India News and Features Alliance (INFA) - LEAVE PAY FIXATION TO INDIVIDUAL BANKS,Dr. Vinod Mehta,21 June 2007

The principle of one type of pay scale for all the bank employees doing similar work in the nationalized banks has been restricting competition, penalizing efficient workers and rewarding inefficient employees.

This issue has become very important in the wake of the emergence of banks in the private sector. The private sector banks are able to attract efficient people by offering better pay packets. Moreover, all the nationalized banks are not doing well—some are relatively more efficient than others. One may then legitimately ask as to why the employees and workers of less efficient nationalized banks should get the same pay and bonus as those of the efficient banks?

So long as the emoluments of bank employees continue to be negotiated with one monopoly type federation of bank employees, such problems will always be there. The time has come to change all this through the active role of citizens. The general public, which is fed up with the antics of the bank employees, must now collectively bring pressure on the Government to introduce far reaching changes in the structure of nationalized banks and prop up alternative institutions of savings at least for the large number of small savers and depositors.

The first and foremost thing which the public must force the government to do is to delink all the nationalized banks from one another and make each nationalized bank an independent entity for purposes of management and functioning.

Simultaneously the all India unions of bank employees and bank officers be derecogonized and in their place recognition be accorded to unions and associations of individual banks. The recognition of all India unions has done immense damage to the healthy growth of banking industry in the country. The bank employees through their all India unions have come to enjoy near monopoly powers which they are using to the hilt to further their interests at the cost of losses to their own banks.

Eonopoly, anywhere or in any sphere, whether of producers, manufacturers, traders or employees is always inimical to the interests of the citizens and must be dealt with seriously. And there are good reasons for breaking the monopoly of bank employees. The all India recognition means measuring the performance of all the good, bad and indifferent employees with the same yardstick; it means the payment of same emolument for the same rank whether the person occupying that post is working or not and whether the bank itself is making profit or not, i.e., in the nationalized banks there is no reward for good work and no penalty for inefficiency. As a result good workers become reluctant workers over a period of time and ultimately become inefficient while the inefficient workers continue to stay put and get all the pay and perks because of all India backing. Since the emolument structure and working conditions are the same in all the nationalized banks the good workers cannot even join another nationalized bank. This kind of thing is understandable in relation to a government department but just unthinkable in relation to a commercial organization like bank.

By delinking the nationalized banks and derecogonising the all India unions and associations of bank employees and officers, the negotiations between the employees and the management will become concern of a particular bank and if a particular bank is earning good profits why shouldn't it be allowed to pay more to all its employees than the bank which is running into losses. This will ensure that the banking industry as a whole is not paralyzed; only the employees of a particular bank may go on strike which may have some grouse against the management.

This delinking and derecogonition must be achieved as soon as possible if the banking industry is to be saved from situations where the capital base of the bank itself stands eroded. There is a general feeling among the public that the bank employees have got more in terms of emoluments and perks than the other comparable strata of the society without contributing anything to the efficient functioning of the banking system. This is high time the government acts tough with the bank employees and take the necessary action keeping in view the interest of the general public.

At the same time there is a need to restructure and strengthen the savings bank facilities available with the post office as an alternative to nationalized and other private sector banks. In some countries like the Netherlands, post office bank is an institution itself mobilizing the savings of general public while offering them low cost facilities like issuing of bank drafts, transfer of funds from one account to another by means of cheque or electronic media; even some of the post office bank branches offer AIM facilities to its customers. These services are provided to customers at rates which are lower than the ones charged by big commercial banks.

This is the kind of alternative banking model which India can look at as for as a large number of average citizens are concerned. Post office in India is one of the oldest institutions offering savings bank facilities to a large number of people all over the country. Moreover, as the commercial banks restructure themselves, the small savers and account-holders are getting marginalized, the post office bank could cater to their needs.

What distinguishes the post office bank from the commercial bank is that post office bank is geared only to meet the needs of the saving public and does not enter into any major commercial activity. People can open savings bank accounts with them, withdraw and deposit money, transfer money or make payments by means of cheque, keep fixed deposits, ask for bank draft as they would do in any commercial bank. Since the post office bank deals mainly with the savings activity it can pay more attention to the needs of the individual saver compared to a commercial bank where mobilization of public savings is one of the many activities of a bank.

However, for the Indian post office to act as an effective alternative to commercial bank as mobilizer of savings and as a provider of banking services, it will have to change its style of functioning and to the extent possible computerize its operations. For instance, there are now computer-linked machines which can automatically update the passbooks saving a lot of time to the general public.

Again the government will benefit in the sense that it will have a large pool of public funds available to it for various kinds of legitimate government activities since the post office funds are not expected to enter the commercial market in any significant way. That is to say the savings mobilized through the post office banking channel could be invested in Government securities etc and the interest earned thereon would be used to pay interest to the depositors. This would also mean that the Government could borrow a part of its requirements from the post office savings bank instead of borrowing from the open market.

The emergence of private banks have changed the equations in the banking sector. Some of them have already consolidated their positions through mergers while others are looking for such opportunities. If the nationalized banks do not raise their efficiency by upgrading their technological base and bringing in talented people, they will lose out in the long run.---INFA