Bank Officers' Association (AIBOA), Indian National Bank Officers' Congress (INBOC) and National Organisation of Bank Officers (NOBO) – had called for an all-India bank strike on September 26 and 27 to protest the merger of public sector banks and demanding expeditious settlement of wages and other issues. This is an intriguing development. Though these four officers' associations are also members of the UFBU, they had separately given a call for this two-day strike against the merger. They have also warned of an indefinite strike in the second week of November if no settlement had been reached by the second week of November. The main fighting unions within UFBU like AIBEA and BEFI have not joined this strike move. Why?

A retired bank employee informed that the AIBOC is known to be in the good books of the IBA and used to have cordial relations with the bank managements. They even supported the bank merger at the time of merger of SBI with its associate banks. They have now made a volte-face and decided to unilaterally go ahead with the strike only with some officers' associations.

On their part, the AIBEA leadership informed the bank officers' associations that they would join the strike if it was limited to the single point of bank mergers. The contention of AIBEA was that the other demands like wage settlement, 5-day work week and reduction in cash transaction hours, pension-related demands and fresh recruitment to reduce workload, etc., were already on the negotiating table and the complex negotiating process had not completely broken down despite repeated delaying tactics by the IBA and calling for a strike on these issues under talks would be a tactically unwise move as that would only give the IBA a handle to indefinitely postpone that talks and delay any immediate settlement.

In fact, bank wage negotiations are extremely complicated and there were diversions galore by the IBA. On the eve of the earlier round of talks, the IBA unilaterally announced performance-linked incentive (PLI). According to that, banks offered fixed pay up to 8 per cent and variable pay above that subject to subjective performance-based assessment by the management. As per the criteria for assessing the performance, employees of only six banks would qualify for PLI. Naturally, the unions strongly opposed this.

Now, the bank mergers hurriedly announced is yet another red-herring. One round of funds for recapitalisation had already been allocated and another major tranche of allotment is not urgently due. Merely merging two balance-sheets cannot produce a viable third one. So the red rag of mergers was being waved before the bank unions only to deflect their focus from eleventh bipartite wage negotiations, the retired bank employee said. He further added that the IBA is setting a trap and some bank officers' associations might walk into the trap but the fighting unions are smart enough to reverse the trap to put a permanent end to the talk of a merger. At best, they could only delay the settlement by a couple of months. Even some half-baked compromise deal with the officers' associations cannot be ruled out but bank managements are quite aware that the fighting unions would reject that. So at best, it could only delay the settlement.

"After all, 1 per cent of wage increase would add Rs 526.50 crore only to the monthly wage bill and meeting the unions demand of 15 per cent wage hike would at the most increase the annual wage bill by Rs 18,000 crore. For the public sector bank managements which 'gifted" double this amount to Nirav Modi and more than hundredfold of this to other corporates as reflected in the NPA mountains, this is no big deal. Their main worry is the backlog. They will have to clear the arrears from 1 November 2017. This the banks want to delay as far as possible", the retired bank employee added.

Other than this, the bank merger move is not justified by any well-considered economic rationale. Noted leftwing ideologue, Prabhat Patnaik has shown in an interview that mergers could not fiscally help the government much. Another study even by non-left economists led by Elena Carlettin has shown that the global experiences of bank mergers indicated that they were fraught with liquidity shocks. So it might not meet Modi Government's expectations of liquidity increase to come out of the economic slowdown. If this happens, even the repo rates might shoot up and lead to a hike in rates and further delay recovery from the slowdown. This study clearly predicts that the probable liquidity shocks of bank mergers—especially, the state-driven ones instead of the market-driven ones—are stochastic in nature, meaning they are random and unpredictable. The merger move could backfire. The fighting unions have not yet announced their own strike plans. When they go ahead with that, it would be a double whammy for the government and would further delay economic recovery.

(The views expressed are strictly personal)