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As employees of state-owned banks bargain hard for a steep rise in pay, the finance ministry has asked the Indian Banks' Association (IBA) to consider moving towards a cost-to-company (CTC) structure to reflect the actual remuneration, including all perquisites and incentives.
If the proposal goes through, every paisa the bank spends on an employee, from concessional rates of interest on loans to the employer's share in the provident fund, might be shown as part of CTC/salary.
The report of a committee on personnel issues of public sector banks in June 2010 had suggested banks consider variable pay as a major component of wages and have the discretion to go for a CTC concept, a trend prevalent world over.
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At present, a raise to bank employees is given on gross salary, which primarily includes basic salary, dearness allowance, city compensatory allowance and house rent allowance (HRA) in some cases. Besides, there are various allowances for travel, buying furniture, cleaning material, telephone, newspapers, leased house rent (if HRA not availed) and medical expenses, among others.
Typically, a government bank probationary officer gets a salary of about Rs 26,000 a month. The perks and facilities could add at least Rs 10,000. There is no upper limit on these, as perquisites are not fixed by the government; these vary from bank to bank. The government believes in many cases the total cost incurred by the bank on an employee is double his or her basic salary.
A bank employee, however, said there was a significant difference in the perks of small and large-size bank employees and if the wage rise is given on the CTC, it would widen the gap in pay packages. Salaries of State Bank of India employees are, for instance, higher than other PSB peers.
Some banks also offer allowances in the name of mid-year transfer, deputation, posting in a hilly region or special area, halting, lodging, discomfort, briefcase, entertainment and club membership fees.
IBA is likely to ask for a 25 per cent rise for the 800,000-odd employees in the 10th bipartite agreement on wage revision. The rise is due with effect from November 2012. Though wage settlement negotiations usually go on for about two years, as bank unions begin with very high expectations, this time the government might settle by the end of 2013, since general elections are due in 2014.
"If PSBs have to run like a professional company, then why not behave like one and move to the CTC concept? We have given this suggestion to IBA," a finance ministry official told Business Standard.
The additional burden on banks due to the ninth wage agreement in 2009 was Rs 4,816 crore for a 17.5 per cent rise and Rs 5,000 crore for pension. The rise was effective from November 2007.
A report by the Reserve Bank of India had said that after the ninth pay revision, the cost per employee in state-run banks went up to Rs 7.16 lakh in 2010-11, against Rs 5.63 lakh in private banks. In the previous years, it was either similar or more in private banks.
