It is set to allow the IBA to bring in components like house rent and city compensatory allowances within the ambit of the wage settlement, thereby partially giving in to the unions' demands.

The Indian Banks' Association will kick off a fresh round of wage negotiations with trade unions and officers' bodies on Wednesday.So far, the premier bankers' body has not been able to make any headway in wage talks as the unions refused to discuss only basic and DA at the industry level and settle the other issues at the individual bank level.

"The government is keen on avoiding any confrontation with the banking sector unions at this point. It may not be able to stick to its old stance of dismantling the system of industry-wide wage settlement giving way to bank-levelwage pacts," sources said.

Nine bank unions, under the umbrella of United Forum of Bank Unions, had earlier threatened to launch a one-day token strike this month protesting against the IBA move. However, the strike was called off as both the IBA and the unions agreed to "start negotiations forthwith with an open mind". While the unions are interpreting the phrase "open mind" as discussions with no preconditions attached, Indian Banks' Association officials have reiterated their old stance of focussing on only basic and DA components of the wage.However, sources in the finance ministry said it might not be possible to hold on to the old stance.

"We will have to work out some sort of a compromise. Maybe, to start with all residual issues and one or two components of the wage will be settled at the individual bank level. It's difficult to dismantle the existing system overnight," a ministry source admitted.

Senior trade unions said they will not accept the original demand of the IBA and discuss onlybasic and DA at the industry level. "This question does not arise. We have withdrawn the strike call on assurance that the wage talks will be broad-based," one union leader said.

Some of the unions are, however, ready to accept the idea of classifying banks into three or four categories based on the financial strength and accordingly split the wage talks.

When contacted, IBA secretary MN Dandekar said: "We have an open mind. We want to settle the issue at the earliest. We can always reach an amicable solution through negotiations."