With many banks facing PCA, wage hike demand seems unjustified: Official

With 4-5 more public sector banks on "cusp" of slipping into Prompt Corrective Action of the RBI, the two-day nationwide strike by PSU bank employees to press for wage hike was not in a good taste, said a top bank official.

The RBI has already put 11 out of 21 banks under the PCA framework in view of worsening of their financial health.

Over 10 lakh bank employees had gone on a two-day strike -- May 30 and 31 -- to protest against a "meagre" 2 per cent wage hike proposed by the Indian Banks' Association (IBA), the representative body of bank managements.

 

With further deterioration in financial health of these PCA banks, the RBI has restrained several banks, including Allahabad Bank, from increasing the loan book.

Given the weak performance of mostly all banks in the fourth quarter, the merit of demanding a high wage revision seems unjustified, said the top banker who did not wish to be identified.

The quarterly losses of these banks are upwards of Rs 50,000 crore.

"To put it in a perspective, 11 banks are already under the PCA framework and to make situation worse, their net NPAs still continue to rise unabated," an analyst with a brokerage firm said.

The most important thing for any commercial entity especially for a bank in this condition is to conserve capital and increase in wage bill at this time would be counter-productive, the analyst said.

"Under such circumstances, the banks cannot afford to take massive increase in the wage-bill," the analyst said, adding it will make weak banks prone to merger and acquisition.

The banker further said, bank employees, whose salaries are already indexed to inflation, need to also understand that since banks are commercial entities, wages cannot be altogether divorced from consideration of profitability.

Focus should instead be directed towards boosting income and lending so that they come out of weak financial health, the analyst said, adding that it will also help state-owned banks from the risk of losing customers to private sector lenders.

Meanwhile, source said that total availability at working ATMs during the strike had dropped to as low as 73 per cent as reloading of the machines was hampered.

On May 29, total ATM availability was in excess of 89 per cent. However, it dropped to 80 per cent on the first day strike and further to 73 per cent on May 31 causing hardship to the public.