Can PSU banks use their profits for higher salaries? FM says ‘No’

FM P Chidambaram

AGAINST the backdrop of the two-day long strike by PSU bank employees seeking higher wages, finance minister P Chidambaram in a strong rebuttal of their demand, said the profit of banks cannot be used only to enhance salaries since there are other obligations. “I will appeal to employees and officers of banks to recognise that banks profits, banks earnings have other claims. While claims of officers, staff and employees must be duly acknowledged, and a fair and just (wage) settlement is arrived at, there are other claimants to banks’ profit,” he said. Speaking during the 78th foundation day of...

Indian Overseas Bank (IOB), he said, “It cannot be that all profits are used to declare dividend and to provide enhanced wages and allowances to bank employees.”

He said a major part of retained earnings must be used to infuse additional capital, otherwise banks will not find the amount of capital that is required over the next five, 10, or 20 years. “The capital is to take care of a number of things. Firstly, banks are obliged to declare a dividend, both to the majority owner of the bank and the other shareholders,” he said. 

Another part of retained earnings has to be infused as capital in the bank for furthering its business, he added. Public sector bank employees started a two-day strike on Monday demanding a revision in wages. There are 27 public sector banks in the country with a combined employee strength of about 8 lakhs and about 50,000 branches of these banks across the country.

The bank employee unions had rejected the Indian Banks Association's (IBA) offer of a 10 per cent wage hike during a conciliation meeting held on February 6 with the Chief Labour Commissioner. The IBA is a body that represents managements of banks. The IBA on its part said that the banks could not afford to a wage revision beyond 10 per cent due to growing non-performing assets in the their balance sheet coupled with provisioning of pension liability, according to a statement on the website of All India Bank Officers Association. The 10-percent hike in wages would have cost the banks nearly Rs 3,000 crore.

The employee unions are demanding for a nearly 30-percent increase in wages. The All India Bank Officers Association also called for "regulated working hours for officers, 5 days a week and compassionate ground appointment", according to a statement on its website. The wage revision of public sector bank employees has been due since November 2012. The staff of public sector banks had earlier gone on a nationwide strike for a day, on December 18, instead of proposed two days, after discussions on wages with the IBA had failed. The bank unions had cited forward movement in the wage talks for deferring the "48 hours strike" to 20th and 21st January 2014.

Despite eight rounds of talks between bank employee unions and IBA to break the deadlock and the strike was subsequently deferred to February 10, 11.