Inertia-activated

Updated: Mar 23 2005, 05:30am hrs
Tuesdays strike by staff at state-run banks and old private sector banks protesting reforms reflects a myopic resistance to efficiency-inducing changes in an environment for long circumscribed by lazy banking. The unions say they are protesting the governments merger plans for state banks and also the proposal to increase FDI in private banks. Considering the fact that our commercial banks employ about 800,000 people in some 46,000 branches, resistance is but natural. Especially, as this constituency fears erosion of what it considers its natural turf, or rather, an unimpeachable monopoly.

Our strikers argue that as the industry has established itself strongly, there is no need for mergers to increase the size! Unions suggest nationalised banks be used to boost developmental activities in the rural areas for economic growth. But ample and data-backed evidence has proven how the existing set-up has not delivered. And consider this. Though the average employee salary in a PSU bank is quite similar to that in private banks, the business generated or income per employee in 2003-04 in HDFC bank, was 195% better than the SBI counterparts. A recent news report revealed business conducted by SBI is nine times bigger than that of HDFC, while its staff size is 36 times larger! Systemic inefficiencies in state-run banks have been much documented. There is a visible consumer shift too, the pace of which will only grow with strikes of this nature. The resultfaster loss of marketshare by PSU banks.

Gone are the days when customers did not have a choice and bank employees could dictate terms. The writing is on the wall. If they continue to resist change, then more and more customers will desert public sector banks for their private sector rivals. And as the regulatory structure becomes more open to overseas investment as indeed it must, weak banks will become ready targets for takeovers and mergers. In the circumstances, it is better if banks restructure and achieve levels of efficiency to become strong players in the post-2009 scenario. Reforms are the way ahead, strikes or no strikes.