ECONOMIC HIGHLIGHTS

New Delhi, 7 August 2009

Bank Employees Blackmail

NPA BUCK STOPS AT STAFF DOOR

By Shivaji Sarkar

It is the worst blackmail of 110 crore people by 10 lakh bank employees. They have no rationale to go on strike as their major demand for 17.5% increase of wages has been accepted. But no sooner had the Indian Banks Association accepted it that they jacked up the demand to 20%. Clearly, a gross irresponsible attitude.

Since employees in different sectors have got a raise, the demand cannot be outrightly rejected. The bank employees, however, have a limited claim. They are only managers of people’s money put in their custody. They hardly earn. They are only known to lose. They are also responsible for the high non-performing assets (NPA) --- literally losses.

Holding the nation to ransom for two days has cost the nation billions. It has affected national and international trade. It has caused immense problem for thousands of job seekers who have to arrange for bank drafts and traders who have to arrange for bank guarantees and payments.

It also raises doubts about the credibility of the system. Such irresponsible attitude also leads to the growth of the parallel subterranean sectors like hawala and hundis. The subterranean sectors have been growing over decades primarily because of their efficient functioning that is not known to break-down.

The Basel II norms --- the principles set for making banking more credible and efficient --- have not made much difference to the banking system in the country. On paper most of the Indian banks have improved on their capital adequacy ratio in line with the global Basel II norms. But the staff has not been able to do much to reduce the NPAs. Instead, scandalously the NPAs have increased by 25.67% in the case of 14 scheduled public sector banks.

Undoubtedly, the present losses due to the strike have to be quantified. The inefficiency of the staff has also made the banking operators increase their charges indiscriminately making it one of the most expensive banking system’s in the world. It is oppressively expensive for a nation that has almost 70% people out of the banking system. The high cost has made it unaffordable.

Sadly, the staff does not consider it their responsibility to make the system affordable. The losses are mounted on the nation. Being organized, the staff thus extracts whatever pound of flesh they want.

Not for them the fact that the bank staff is supposed to protect the wealth of their custodians. Instead, they are breaking into it, weakening the national financial system and pushing the country back on its quest for progress.

Importantly, an ASSOCHAM study has expressed concern over the risk management practices of the banks. It said that the net non-performing assets of 14 commercial banks, in absolute terms, have increased by 25.70%. Wherein the Gross NPAs of banks rose from Rs. 283.9258 billion ($7.47 billion) to Rs. 321.2948 billion ($8.45 billion) between 2007-2008.

The maximum rise of 266% in net NPAs was witnessed by the Punjab National Bank in the third Quarter of 2007-08, followed by the Centurion Bank of Punjab with an increase by 125%, ICICI Bank 77%, Vijaya Bank 49%, HDFC Bank 37.46% and the State Bank of India 25%.

In simple terms this means that the staff has virtually misappropriated Rs 32100 crores. Since the banks are in the public sector and even the private banks deal in public money, the losses are dumped on the users conveniently. The recent Lehman Brothers and AIG debacle in the US has not taught the sector any lesson.

Additionally, an employee in a sector gets a raise based on the factors of the prevailing price rise, performance and profits of the sector.  The bank employees qualify only on the first count. Yes, they have qualified for the dole because of high food and consumer price inflation. On all other counts they have miserably failed.

Needless to say, the Indian Bank Association (IBA) has taken the decision of granting 17.5% hike without taking the nation into confidence. Can the bank users afford this kind of illogical raise when their actual wealth is shrinking? The IBA should not function like a cartel. It has to function in the interest of depositors and other users. Its functioning in managing the banks has also been questioned. Before accepting the grant of any raise it should have consulted with the people on whose money they do business.

The negotiations would be on for quite some time. The IBA needs to stress on the cost of sharing the losses. The wage agreements have to be transparent. Since the society can bear the cost only in a limited manner of less than 0.10%, the cost of the losses must be dumped on the staff and officers at a proportion that needs to be decided. The staff and officers should be told that every gain has its risks as well and they could not evade that.

The settlements of the NPAs must be done every year. This would also have a salutary effect. The officers and staff would feel more responsible while handling public money. They would treat the bank customers with more respect and hopefully harass them less.

The employees are correct in demanding the pension. The financial sector at the prompting of the stock market wants pension to be linked to the equity market. This puts public money again at high risk and it adds to the profits of the manipulators. This demand of the bank employees should be accepted and the pension must not be left to the speculators.

The wage agreements should have checks both on the employees as well as the employers. If employees have to pay for operational losses, the employer also does not have right to play with the money of employees --- pension after all is deferred wages and not a dole.

The IBA and employees are both responsible for the present morass and they need to settle it without dumping any cost on the nation. ---- INFA

(Copyright, India News & Feature Alliance)