Bank unions stir on Oct 27 against reforms

Bankmen are on the warpath again as the United Forum of Bank Unions (UFBU) has called for a token strike on October 27 on a host of issues which indicate that all is still not fine on the proposed financial sector reforms front, the assurances from Prime Minister Manmohan Singh and Union Finance Minister P Chidambaram notwithstanding.

The Prime Minister and the finance minister are hopeful of a consensus among political parties on financial sector and pension reforms. However, the strike call given by UFBU demonstrates that an agreement on reforms is still not in sight.

General secretary of the All India Bank Employees' Association (AIBEA), C H Venkatachalam, said that financial sector and pension reforms would be opposed tooth and nail by Left parties. AIBEA is the dominant union in UFBU representing close to 5 lakh bankmen.

Venkatachalam said the UFBU would oppose any move to privatise the banking sector, unrestricted entry of foreign capital, mergers of PSU banks, and outsourcing of key banking jobs. "What they are trying to do is once again bring in class banking as opposed to mass banking," the senior trade union leader alleged.

Venkatachalam said that the Reserve Bank of India (RBI) through an innocuous circular had sought to allow PSU banks to outsource crucial banking activities.

"It is their argument that clearing of cheques can also be outsourced as is being done in Germany," he said questioning the motive behind the move when this was not being done even in the US and Japan.

"Out of 140 countries which have a clearing house functions why should you single out Germany and try to emulate it?" he posed adding that "you should do what is best for your country."

Venkatachalam said that the volume of cheques being handled in the Indian banking system was huge and when banks had introduced electronic clearing and were still keen on improving the system, there was no point in considering outsourcing.

The Payment Corporation of India would cause loss of revenue to banks too, said Venkatachalam pooh-poohing the theory that it would be a no-profit, no-loss company and that there would be no revenue loss.

"The bank presenting a cheque for clearing pays Rs 2 per transaction. Fifty lakh cheques are presented every day. So Rs 1 crore is paid by some banks and collected by others. It doesn't take an Einstein to see that there will be a loss of between Rs 300 and Rs 400 crore," he said.

Venkatachalam said that outsourcing of retail banking jobs such as opening a fresh account, issuing cheque books and approving loans will make 60 to 70 per cent bankmen redundant besides "this would be outsourcing permanent jobs on contract basis." He said that not only unemployed youth would be exploited at cheap rates and the confidentiality aspect of a customer would go for a toss.

The trade union leader said that it was still dangerous to leave the responsibility of social lending to private agencies. "Granting small loans will be at their whims and fancies and this would be bad for all," he said.

He also shot down Tarapore Committee's recommendations as not being sound for Indian conditions. Some recommendations such as allowing more foreign capital in the banking sector, merger of PSU banks and reducing government capital to 33 per cent are clearly bad for the banking sector, Venkatachalam asserted.

He said that the justification given for encouraging merger of PSU banks was flawed as PSU banks were never formed for global competition but for domestic banking requirements. They were formed following certain statutes of the Parliament and had a definite social objective and economic outlook.

"The government should consider floating an international bank of India for global competition and we will have no objection to it," Venkatachalam said.

He said it was incorrect to say that PSU banks would become big, in the global sense, through mergers. The total capital of all 27 PSU banks combined is just Rs 15,000 crore or $3 billion where as Citi Bank alone has $62 billion or 20 times more.

In terms of assets, all PSU banks put together have some $ 275 billion while real global banks such as the Hong Kong Bank or Stanchart alone have many times that. He said that Indian banks were never meant to be capital driven like Western banks and reiterated that such moves would be opposed.

Venkatachalam was in city to participate in the AGM of the Eastern Maharashtra Bank Employees' Association (EMBEA).