Saturday, February 28, 2015

Wage Settlment From Different Angle

Controversies of Interpretation of Clauses of Agreement Dated 23rd February 2015  -  Some Questions That Needs To be Answered Immediately by UFBU Leaders- ByRajesh Goyal

I sincerely thank our readers for seriously analyzing my article titled “UFBU Seems To Have Made A Complete Sell Out to IBA Specially For Officers ?   The fate of Bankers Retired / Retiring Between 1st November 2012 and 31st October 2017 Seems To Have Been Completely Sealed ?.    Some of our readers have agreed with me but large number of others have written that my assumptions are wrong.  I am happy my article has stirred the minds of the bankers who are usually a mute spectator.

The above article seems to have completely thrown the union leaders into disarray, and they appear to be in damage control by blaming for spreading misinformation.   However, none of them is ready to issue a circular clarifying the controversial clauses in the agreement  and giving their own version of the interpretation.
We keep on getting certain feedbacks about our activities.  One of the interesting feedback is from one of our followers who has sent this email to us quoting  one Mr Tushar Kanti Hazra  [General Secretary of the Bangiya Gramin Vikash Bank [RRB],Officers Confederation[a wing of AIBOC] :  “Who is Rajesh Goyel? He has nothing to do except to mislead the officers and employees of the Bank. One single individual can not be more prudent than a collective leadership like UFBU. HE HAS NO STAKE EITHER IN THE INDUSTRY OR IN THE MEMBERSHIP BUT UFBU HAS. LET THE FINAL SETTLEMENT COME. PLEASE WAIT WITH PATIENCE AND DONT BE CARRIED AWAY BY THE NEGATIVE CAMPAIGN OF THE PEOPLE LIKE MR. GOYEL”.
I am not shocked by such comments as union leaders and politicians are in the habit of blaming the crusaders for the mistakes and scams done by such union leaders / politicians.   However, I would have preferred him to request his top leadership to issue clarification about 2% rise in Basic Pay issue and close the discussions instead of rhetorically telling his followers that Rajesh Goyal is misleading the officers.   We are not perturbed by such bashing and we will continue to analyse and create awareness among bankers for various issues which are their major concerns.   It is for our readers to decide whether they like our analysis or not.  The day they will feel that we are biased, we will see fall in our followers.
Frankly speaking, I have achieved the purpose I intended while writing the above article.  I had noticed the dangers of interpretation of the above agreement, and therefore, decided to make a chart so that Aam Banker can understand the implications of a bad interpretation as it is usually done by IBA.   The main purpose of the article was to stir the minds of the bankers and make them aware of the pitfalls ahead if no serious attempts are made to fill the wide gaps that have cropped in the agreement on the behest of IBA, and give a chance to UFBU leaders to put out their own version on the interpretation of the clauses agreed upon.
Remember that at nowhere I have mentioned that all the remaining load will be certainly loaded on HRA, it is a pure  assumption, which can be refuted by UFBU by giving their own broad calculations / interpretations of the clause.   I made this assumption as in the present Pay Slip components we do not have any other component which can be applicable across all the sections, eg. FPA and PQA are only available to senior bankers, allowances like hill allowance are applicable only in certain regions, CCA is applicable only in cities etc etc.    Thus, in the absence of any commitment by either IBA or UFBU, we are left to assume that the maximum increase may be shifted to HRA as it suits Banks.  IBA is likely to interpret that we have committed only for increase in Pay Slip components and may deny to introduce a new component in the Pay Slip. 

In view of the dangerous wordings of the agreement and serious credibility crisis for UFBU and IBA,  there are some important question that needs to be answered IMMEDIATELY  by each and every leader of  UFBU, who signed the agreement dated 23rd February, 2015:-
  (1) Were UFBU leaders given the copies of the likely offer in advance by IBA? (As is the practice in negotiations by matured teams, so that other team also come prepared with counter arguments).  If yes, on which date did UFBU received the same?  Was it forwarded to all the 9 leaders.   Did each union discussed the same within their core group to study the pros and cons of such an offer given in advance;
 (2)   If UFBU leaders were not given the same in advance, how much time they were given to study the clauses of the agreement and its implications in the meeting itself?  Did they had the tools and background help to study all such offers?    Did nine leaders go into huddle to discuss these clauses?   Negotiations are an art for which you need to have a team which works on the positive and negative impact of various offers.  If you do not have any such team sitting outside the negotiation room, you are bound to fall in trap.   I have not heard of any such teams.  UFBU leaders can clarify on that aspect.
 (3)    Did nine leaders of UFBU made any detailed analysis of what is being signed by them or they merely signed on the dotted lines?
 (4)      If the detailed analysis was made by 9 leaders during the course of meeting itself, what were the apprehensions of each of them about MERE  2% increase in Basic Pay?   Were their any clarifications by IBA on such apprehensions?  Or were there  no apprehensions and all 9 UFBU leaders readily agreed to the trap laid by IBA to get the deal clinched without giving sufficient time to deliberate and discuss the pros and cons of such a deal?
 (5)      Did IBA really agreed to introduce a new component in the Pay Slip on the lines of Grade Pay central government on which DA will also be payable?   If so, why UFBU circular is silent on this subject.  Let this aspect be shared through a joint circular of UFBU.
There would not have been any need to raise above questions if UFBU had followed a more transparent / democratic method in informing the details of the discussions that are held behind the closed doors. However, there is a gag order on all leaders participating in the negotiations to keep completely mum outside the negotiation room.   Even in Parliament each party takes its stand and makes it public and finally the Bill is passed what majority desires, but after taking into consideration / answering the apprehensions of the minor parties.
 Therefore, I would like to reiterate the need by Aam Banker to follow up with UFBU leaders to get answer to above questions and ensure that IBA does not interpret the agreement on the worst lines. It needs to be interpreted in a way so that Aam Banker gets its due share.
 I am sure the serving bankers will continue to participate in the discussions and offer ways as to how the Pay Scales needs to be constructed within the boundaries  already drawn by IBA and UFBU in the agreement dated 23rd February, 2015.  Best of Luck to all bankers for interpreting the agreement which benefits them to the maximum.
 PS : Now I would like to share the funniest news which was in circulation “IBA has also agreed for a two Saturday holiday with retrospective effect from November 2012. The arrears for the Saturdays worked will also paid with retrospective effect from November 2012”.  I was stunned as to how bankers are ready to believe such illogical news.   We tried to trace its origin.  I found that this seems to have been originated from a newspaper, the correspondent of which seems to have not given the desired thought about its practicalability.  The link is , where in GS of AIBOC has been quoted as   -  Harvinder Singh, general secretary of All India Bank Officers Confederation, told dna, “The wage settlement was not really a compromise. The management and the employees have compromised on some of their demands to that a good wage settlement is in place. Saturday remaining closed is also a cost to the bank. We will also get arrears for Saturdays worked 2012 with retrospective effect.”
The news in a respected newspaper baffled me more.    I am happy that now AIBOC on its website has denied the above news and informed its members that it is  misquoted and there is no such proposal.   I welcome AIBOC’s initiative in this regard.   I am sure all bankers will be happy if  Mr Singh and other union leaders can also issue clarification on the interpretations of the clauses agreed upon by UFBU


Health Of Public Sector Banks

Survey pitches for 'exit' of non-performing government banks-Business Standard 28.02.2015 Economic Survey Report 14-15

Economic Survey 2014-15 has laid down a road map for reforms in public sector banks (PSBs), which includes, among other things, the “exit” of non-performers. Backing the government’s recent move to capitalise banks based on their efficiency, the survey argued for doing away with a one-size-fits-all approach for PSBs. As of now, all state-run banks are treated on a par, regardless of their size, in all areas, ranging from the appointment process, compensation policies and distribution of capital to employee performance.

“Differentiation will allow a full menu of options such as selective recapitalisation, diluted government ownership, and exit,” the Survey said. While it didn’t elaborate on the exit option, the PJ Nayak committee, appointed by the central bank to look into governance issues in PSBs, had recommended the government give up its control in these banks and reduce its stake in these to less than 51 per cent

• Deregulate: SLR needs to be brought down; priority sector lending norms should be revisited
• Differentiate: Wide variation among the performance of  PSBs; public ownership, exit and recapitalisation should be on a selective basis
• Diversify: Need to have new banks, new type of banks
• Disinter: Better bankruptcy procedures essential; need for independent renegotiation commission, with political authority and reputational integrity to resolve big and difficult cases


 So far, the government’s stated position is to reduce stake up to 52 per cent. In some banks, the government’s shareholding is as high as 80 per cent.

 The survey has suggested reforms in four areas, christened 4 Ds — deregulate, differentiate, diversify and disinter. To address the asset side repression in the banking system, deregulation in terms of lowering the minimum requirement for statutory liquidity ratio (SLR) was suggested. SLR is the proportion of net demand and time liabilities a bank needs to invest in government papers.

 The observation is in line with what the Reserve Bank of India (RBI) has suggested, as this will release funds for banks; these funds could be deployed in productive sectors. However, for such a move, the government has to stick to fiscal discipline, as SLR has become a means of financing a bulk of the fiscal deficit. The survey said while the minimum SLR a bank should hold was stipulated at 21.5 per cent, in reality, they held more than 25 per cent.

 Another area of deregulation was revisiting priority sector norms, which had to be redefined to make the sector more targeted, smaller and need-driven, the survey said.
 Highlighting the need for a diversified banking sector, the survey said the country needed more and different banks. The banking regulator has already taken steps in this direction, agreeing to offer niche bank licences.

 The fourth D (disinter) refers to a robust recovery mechanism and a bankruptcy law. RBI has emphasised the need for a bankruptcy code in the country to tackle the problem of wilful defaulters. Delay in loan recovery is one of the reasons behind the pile-up of stressed assets in the banking system. Currently, such assets account for about 10 per cent of the total loans given by banks, impacting their profitability. As the survey notes, “distressed assets hang like the Sword of Damocles over the economy and require a creative solution”.

“When the next boom and bust comes around, India needs to be better prepared to distribute pain between promoters, creditors, consumers, and taxpayers. Being prepared for the clean-up is as important as being prudent in the run-up,” the survey said.
Private banks come under fire for slow growth

 Economic Survey 2014-15 criticised private banks, saying these entities had been growing slowly. The survey said aggregate growth in the share of the private sector in the overall banking segment “barely increased” at a time when other sectors in India saw a rapid rise of private players. It also raised concern over the lack of adequate competition in the sector. Though competition had picked up and private banks had seen steady growth during 1990-2007, after 2007, growth of private banks had been slow, the survey said.

 “India saw a steady rise in the size of private banks till 2007, both in relation to deposit and lending indicators. Thereafter, the process slowed considerably and in the aftermath of the Lehman crisis, there was a flight to safety toward public sector banks,” it added. Faster growth in this segment was necessary, as the banking sector had a big role to play, considering bank credit was a small part of overall credit needs, the survey said.

My Observations on above news are as follows:

This refers to news related to 4D steps proposed by GOI to improve health of public Sector banks (PS banks).  I would rather say that 4 Dimension approach to fully damage public sector banks and promote future of private banks is going on without any check since long. For last four decades and more Government of India (GOI) has been prescribing one medicine or the other to cure the sickness of the bank . But unfortunately sickness of banks is growing without any sign of improvement.

First step suggested is to deregulate PS banks and redefine priority sector lending. SLR is a safety valve which ensures safety of bank in all conditions. GOI has been diluting and reducing SLR to create additional liquidity for PS banks. But it is known to GOI that almost all banks have parked their fund in SLR more than what is prescribed for them . Obviously banks are not sick because of liquidity problem or because of shortage of fund.

Rather it is undoubtedly the casual and corrupt approach of bankers and that of politicians and RBI regulators which has damaged banks more. It is top bankers, politicians , RBI inspectors or auditors who think it wise to keep their eyes and ears closed on all misdeeds committed by top bankers, by Finance Minister and by RBI regulators in their mutual interest. It is lack of proper regulation which has damaged the bank and unfortunately GOIs trying to deregulate it more . It means GOI instead of taking corrective steps to cure health of sick banks is trying to add fuel to fire . GOI is not striking at root cause of problem ,but simply conceal it somehow or the other.

I would like to say here that banks were nationalised in the year 1969 with sole purpose of giving relief to poor villagers and poor traders .GOI  prescribed 40% minimum lending to priority and neglected sectors for all PS banks and from time to time attached stress on it. They further prescribed various sub-target for agriculture , weaker section  and other neglected sectors of the society. Banks were allowed to use residual resources i.e. to the extent of 60% towards other commercial activities or personal loans to earn profit and to make banks able to meet the demand of Priority and neglected sectors. In this way GOI had contemplated a balanced approach towards weaker and stronger  sections of the society. Manufacturing activities as well as farming activities got desired importance.

But unfortunately in the year 1991 , GOI adopted so called reformative steps and put profit target above social obligation of the bank. To meet this hidden purpose, GOI from time to time included various non-priority lending done by bank to the domain of  priority sector lending and thus helped banks to achieve target for Priority sector lending by just manipulating and realigning lending under various sectors. Gradually culture of top management was changed  by injecting the need of lending for  non-productive and loss making infrastructure projects and by putting pressure on growth of  retail lending . Due to this, real farming and real manufacturing activities faced great setback in the country and bad outcome of this is now visible to people of India in general and to GOI and Management of PS banks in particular. 

By emphasising lending for housing sector and by giving all concessions to home buyers and home makers , GOI enabled various real estate builders to come into market , earn exorbitant profit and to increase the rate of landed property to such a high extent that it has become almost unaffordable for 95% of Indian population, i.e for common men. Thousands of apartment have come in the market but  there are no buyers or inadequate buyers to buy such highly costly flats and there is no reduction in selling price of these flats. As long as people of  India do not have buying capacity , all concessions goes in vain . Similarly making car loan cheaper may help car makers and help to upper middle class segment of society , but for common men it is of no use whether interest rate is made cheaper or costlier. Banks have diverted short term fund in lending long term infrastructure projects and still they are unable to use their full resources and they have to park the same under SLR funds under compulsion.

Now again GOI is trying to redefine PS lending and realign various targets under this sector so that banks may avoid lending to this sector to maximum extent and focus on non-priority lending . Another step to defeat the very purpose of nationalisation of banks. If GOI wants banks to earn profit and do all what is needed for increasing profit , then GOI should stop interfering in internal affairs of bank management and stop shedding Crocodile Tears for poor and neglected sector. Rather PS banks should be made as free as private banks are .

GOI has to understand that performance of public sector banks cannot be compared with that of private banks. Because former is meant to serve poor , common men and also to corporate sector . They have to earn and distribute its resources to poor and common men so that a balanced is maintained between producers and consumers. On the contrary sole target of private banks is to earn profit. They are least bothered about downtrodden and neglected sector of the society and they are not bothered of what sectors are to be given financial assistance on priority. PS banks are to fulfil the national objective whereas private banks are made to fulfil personal objective of promoters of the banks.

Further GOI prescribe new banks and new types banks to make PS banks healthier. I am unable to understand how GOI will make health of PS banks better by giving new licenses  for new banks or for payment banks. GOI failed to keep 28 or 29 banks healthy and to cure its sickness by various regulating steps taken during last 45 years . For last 25 years i.e. since 1991 they are speaking that banks are improving due to reformatory steps taken by GOI in the era of Liberalisation, privatisation and globalisation. Unfortunately the health of PS banks is so bad that their survival is at state, their ability to cope with Basel III norms on capital is doubtful and their expectation on capital infusing from GOI is also doubtful and imaginary.

GOI totally failed to control thousands of NBFC and chit funds who are looting public money by offering higher interest rate and then lying away from market. God knows how the same government will be able to control additional hundreds of new banks likely to enter the market under new license policy. GOI will make one after other experiment and it is always the poor depositors, tax payers, investors and other stake holders in PS banks who are to suffer due to wrong policies of the government and bad execution of good policies.

Lastly I do not want to comment on the proposal of the government to make Bankruptcy rule more effective. First they make all efforts to make banks bankrupt and then suggest ways how to cope with or it or how to close it by tagging them with the word  'inefficient' or 'unviable' or by suggesting closure of weak banks or by advising merger of weak banks with strong banks. GOI may change the name of a bank , open new banks or may go for consolidation of banks and in short may change the bottle but cannot dream of improvement until the wine is same in new bottle.

 Until culture change, until mindset of bank officers change, until culture of flattery and bribery ends at all levels, it will be foolish to hope that by 4D approach suggested by new government will be improve the health of sick PS banks.

AT most, private banks will prosper at the cost of PS banks , as private telecom service providers are prospering at the cost of BSNL an private airlines are prospering at the cost of Indian Airlines. By changing recruitment process of ED and CMD, or by splitting the post of CMD or by allowing officers of private banks to become Chief of PS banks, GOI cannot ensure good health of banks , but simply trying to put carpet on underlying malady. Health may not improve simply by manipulation in Balance sheet or by changing the face of ED or CMD or by hiding ill-motivated lending done by top bankers in nexus with politicians and corporate houses.

28.02.2015 9.30 a.m.

Pannvalan Pann writes on Facebook as follows

Everybody talks about raising the standards of banks in India to the global level particularly in the areas of technology, customer service, transaction security and confidentiality, product range etc. But, neither the Bank Managements nor the Trade Unions in India are insistent upon implementing the same labour standards (service conditions and welfare measures) as obtaining in the developed countries in Indian Banks. Moreover, even today the infrastructure available in rural...l and semi-urban branches is not at all satisfactory and at a number of places, very pathetic too. Starting from safe drinking water, dining hall/rest room, clean and neat toilets, vehicle parking space, cosy and comfortable furniture, Generator/UPS etc. (other than for the computer systems) are not yet made available in nearly two thirds of the bank branches in India. A few banks like SBI and new generation private sector banks may be an exception.

But, I doubt how many of these new generation private sector banks have rural and semi-urban branches vis-a-vis urban and metro branches. Even whatever rural and semi-urban branches they have are situated on the peripheral areas of a big town or city (barring some exceptional cases). For RBI classification purpose, they will be rural and semi-urban branches. However, as they fall within Urban Agglomeration limits, staff working there (including the Manager) will be eligible for HRA/leased rentals and CCA as applicable to metros and they will be shuttling between the main city and their branches every day. Thus, nobody stays near their branches.

I have myself seen many bank branches that are situated in villages where no police station, fire station, post office, telephone exchange, primary health centre, or high school exist. Obviously, there will be no bus stand and railway station too. Even Medical shops will be situated a few kilometres away. Then, what to talk of availability of qualified doctors? Many bank branches are situated in remote corners and are not easily accessible , except by two wheelers. During rainy season, the roads will be muddy, having potholes and very rough patches, posing danger/threat to the users. But, no one has bothered about all these.

Why the government expects only bankers to work in such sub-human conditions?
Neither government department or public sector enterprise has any significant presence in rural places (as public sector banks do have) and their staff are not required to complete the mandatory rural service, if they want further promotions.

Budget 2015: Jaitley just deepened the crisis in public sector banks-FirstPost

Mumbai: The big shocker of the budget came for state-run banks, especially small and non-performing ones, when Jaitley announced lower share of capital for these entities and remained largely silent on ways to recapitalise these entities, including paring the government’s stake in state-run banks.

The Rs 7,940 crore capital infusion announced in the budget is nearly half of what state-run banks require and lower than what the government committed for fiscal year 2015.

Even for last year, the government has so far infused only about Rs 6,990 crore out of the promised capital infusion of Rs 11,200 crore, based on performance.

Jaitley’s message is clear: Small government banks, especially which rank lower in terms of performance, will have to go to the market to raise funds or get merged with other banks. They needn’t expect any capital from the government from now on.

But raising money from the market wouldn’t be an easy task for smaller banks, since there is very less investor appetite in these banks, burdened with high bad loans and poor growth. Except the large lenders, like State Bank of India, not many lenders have been successful in tapping private funds.

Traditionally, state-run banks are heavily dependent on government funds for capital. Logically, the reluctance of the government to infuse capital would step up pressure on banks to seek options to merge with large banks or shrink their business size.
capital infusion

Remember, the reasons for non-performance of many state-run banks are not necessarily their inefficiency in operations but the lack of their autonomy. There have been frequent interventions by the government in their business decisions.

These banks were used to roll out the populist measures of governments — loan waivers and different forms of directed lending — time to time regardless of which government rules at the Centre, unlike their rivals in the private sector. Hence, the government cannot escape the responsibility of their current state.

Interestingly, even though the government has cut down the capital infusion for banks, the budget for 2015-16 has increased the farm loan lending target for these lenders to Rs 8.5 lakh crore or 14 percent of the total bank credit. This has irked bankers.

"On one side, the government is not giving capital and at the same time, they expect us to lend more. Where is the money?" asked the chairman of a state-run bank on condition of anonymity. Even analysts have raised caution on the lower-than-expected capital infusion.
"We were expecting an infusion of Rs 15,000 crore in banks this year to meet their Basel-III requirements. What has come is much lower, which will be insufficient for lenders to meet the requirements," said Vaibhav Agrawal, vice-president, research at Angel Broking.
Even though the government has conceptualised forming a holding company to facilitate capital mobilisation of state-run banks, this will not offer a solution for banks in the short term, especially in the backdrop of rising stress on the balance sheets of banks.

The absence of adequate capital infusion in state-run banks would mean two things:
One, majority of the government banks may walk into deeper problems on account of capital required to meet the Basel-III norms and provide for bad and restructured loans stipulated by the RBI norms.

As Firstpost has noted earlier, the government banks would need a substantial amount of capital to meet the mandatory capital requirements under the Basel-III norms, to make provisions for a sizeable chunk of stressed assets on their books and to get ready for an expected pick up in credit growth.

The estimated equity capital requirement for state-run banks to meet the Basel-III norms alone is about Rs 2.4 lakh crore.
As of end December, total gross bad loans of banks stands about Rs 2.9 lakh crore. If one combines this with the restructured loan stock, the pile rise to over 10 percent of the total bank loans. Lack of capital would deepen the crisis of state-run banks.

Two, state-run banks with weak capital base would limit their ability to lend to productive sectors, essential for economic recovery. Weak capital position of public sector banks would logically push private sector banks to step up lending. But, one has to wait and watch if private banks, which typically avoid high risk sectors, would do that. In the absence of adequate bank funding, the expected recovery in growth can get delayed.

In the absence of a recapitalisation roadmap, the government, which owns more than 75 percent in 10 out of the 27 public sector banks, has to either bring down its stake in government banks below 51 percent to free up equity capital in these lenders.
For now, Jaitley’s silence has only contributed to deepen the crisis in public-sector banks.

Arun Jaitley's Budget 2015 sets the stage for a new economic order-ForbesIndia

FM decides to plump for growth, eases fiscal deficit target to push public investment; significant reforms on black money, ease of business and entrepreneurship
t would seem Finance Minister Arun Jaitley was well aware of the huge burden of expectations he was carrying on his shoulders this time, when he rose to present the Budget for 2015-16.  Taking off from the view that the world now thinks it is “India’s chance to fly”, Jaitley put together a Budget which, if one joins the dots, sets the stage for a new economic order in India. Alongside, acutely aware of the need to push growth despite the new GDP calculations, the finance minister has taken the route of pushing public investment for the purpose while veering slightly away from the fiscal consolidation path for the moment.

In many ways, Jaitley has presented a Budget which does not disappoint those who had placed their faith in this being a much more substantive vision statement than the one he presented just after the Narendra Modi government took charge in 2014. Budget 2015 operates on some clear themes, and Jaitley has taken pains to explain not just the challenges he faces but also the key ideas he is banking on. Declining agricultural income, the need for increasing investment in infrastructure, the need to remain on the fiscal consolidation path, a perceptible decline in manufacturing and the impact of the greater devolution of taxes to states have been highlighted in his Budget speech as his major challenges.

The Balancing Act
In that context, Budget 2015 is nothing short of an efficient balancing of imperatives and a road map for reform despite pressures. As expected by some quarters, he has eased the fiscal consolidation target a bit announcing that the three percent fiscal deficit target will now be met in three years, rather than two. The FY16 target is now at 3.9 percent, rather than the earlier 3.6 percent, though he has managed to stick to the 4.1 percent target for FY15, even as he reiterated the government’s resolve of not wavering from the fiscal consolidation path. Alongside, infrastructure spends have been hiked by way of higher outlays for roads and railways and an increase in the capex spends of state-owned enterprises. The Rs 20,000 crore corpus National Investment and Infrastructure Fund (NIIF), the proposal to have tax-free bonds for roads, rail and irrigation sectors and the accent on public-private partnerships for boosting infrastructure are steps aimed at making sure that the relaxation in the fiscal deficit target is targeted towards investment in infrastructure. The disinvestment target for FY16 has been pegged at Rs 69,500 crore, which will be crucial for public spending.
Reformist ThrustJaitley has not disappointed on the reforms front. A number of the broad proposals–be it on creating a job-creating economy rather than a job-seeking one or in making the capital markets more efficient or even on the banking front–would rank as important steps in creating a new economic framework. Sample some of the steps. The Forward Markets Commission has been merged with Sebi, a Public Debt Management Agency will be set up to bring external and domestic borrowings under one roof and section 6 of FEMA will be amended. There are several steps to ensure better monetisation of gold and foreign investments in alternative investment funds have been allowed.

A number of initiatives have been announced on the ease of doing business and the skilling side too, an aspect which has been at the centre of pre-Budget debate in connection with the government’s Make in India programme. The setting up of the MUDRA Bank to refinance the microfinance institutions and the entire initiative of ‘funding the unfunded’ also aims at addressing a major gap which existed for micro and small enterprises which struggle to access funds.

Perhaps one of the most important elements of the Budget is the move to rein in the parallel economy. Through a series of steps, Jaitley has aimed at addressing the black economy which includes the creation of a new law on black money and tough measures to bring offenders to book.

There are some other big moves as well. The General Anti Avoidance Rules (GAAR) a bugbear for quite some time, has been deferred by two years, the Goods and Services Tax timetable is now clear, the accent has moved from reducing subsidies to plugging subsidy leakages through what the Budget calls the Jan Dhan, Aadhar and Mobile (JAM) trinity for direct benefits transfer and the tax structure is being sought to be simplified and made predictable. All these were key concerns expressed by India Inc and the markets ahead of the Budget.

For the corporate sector, the broad road map is to reduce corporate tax from 30 percent to 25 percent over the next four years beginning next year. And the Budget also has enough for the individual taxpayer as well. Predictably, despite the markets being choppy through the day owing to some concerns on aspects of the fine print, the overall reaction from Corporate India has been one of cheer.

Says KPMG India CEO Richard Rekhy: “The finance minister has come out with a pragmatic Budget which is directionally focussed at achieving growth and keeping the fiscal prudence in mind. The focus is on ease of doing business in India and increased infrastructure spend. Measures like New Bankruptcy Legislation, startup entrepreneur’s funds, GST rollout by FY 2016, deferral of GAAR will definitely support the cause of ease of doing business in India.”

Adds Rajiv Lall, executive chairman, IDFC: “It’s a development-oriented budget and not a populist budget. A welcome shift in direction.”

However, BMR Advisors chairman Mukesh Butani expresses mixed reactions. “From a policy standpoint, the FM has engineered the Budget around the prime minister’s initiatives such as ‘Make in India’, ‘Swachh Bharat’, and ‘Skill in India’.  The focus on black money and curing the economy of this menace seems to have taken centrestage. The impetus to infrastructure, agriculture and education sectors is laudable though the much-expected big bang reforms are yet in the waiting.”

Impact Under Watch
With the overall macro situation now benign and inflation coming under control, Jaitley realises this was his best chance to lay the broad reform framework in place, and execute the various elements over time. However, what will be keenly watched is how the Budget initiatives play out in the days and months ahead and whether Jaitley’s gamble on growth actually pays off.

As BMR’s Rajiv Dimri points out: “Much of the reforms process outlined in the Budget proposals need to be realised through tangible steps over the year. It remains to be seen how reforms unfold and take shape in terms of GST implementation and TARC recommendations. Impact on prices would be interesting to watch with Budget proposals withdrawing service tax exemptions on construction of airports and ports, government services, increase in service tax rates and higher additional duties on petrol and diesel.”

While the ultimate test for Jaitley will be in how the various Budget proposals are implemented, the finance minister does deserve full marks this time round for putting forward a Budget which aims to address multiple challenges. As a statement of intent, it gets full marks. And that is a pretty good beginning.

Read more:

Thursday, February 26, 2015

Govrnment Worry Over Health Of Banks

RBI's new base rate norm leads to delay in revision of rates, say bankers--Business Standard

( see my observation given below)

Say cost of funds hasn't come down as expected-Business Standard-26.02.2015
The Reserve Bank of India (RBI)’s recent directive on computation of the base rate is proving a stumbling block for lenders in reducing base rates. This is because against expectations, the cost of funds hasn’t declined, say bankers.

Base rate is the benchmark lending rate to which all loan rates are linked.

“I had said the base rate will come down, depending on the calculation for it. But according to the revised calculation, it is not coming down. Going by the old calculation, it will come as a reduction in my deposit cost; so, automatically, the base rate will change. But in the revised guidelines, a majority of your deposit has to be considered; so, my cost does not come down,” said Aditya Puri, managing director of HDFC Bank.

  •  Base rate is the benchmark lending rate to which all loan rates are linked
  • According to the new norms, banks are free to calculate the cost of funds on the basis of the average cost of funds or the marginal cost of funds or any alternative method. But these should be available for scrutiny whenever required
  • After RBI's repo rate cut in Jan, only three lenders — Union Bank of India, United Bank of India and Karur Vysya Bank — reduced their base rates

Earlier, Puri had said as deposit rates had started falling, lending rates were expected to decline in the January-March quarter.

According to the new norms, banks are free to calculate the cost of funds either on the basis of the average cost of funds or on the marginal cost of funds, or any alternative method. But these should be available for scrutiny whenever required, the central bank had said.

State Bank of India (SBI) Chairman Arundhati Bhattacharya said RBI had said the mandate of choosing the maturity bucket with the highest deposits had challenges. “Say, today I have the highest amount (of deposits) in the one-year bucket; in one or two weeks, it could be the one-two year block. Does that mean I shift the base rate immediately? There are difficulties in doing these types of calculations,” she had said while announcing the bank’s earnings earlier this month.

SBI has written to RBI, fro more clarity on the issue.

Another banker said to calculate the cost of funds, lenders earlier considered the interest in the bracket where the rate was the highest; the deposit base could be small. But now, banks have to consider the interest on the tenure with the largest deposit base. “It is because of this that for some banks, the cost of funds hasn’t fallen as expected,” the banker added. In January this year, RBI had cut the repo rate, the rate at which it lends to banks, by 25 basis points. This was followed by widespread expectation that banks would embark on a rate-cut cycle. However, only three lenders — Union Bank of India, United Bank of India and  Karur Vysya Bank — reduced their base rates.

“Once you choose a particular methodology, you can change it only once in three years (according to the new norms). There will be no elbow room to change that in between. Therefore, we have taken the time to assess it and we have realised the cost of funds hasn’t come down. As a result, the expected revision in the base rate hasn’t happened so far,” said the chief financial officer of a public sector bank.

Lack of demand is another reason why banks haven’t cut rates. Lenders believe if the base rate is revised, their margins will come under further pressure, as there is no demand to offset this.

MY Observation on above news is as under :

It is now reported by some of CMDs of public sector banks that they are unable to reduce  Base Rate because revised policy for calculation of Base Rate prescribed by RBI does not permit them to do so.

As I used to say in the past that bank management never take into account whether the change in base rate announced by them will cause erosion in profitability of the bank or not. They used to focus on what FM wants them to do. There are many flatterer CMD who used to announce cut in base rate even during midnight without computing even cost of fund in tune with RBI directive on how to arrive at base rate.
Last month RBI Governor Mr. Rajan issued fresh guidelines for banks  making computation of Base Rate for a bank  more to the point and transparent. This has put hurdles in the path of Yesman type Chairman of banks. Now they are unable to bring down Base Rate because their asset -liability position do not allow them to do so without taking the risk of loss in profit. Salute to RBI who has put brake on Yesmanism .
Till a few years back, say upto 2010-11 , these Yesman type CMDs used to buy deposits at higher rate to achieve target fixed for deposits and similarly used to increase advance in the month of March by sanctioning short term loan at much lower rates to achieve targets fixed for advances. The primary concern of  a CMD used to be winning the blessings of Finance Minister even if caused huge loss to the bank.

It has also been detected five years ago that CMDs of bank did not even make adequate provisions for Bad assets and for terminal benefits payable to their own staff after their retirement. When it was brought to the notice of Government of India , RBI as a special case permitted these Yesman type CMDs to amortise residual provision towards pension, bad assets and other terminal benefits for five years to avoid accumulated burden in one finance year.

This is why I always use to say that until GOI or FM or RBI are unable to end flattery and bribery culture in public sector banks, they cannot dream of inculcating credit discipline  or they cannot enforce good HR Policies  in banks ,they cannot stop rising trend in bad debts and they cannot improve credit quality which are backbone for survival of banks as also for earning desired true  profit .

Similarly management of public sector banks opened numerous economically unviable and loss making branches in remote and critical areas merely to please Finance Ministers. They opened numerous unviable ATMs throughout the country just to increase sale of a ATM vendor who was associated with some VIP or the other . They were and still are unable to properly serve the customers residing near to  of such branches in want of adequate quality manpower and are willingly or unwillingly allowing branch heads of such branches to indulge in reckless lending to achieve the target even though after two to three years all such advances will invariably turn Non Performing assets and cause considerable dent in profits of these banks.

It is good luck that now GOI has asked them to make their banks efficient in terms of return on assets and return of equity to get capital infusion . GOI has asked them to curtail operational expenses which will help in raising profits. At least now some of banks have stopped reckless expansion programme and even decided not expand in foreign countries.

There is a proverb 'sau chuhe mar kar billi haz ko chali"  . I say so that public sector banks in general have opened thousands of branches and ATMs during last two to three years just to fulfil the task of Financial Inclusion even though they are all loss making branches and they have undoubtedly no bright future in coming few years or even in a decade or more.

This happens only because majority of officers in PS banks work to please ministers and RBI officials so that their career may see bright future. They are not as professional as their counterpart in private banks are.

Budget 2015: Jaitley should unveil a solid plan to refuel NPA-ridden public banks-FirstPost.26.02.2015

The Narendra Modi government has so far remained somewhat non-committal when it comes to the issue of capitalisation of state-run banks, which are reeling under heavy non-performing assets (NPA).

The steps taken so far, such as offering capital only to those banks that are deemed efficient, are largely cosmetic since these entities have lacked autonomy and are often micromanaged institutions for several years now.

Whether the budget will offer a roadmap for bank capitalisation, is something keenly watched by economists and financial sector watchers, who aren’t quite impressed with India’s China-matching growth rate as depicted in the re-based GDP numbers.

The reason: unless the state-run banks, which control about 70 percent of the banking industry, are refuelled with adequate funds, it is difficult to take the economy back on track by expanding the much-need credit support to industries and individuals.
But, the government banks, which are neck-deep in bad debt, require substantial amount of capital to revitalise their operations but the capital support from the government has been weak so far.
Of the committed Rs 11,200 crore capital in state-run banks for 2014-15, the government has so far infused only about Rs 6,990 crore in a handful of large banks.

Funding the India-story
With the ability of a fiscally constrained government limited to push growth by way of public spending, the onus of breathing back life back into the economy largely rests with banks, especially state-run banks.
A significant portion of corporations remain heavily dependent on bad loans even though some top-rated companies have tapped the bond market. But that’s not the case with majority.
One of the reasons for the slow-credit offtake seen in the recent years is the capital shortage of state-run banks. In the last two years, in particular, loan growth has been anemic.

On the other hand, most of the companies had seen an escalation in their project costs in the face of high interest rates and demand slowdown in a sluggish economy.
Subsequently, many companies had to opt for loan restructuring to stay afloat in the business. To get these projects up and running again, companies need cash and state-run bank’s capitalisation is highly critical.
While the revised GDP numbers suggest a new picture of the economy is indeed on course of recovery, some of the macro-economic indicators haven’t supported the super-growth story.

For instance, bank lending to industry has grown by just 2.1 percent for the fiscal year until December as compared with 8.1 percent in the corresponding period last year.
Even in the infrastructure segment, which consists of power, telecom and roads, loan growth has remained tepid at 6.8 percent compared with 10.3 percent a year back.
Absence of a pick-up in fresh money flow to industries indicates some sort of mismatch in the GDP numbers and the actual situation on the ground.
Widening capital gap
As Firstpost has noted earlier, government banks would need a substantial amount of capital to meet the mandatory capital requirements under the Basel-III norms, to make provisions for a sizeable chunk of stressed assets on their books and to get ready for an expected pick up in credit growth.
The estimated equity capital requirement for state-run banks to meet the Basel-III norms alone is about Rs 2.4 lakh crore.

Basel-III is the advanced capital norms all banks worldwide need to comply with in a phased manner. For Indian banks, the deadline is 2019. With the deadline to meet the advanced capital requirements under the Basel III norms fast approaching, sate-run banks will need to raise substantial amount of capital.
Global ratings agency Moody’s Investors Service estimates the state-run banks would need anything between Rs 1.5 lakh crore and Rs 2.2 lakh crore, or $26 billion and $37 billion, to comply with Basel-III.

Remember, this estimate covers just 11 state-run banks that the agency rates. These are estimates and the actual requirement could vary, likely on the upside.
Basel-III requirement is only one side of the story. The bigger worry is the stressed asset scenario, which could emerge as a major risk for state-run banks.
At present, the stated amount of bad loans or NPAs in the banking system is Rs 2.9 lakh crore, while the restructured loans are estimated to be between Rs 5 lakh crore and Rs 6 lakh crore.

According to the PJ Nayak committee, which looked at various aspects of public sector banks, state-run banks would need over Rs 3 lakh crore capital if their loan book grows 16 percent per year and if about one-third of their restructured loan portfolio turns bad.
Global rating agencies have already sounded caution saying the government must offer a clear, convincing picture of structural reforms in the economy to get the economy back on actual growth path and fiscal prudence.
Until the time the government remains the majority owner in state-run banks, it can’t escape from the responsibility of funding these entities. The budget will be keenly watched on this.

Banks crack heads over Rs 40,000 crore Bhushan steel loans-DNA

Cash-strapped Bhushan Steel may get some time to repay Rs 40,000 crore loans to banks as bankers plan to restructure the company's account. Lenders to the steel company have called for a meeting on Friday to restructure the company's massive loans

Banks are considering the 5:25 scheme introduced by the Reserve Bank of India (RBI) for the company. The central bank first introduced this flexible financing scheme in July 2014, whereby banks can extend duration of loans to 20-25 years to match the cash flow of the project, while refinancing them every five or seven years. Until this provision came into being, banks were not lending beyond 10 to 12 years, which had put infrastructure firms in strain as their cash flows were stretched.

A senior banker involved in the discussions told dna, "We will consider if the company can qualify for the 5:25 scheme or the plain restructuring. A decision will be taken on Friday after a brain storming session in Mumbai. The plants of the company are all working very well and we believe that if the company gets some time to repay the loans, then it may come out of the stress."
With close to Rs 40,000 crore of loans at stake, lenders have formed a steering committee with representations from State Bank of India (SBI), Punjab National Bank (PNB), Bank of India, Bank of Baroda and IDBI Bank to closely monitor the functioning of the company. Two bankers from SBI and PNB are already on the board of the company.
The promoters, Singhal family, holds a 63.24% stake with Brij Bhushan Singhal, founder chairman, holding 19.31% stake, as on quarter ended December 2014. Bhushan Steel is India's third-largest secondary steel producer company with an existing capacity of two million tonnes per annum

The new RBI scheme is a flexible refinancing and repayment option for long-term infrastructure projects where total exposure of lenders is more than Rs 500 crore. The option will also be available for projects that have already been classified as bad debt or stressed but it will be treated as restructuring and the project will continue to be termed as a non-performing asset (NPA) till the project gets upgraded after satisfactory performance on servicing the loans.

In the third quarter ended December 31, 2014, Bhushan Steel's net loss widened to Rs 454.24 crore on higher expenses and finance costs. It had reported Rs 54.79 crore net loss for the corresponding quarter of last fiscal, 2013-14. Its income from operations grew marginally to Rs 2,460 crore, from Rs 2,407 crore a year earlier. Expenses, on the other hand, also increased to Rs 2,336 crore, from Rs 2,047 crore. Besides, a nearly Rs 150-crore higher finance costs made its bottomline shrink during the third quarter of the current fiscal. The company incurred Rs 580 crore finance costs, up from Rs 432 crore in the corresponding quarter of the last fiscal.

Govt clears criteria to appoint 5 PSU bank chiefs-Money Control

The Appointments Committee of Cabinet today approved the criteria and method for selection of managing director and chief executive officers in five public sector banks -- posts that have been lying vacant for long.
The Appointments Committee of Cabinet today approved the criteria and method for selection of managing director and chief executive officers in five public sector banks -- posts that have been lying vacant for long.
The five banks are Bank of Baroda , Punjab National Bank , Bank of India , Canara Bank  and IDBI Bank .
"The guidelines envisage that both governmental and non-governmental candidates can apply," the government release stated. "The candidate should have at least 15 years of mainstream banking experience, of which three years should at least be at the Board level. The candidate should be in the age group of 45 to 55 years and will have a fixed tenure of three years, subject to normal age of superannuation of 60 years."

Bank of Baroda stock price

On February 26, 2015, Bank Of Baroda closed at Rs 172.40, down Rs 4.8, or 2.71 percent. The 52-week high of the share was Rs 231.50 and the 52-week low was Rs 101.80.

The company's trailing 12-month (TTM) EPS was at Rs 18.38 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 9.38. The latest book value of the company is Rs 167.11 per share. At current value, the price-to-book value of the company is 1.03.

Modification In Appointment Of Chief Of Public Sector Banks

Govt banks' CEO selection opened to private sector-Business Standard 27.02.2015

This is also the first time a public advertisement seeking applications has been put up on the Union finance ministry's website

In an unprecedented move, the government has invited applications from private sector candidates for the position of chief executives in public sector banks (PSBs). This is also the first time there is a public advertisement seeking applications, put up on the Union finance ministry’s website.

 Applications are invited for the post of managing director and chief executive officer (MD & CEO) in five entities – Bank of Baroda (BoB), Canara Bank, Punjab National Bank (PNB), Bank of India (BoI) and IDBI Bank. Those in BoB, Canara and PNB are vacant and the chief executives of BoI and IDBI will retire in May and June, respectively.

 In December last year, the government had decided to split the charge of chairman and managing director in PSBs. Government-run banks are to now have a MD & CEO, and a non-executive chairman.

 Those between 45 and 55 years of age will be eligible to apply and should have at least three years of board-level experience. One may apply for vacancies without a limit.
“The candidate should have at least 15 years of mainstream banking experience, of which three years should at least be at the board level,” said the finance ministry. Those selected will be given a fixed tenure of three years; the retirement age will be 60 years. Those selected must join within 30 days from the date of offer, extendable by another 30 days on request.

 The ad says if the selected candidate fails to join even after the notice, he/she shall be barred from consideration for appointment in all PSBs or autonomous bodies or statutory or regulatory ones for three years. The applications will be screened by a committee and suitable candidates chosen for an interaction with the selection committee, which will make recommendations to the government.

 Along with the application form, the candidates have to give attested annual confidential reports of the past five years and vigilance clearance certification that no disciplinary or criminal proceedings are either pending or contemplated.

 Public sector bankers who meet the eligibility criteria will also be able to apply. The move paves the way for several State Bank of India officials, particularly  heading subsidiaries and associate banks, since they have board-level experience.

 The move will also open an opportunity to private sector bankers who aspire to head a bank. The Reserve Bank of India recently raised the retirement age of an MD & CEO in private banks to 70 years, from the earlier 65. CEOs of leading private sector banks still have at least five years before they retire.

RBI expresses concern over delay in appointing heads of banks-DC

Mumbai: Expressing concern over the delay in appointing heads of three large public sector lenders, RBI Deputy Governor S S Mundra said that the central bank has urged the government to expedite the process in this regard.

The government is yet to appoint heads of three 'A' category banks, namely Bank of Baroda, Punjab National Bank and Canara Bank, which have been headless for many months now. "Certainly, I am deeply worried. Three large public sector banks, which fall under the category of the top four banks, are without heads.

Leadership matters in our organisation for policy direction," RBI Deputy Governor S S Mundra, who himself was a commercial banker, said. Last December, the government had split the post of chairman and managing director for state-run banks and appointed managing directors as well as chief executives at banks.

The four managing directors and chief executive officers appointed are P Srinivas at United Bank of India, R Koteeswaran at Indian Overseas Bank, Kishore Kumar Sansi at Vijaya Bank and Animesh Chauhan at Oriental Bank of Commerce. Mundra said that the central bank has also asked the government to take a decision soon about appointing heads of these three large banks.

"From the RBI side also, these concerns are flagged to the government in its capacity as owner, to hasten the process and see that these appointments are done as early as possible," he said. The government is also yet to find a replacement for Syndicate Bank CMD S K Jain, who was suspended after his arrest in an alleged graft case.

Replying to a specific question about consolidation in the banking industry, Mundra said that consolidation and merger is a very long-term strategy and its purpose has to be analysed before going for it.

Various Observation On 10th Bipartite Settlement

  1. Hike in Pay Slip Components
9th BPS - Rs.2,798 Crores
10th BPS - Rs.4,725 Crores
  1. Hike in Total Staff Costs (including Pension and Gratuity)
9th BPS – Rs.4,816 Crores
10th BPS – Rs.8,000 Crores
  1. Hike in Pay Slip Components as % of Hike in Total Staff Costs
9th BPS – 58.10%
10th BPS – 59.06%
  1. AICPI
9th BPS (as on 01-11-2007) –   3035 Points (Base: 1960=100)
10th BPS (as on 01-11-2012) – 4907 Points (Base: 1960=100)
  1. Present Value of money
  2. Rs.2,798.00 Crores as on 01-11-2007 is equal to Rs.4,523.82 Crores as on 01-11-2012
Rs.4,816.00 Crores as on 01-11-2007 is equal to Rs.7,786.53 Crores as on 01-11-2012
  1. Break up particulars of Award Staff and Officers
9th BPS (as on 31-03-2007)   – (a) Award Staff - 469,985  (b) Officers - 305,117
10th BPS (as on 31-03-2012) – (a) Award Staff - 451,634  (b) Officers - 385,284
  1. Apportionment of the Wage Hike in 10th BPS
(a)  Award Staff – Rs.2,270 Crores (48.04%)
(b)  Officer Staff – Rs.2,455 Crores (51.96%)
  1. Average Benefit per head in 10th BPS
(a)  Award Staff – Rs.50,262
(b)  Officers – Rs.63,719
Considering the award staff include Sub-staff, average hike per head is much better.
In contrast, officers include all officers from JMGS I to TEGS VII.  Therefore, average hike per officer is not attractive, comparatively.
  1. Other Points
Reimbursements related to hospitalisation and leave travel allowance will be calculated separately..

Some Suggestions for UFBU by Aam Banker-
By-Hiren Bhatelia

While congratulating the UFBU for finally clinching the 10th BPS, some points need to be pondered over in a fair and just way, without prejudice:-
1.       If the final goal was just 15 %, it should have been achieved within a few months, at least before the general elections. This rise, especially after such a long period of about two and a half years, cannot be called a satisfactory one (at least, please do not call it a historic achievement, dear leaders)
2.     The UFBU could, at least have brought down the current settlement period by a year or two with this paltry rise, in view of the next Central Pay Commission coming into force shortly. (They can still raise this point)
3.     There is nothing like an achievement in two Saturdays’ off in a month. While counting the paltry annual gain of a few hours, we ignore the loss of holidays falling on Saturdays and inclusion of these Saturdays falling during leave periods. Had we got 1st, 3rd and 5th Saturdays as holidays, it would have been a better option. If this was done, the bank employees could take up their works relating to other government offices that remain open on these Saturdays. (This is not a difficult point and the unions can still modify the agreement if there is a will among them). Alternatively, the other Saturdays should not have been made full working days; otherwise this is not an achievement at all.
4.     The wage hike, under the prevailing circumstances, may be called satisfactory if we go by the arguments of the unions, but in that case other issues of justice, parity, non-discrimination which have crept in during the past years must have been cleared or must be cleared during the next talks. (The issues are narrated hereunder)
5.     When there were talks of bringing parity with Central Govt. Employees among the bankers, at least, the same among the PSBs (including SBI) inter se must have been brought or must now be brought.
6.     There was no justice or fairness in the amounts got contributed to the pension fund by the pension optees of the second option, let alone the very unjust idea of any extra contribution. The same amount contributed by a person retiring in 2010 itself (when the extra contribution was made) and by the person retiring in 2020 cannot be placed on par as with the same amount of extra contribution the person retiring in 2010 would get immediate pension benefit whereas the person retiring in 2020 would get it after a decade. At least, this anomaly of the 9th BPS needs to be rectified during the next talks. This may be by way of paying interest on the extra contribution till the date of retirement.  In fact, if the issue of restoration of old pension scheme for the NPS holders can rightly be reopened, why not the refund of extra contribution by second pension optees be demanded?)
7.      It is quite unfair that the new recruits during the 9th BPS negotiations got full arrears as against their senior counterparts who got negligible arrears due to heavy contribution towards the pension fund. Such situation has never arisen in the past and must be rectified now.
While the unions have rightly included the issue of bringing NPS holders to the old pension scheme in their demands, in fact, it is just a populist demand which is never going to be achieved in view of the fact that the new central government employees from 2004 too are under the NPS. The achievable thing was and still is the restoration of CPF of 12% on Basic + D.A. if the old pension scheme cannot be brought back as the banks contribute the same even under the NPS. 

8.In fact, if the new recruits in SBI can still have the old (third benefit) pension scheme, why not their counterparts in other PSBs have the old pension scheme? But, to hope for this under the prevailing mindset of the union leadership and under the current circumstances, looks impossible just like the just and fair thing of giving third benefit pension to all PSB employees on the principle of equal pay for equal work. However, these discriminations can still be removed with the paltry wage hike agreed upon if we have firm determination.
 9. While the difference in special allowances in SBI and other banks may be justified in view of difference in duties, there is no justification in difference in Professional Qualification Pay as the employees get it for the same qualifications in all banks.
  10. It must be ensured that there is no discrimination among cadres in the issues relating to welfare of employees.
   11.     The issue of reduced bank holidays in many States needs to be taken up now. The State governments declare different number of holidays for their own staff and under the negotiable instruments act. Either the past position of the same number of holidays should be restored or the guarantee of minimum 23.5 holidays in a year, with compensation for the lesser number of actual holidays than this by way of extra casual leave, as in LIC, must be achieved. The same bank employees in different States now get different number public holidays. At least this should be resolved in the above manner.
  12.     There is no logic in allowing Special Sick Leave up to 4 days without medical certificate (as is learnt to have been agreed upon) while continuing the same requirement for regular sick leave. Small sickness does not need consultation of a doctor always and it has no relation to the type of sick leave an employee avails for the same. In fact the period should be 5/6 days to enable a sick employee to have sufficient rest by combining weekly off/s.
  13.     Availing of agreed leave must be made right of the employees. When no exigencies of work come into picture when employees are deputed to election duty en masse, why this reason should factor in while granting eligible leave to the employees?
 The leaders have still a chance to regain the past glory of the unions if at least the above points of justice, non-discrimination and fairness are considered before concluding the final settlement.  It will be great if the leaders take the above comments as suggestions for improvement during the next rounds of talks for concluding the final settlement.

Bank branches to be closed on 2nd, 4th Saturdays
IBA signs pact with unions, settles for 15% wage hike---BUSINESS STANDAD 26th Fab 2015
Bank employee unions have called off a planned four-day strike after agreeing to a 15 per cent wage increase and two more holidays a month – the second and fourth Saturdays, a senior union official said on Monday.

But other Saturdays in a month will be working, the union official said. A formal approval from the government and the regulator might be required for effecting changes in the working schedule.

The annual wage bill (at 15 per cent rate) works out to Rs 4,725 crore for banks.  This will be a five-year wage pact running from November 1, 2012 to October 30, 2017. At base level, the wage bill burden for five years would be over Rs 23,600 crore. The actual bill would be more, “as the cost of medical, hospitalisation scheme, other items, superannuation, provident fund, gratuity and pension is being worked out separately”,  said Vishwas Utagi, convener, (Maharashtra), United Forum of Bank Unions.

The process of wage negotiations started after the unions submitted their charter of demands in October 2012. They demanded broadly a 25-per cent hike before settling for a 15-per cent rise.

In the last round of wage settlements, the employees received 17.5 per cent hike that included pension and other retirement benefits also.

The bank managements offered a 5-per cent hike at start and raised gradually through negotiations to settle at 15 per cent. Unlike previous wage negotiations, banks are better prepared this time around. Banks have been making provisions in books assuming a 13-15 per cent annual hike in wages. Banks began making provisions from 2012-13.

The distribution of annual wage increase between workmen unions and officers’ association will be worked out separately based on break-up of establishment.

“As per the agreement, the second and fourth Saturdays of every month will be holidays and the remaining Saturdays will be full working days,” IBA said. The details of the bipartite settlement will be worked out in the next 90 days.

Banks would start distributing arrears soon.
IBA's deal with bank staff may amount to Rs 1,600-cr windfall for general insurance companies -Economic Times
MUMBAI: State-run general insurance companies could be in line for a windfall of Rs 1,600-crore business a year, following the Indian Banks' Association's (IBA) wage deal with more than 10 lakh staffers, said two people familiar with the matter.

From now on, banks will buy health insurance cover from one of the state-run general insurance companies instead of reimbursing the medical expenses of staff in full which goes as part of their expenses, they said. This could also reduce the expenses and put a cap on the liabilities of banks in the future. "This is a path-breaking agreement," said TM Bhasin, chairman of IBA and CMD of Indi an Bank. "Besides a 15% hike and holiday on alternate Saturdays, it is mutually agreed that the bank will buy medical cover for the employee and his family."

Bank employees unions, including that of State Bank of India (SBI) and the industry body representing state-run banks, agreed on a 15% increase in their basic salaries for the period 2012 and 2017. One new factor that crept into the agreement this time, other than holidays on alternate Saturdays, is medical cover.

Although no definitive agreement or insurance underwriter is yet to happen, executives in both banking and insurance industries indicate that underwriting norms could lead to an outgo of about Rs 1,500 crore to Rs 1,700 crore. That will depend on individual bank's negotiating power.


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