The United Forum of Bank Unions (UFBU), an umbrella body comprising 9 unions of public sector bank employees, has threatened a nationwide strike on August 6 and August 7 if the government and senior bank managements do not respond to their demands, mainly better pay. Public sector bank strikes are not what they used to be?private banks have made the difference. But sarkari banks are still in an overwhelming majority in the sector and such strike threats therefore matter. The issue is not about better pay?we have always argued the public sector should get paid better. The issue is the structure in which bank pay is determined. The structure allows the kind of blatant blackmail that bank union leaders periodically engage in. The most fundamental problem is that all public sector banks, irrespective of size and profitability, function with uniform, government mandated pay scale for their employees. This allows the dangerous, uneconomic and antediluvian practice of industry-wise collective bargaining. It gives something like UFBU enormous power. Equally important, such pay settlement ends up penalising employees of bigger and better performing public sector banks. If every public sector bank could set its own pay in line with its revenues and profits, the issues of union blackmail and better incentives will be addressed simultaneously.
Note, here, that some public sector banks have built a case for greater autonomy in pay fixing through their much improved performance in recent times. In fact, on the key indicator of business (revenue) per employee, according to the FE Best Banks Survey, State Bank of India, Indian Bank, Punjab & Sind Bank, Central Bank of India and United Bank of India all outperform leading private sector banks like ICICI, HDFC and Axis. Interestingly, major nationalised banks have also been reducing their employee strength over time?SBI, Canara Bank and Punjab National Bank, for example, all reduced their employee strength between 2007 and 2008, SBI leading the way with 5,000 fewer employees. On another key indicator?operating expenses/total asset ratio, leading public sector banks, according to the FE Best Banks Survey, often outperform and rarely trail, the leading private sector banks. Therefore, if good sarkari banks can fix their own pay, they can compete with private sector banks much better. True, this will create a pay differential among sarkari banks. But that?s very good. Talent will be better rewarded and underperforming banks will stand out more. PSUs have different pay grades. Why can?t banks? The argument on retaining status quo comes from the ?everyone is equal? notion that?s the bane of government employment. If the government insists on operating in commercial areas like banking it should give its organisations basic commercial freedoms.