I have just come across news items appearing on internet under the heading “Chidambaram to bank staff: All profit can't be used to pay higher wages”.  The report broadly says :

(a)             “A significant part of retained earnings must be used to infuse additional capital, otherwise banks will not find the amount of capital that is required over the next 5, 10, 20 years”    He also  told that the capital is to take care of a number of things. Firstly, banks are obliged to declare a dividend, both to the majority owner of the bank and the other shareholders,"   "It cannot be that all profits are used to declare dividend and to provide enhanced wages and allowances to bank employees."

(b)            “Claims of officers, staff and employees must be duly acknowledged, and a fair and just (wage) settlement is arrived”  but  there are other claimants to banks' profit.

The above report is significant as this has been issued by FM on a day when most of the bankers are on 1^st day of the  strike (out of the 2 day strike).   It clearly indicates :-

(i)                           FM is full aware of the strike and is concerned about the same

(ii)                        He is fully aware of the fact that bankers are being paid lower wages than their counterparts elsewhere;

(iii)                      He wants a fair and just wage settlement;

(iv)                      However, he is of the opinion that claims of other stake holders like Government, public and capital infusion (through retention of higher profits) have higher claim than the employees.

Thus, he openly advocates that even fair and just wage revision can wait to pay more to Government, Public and retention of profits to be used for future.

I would like to remind Finance Minister  (He may NO  more be an FM after next 100 days, as is being claimed by other Prime Ministerial candidate, Mr Narinder Modi) a few basic facts :-

(A)    Are banks a personal fiefdom of FM or Finance Ministry?  Nowhere in the world I have heard wherein the shareholders dictate the company as to how much dividend be paid to the shareholders.   However, in India, Finance Ministry dictates such things.   Readers can click  on the link given within brackets here to read the report wherein Finance Ministry has dictated such terms to Public Sector Banks.    [Finance Ministry Wants 20% Dividend From Banks].   Is it fair to ask a company to declare a minimum dividend  or rather it should be decided by the Board of Directors depending on the surplus profits available after meeting the genuine needs of its expenditure.    Such dictates by FM only pressuries the CMDs,Auditors to ignore the fundamentals of accounting and ensure that the desired dividend is declared by banks.  I am sure if such a thing is challenged in a Court of law, Finance Ministry may find it extremely difficult to defend.  

  (B)    By asking a declaration of minimum level of dividend, is Finance Ministry not encroaching upon the fundamental right of the banks to keep a portion for future expansions.   There are hundreds of examples in the corporate sector, when companies do not declare any dividend to conserve more funds for future expansions.   However, in case of banks, FM wants that funds for further capital must be kept aside by NOT increasing the salaries of the employees.   Does this means the Government must be paid the dividend even if bank employees wages are on the verge of starvation?  Why only bankers are required to work for 6 days a week and forced to work without overtime?

(C)    All bankers are well aware about various types of pressures exerted on banker by big borrowers for sanction of loans / enhancement of limits, Restructuring of Loans, OTS  of Loans by corporate borrowers, and loan waiver schemes.   I think before FM has any right to ask bank employees to sacrifice their increase in wages, he should ensure that no one from any Government ever dares to exert pressure on bankers for such activities which in reality drain lot of funds of banks.

(D)    Why FM statement clearly indicates that he wants the Banks to be purely commercial in nature i.e. wages will be paid only after meeting the demands of other stake holders i.e. shareholders, future requirements etc.  In case he wishes that banks should be pure commercial organizations, then  why non profitable works like handling of Government business, Pension payments, Financial Inclusion, Compulsory opening of branches in rural areas are imposed on public sector banks.  For such non profitable activities, either banks should be compensated or banks be made free to handle such business.  I am sure thousands of crores of additional profit will be generated as the staff working on such activities will be able to devote more time for acts like recovery of NPA etc.

(E) FM is fully aware of huge number of scams that have been surfaced in last few years.   I am sure,  the funds misappropriated in a single scam of 2G (Rs1,76,000,00,00,000) or coal allocation would have been sufficient for 100 years of wage revision of bankers.  However, politicians can not be questioned as they say you should come to Parliament by fighting elections.

(F) FM / PM  talk on the basis of his education in Harvard and not like a common Tea Vendor.   He does not know the constraints of a Aam Banker for his day to day survival.  He can always say like Rahul Gandhi that "poverty" is only a state of mind.   He feels that if Bankers will start thinking that they are well paid, then they will become rich.  

There can be many more arguments to expose the fallacies of the FM’s statement.  Our readers will certainly add such arguments in the comments column.

Thus, now IBA is likely to take more hardened stand, and UFBU leaders have to be ready with better background paper work to counter the fallacies of FM and IBA arguments.  

In case bankers are not given an honourable rise in wages, I am sure slowly lesser and lesser intelligent workers will join banks.   This will lead to more NPA, higher frauds and poor service to customers.   Thus, in short run, IBA and FM may be happy but in the long run they will rue their decision.   A good example of this attitude is stoppage of recruitment from 1986 to 2004 or so.   At that HRD people used to boost of saving few hundred crores, but now the whole banking industry is in turmoil as there are no mid age bankers.   Mass recruitments are resulting in recruitment of lower standard of the recruitees and banks have no facilities and time  to train  them.   All this is leading to slippage of more and more loans.

FM and Bank management needs to be visionary rather than short sighted.   Or else banking industry will remain in turmoil and we will keep on fire fighting only rather than go for solid foundations on which to rest our financial sector.  I can guarantee if now bankers are not paid well, the next five years will see mass exodus of good people as new banks are coming up.  The left over people will be disgruntled  and new recruits to be poor qualified, resulting in lower standards and all around fall in the rating of banks.

I can only hope better senses will prevail upon FM and people sitting in government and they will ensure honourable wage settlement at the earliest or bankers may have to go on long warpath.