Uco Wage Freeze Adds Insult To Injury

While the leftists and their major constituents, unionised white collar workers, can be left to sort out who is the renegade and who is the class enemy infiltrator, the bigger issue is whether this is indeed the first of a well thought out set of actions based on a coherent strategy, or merely an attempt to test the waters and rapidly retreat if the move runs into heavy weather. On the face of it, some fresh thinking seems to have been done as several things are being talked about at the same time. In two meetings with bankers, the finance minister has talked about greater autonomy for the better run public sector banks. Two specific facets of this have been discussed. One is to allow the profitable ones to enter into their own wage agreements with their unions, depending on their ability to pay. This is the natural corollary to the decision to freeze wages in a loss-making bank. And the other is for the Reserve Bank to give greater freedom to the same profitable banks in deciding where to have branches and

 

where not to.

The issue of branch expansion or contraction is historically important. In the past, rapid branch expansion to make banks accessible to ordinary people was considered a key goal of nationalisation. A corollary to this was the severe restrictions imposed on foreign banks branch expansion and ability to put up cash dispensers. This was to prevent them from taking away the cream of the business, unencumbered as they were with any social obligations. These restrictions make little sense in todays age of electronic banking in which a branch can be anywhere and effectively function as an administrative office, and real banking transactions can be carried out by customers anywhere in the country by accessing the central computer. So it is about time that the fetishism over allowing or not allowing branches to be opened was given up. In fact, partial freedom in closing down uneconomical branches is already there.

But autonomy to banks is not a non-issue. Is the government really serious about it? Unfortunately, feedback from the banking division is discouraging. The feeling is that the issue was raised on the two occasions as merely a talking point. If the officials concerned were really serious about initiating a new regime, they would have prepared notes and started files on the matter. Nothing like that has happened. Issuing a directive to the Uco Bank board is one thing. Repeating the same, maybe, to the board of the United Bank is another. But these are all individual discretionary decisions. There is as yet no serious attempt to give some banks total freedom in wage negotiations. The unions would be dead against it. Many managements would find it irksome as then they would not be able to hide behind a stand supposedly jointly taken by the Indian Banks Association and, perhaps most important, it would mean serious loss of power or ability to generate paper work on the part of the banking division officials.

Memory is still fresh of what serious objection the banking department took to the State Bank of India giving one special increment to its employees to facilitate computerisation.

But there can be an even more serious objection to the healthy banks getting more freedom to do as they please. They need it the least and since they have a healthy bottomline, this would be an invitation to their unions to demand more at a time when the banks still earn a bit of rent income. On the other hand, freedom to act and take innovative decisions is vital for loss-making banks. It is their managements which have to restructure. A case in point is the decision by Indian Bank to negotiate and write off some loans so as to earn something as also to clean up the balance sheet and then start off again with a clean slate. But how can that be done? Naturally by giving them proper boards with competent professionals and, first of all, separating the functions of chairman and managing director.

Come to think of it, reorganising sick banks in this manner is even more difficult than selling them off, with all the attendant political fallout, and leave the restructuring to be done by the new owners. So the bad news for the reform lobby is that real banking reform is still far away and the good news for the unions is that the bureaucrats are on their side still. If the strike calling and sabre rattling do not work, then the next best thing to do is to work in concert with the bureaucracy and bury the proposal in a mountain of paper. There is still some life left in Indias brand of leftism.