Bankers’ Vision And The Employees Concern 

K V George

INDIAN Banks Association’s vision-2010, formulated by the S C Gupta Committee in December 2003, forms apparently a fine print of Narasimham Committee recommendations, fairly updated. Whereas the Planning Commission released its Vision-2020, the Indian Banks Association (IBA) limits its prescriptions to ten years, thanks to fast changing technology.

According to the Planning Commission, by 2020, the population of India will be 130 crore, out of which 40 per cent will be urban, highly educated, healthier and prosperous compared to 28 per cent as in 2004. Only 40 per cent of the population will be engaged in agriculture as against 60 per cent now. Share of agriculture in GDP will be a nominal 6 per cent as against 28 per cent today. Small and Medium Enterprises (SMEs) will emerge as a vibrant sector and prime job provider. Exports will constitute 35 per cent of GDP as against 15 per cent at present. The economy will be indeed, market driven, productive and competitive.

S C Gupta Committee derives inspiration from the above projections and envisages the Indian Financial System to be inherently strong, functionally diverse and flexible by the year 2010. Banking system will naturally have a dominant and controlling role to play.

FUTURE LANDSCAPE OF BANKING INDUSTRY

The key function of the Indian Financial System will be to make available investible resources to the potential investors in the required form and tenor viz, equity, debt and loans, short and long term. Infrastructure funding will be around Rs 1,20,000 crore. Foreign direct investment (FDI) cap in banking sector will move up to 35 per cent. Rupees will be fully convertible. Education and health sector will enjoy larger investment from abroad. Non Banking Financial Intermediaries (NBFIs) will be integrated into the financial system.

The future landscape of the banking sector accordingly will have the following four characteristics:

1.     Consolidation of players through mergers and acquisitions (M&A).

2.     Globalisation of operations.

3.     Development of new technology.

4.     Universalisation of banking.

STRUCTURE & OWNERSHIP CHANGES

Large presence of international players, reduced government holdings upto 33 per cent M & A and greater role for SMEs being the cardinal features, social lending will undergo change. Directed lending will be business driven. Lending to small borrowers, agriculture and unorganised sectors will be through separate delivery channels such as intermediaries of franchise agents as a means to reduce transaction cost.     

Most of the changes will be technology driven. This will provide complete financial solution for different type of customers. But technology involves huge capital outlay and high degree of obsolescence. Cost will be shared by global partnership on technology and skills. To ease pressure on capital structure, M&As are proposed. Merger will be either between public sector banks or between the public and private sector. As an alternative to M & A, strategic alliance or partnership and collaborative approach will be resorted to.

Under WTO guidelines, financial sector will be opened up from 2005. This would facilitate a number of global banks taking large stake and control over banking entities in the country. They would bring capital, technology and management skills. FDI cap will be raised and Banking Regulation Act will be amended to remove ceiling on voting rights.

Large network of branches will be rationalised to ensure cost effectiveness. Different functional areas such as housing, credit cards, mutual funds, insurance, will be subjected to segmentation and specialisation.

Core Banking Solution (CBS) will be adopted in a fully networked environment. Back office functions will be taken away from branches to a centralised place. The real growth driver for cost cutting would be virtual branches, viz. ATM, internet banking, mobile banking, kiosks etc which can be manned by few persons and run on 24*7 basis to harness the real potential of technological utilities.

Many non-strategic functions would be outsourced more profitably. Specialised agencies could come forward to undertake marketing and delivery functions on behalf of banks. In short, banking products will be sold outside the four walls of bank branches.

Total computerisation will render a part of the workforce surplus. Banks will go for a rightsising exercise. Some banks may resort to another round of VRS to shed excess flab while some others may go for redeployment to strengthen marketing arms. Manpower recruitment will be mainly in specialised areas and technology applications. Commitment of staff will be shifted from organisation to profession. There will be greater lateral movement of personnel. Training and skill development will however continue to be key human resource functions. With the age profile of bank staff undergoing changes, banks will have to focus on leadership development and succession planning.

The present pyramid management structure will go. There will be reduction in tiers to ultimately settle for a flat structure.

REGULATORY AND LEGAL ENVIRONMENT 

Deregulation of rate of interest and moving away from issuing operational prescriptions are important changes. Focus will be shifted from micro monitoring to macro management. Supervisory role of RBI will be shifted more towards off-site surveillance rather than on-site inspection. The new tools will be fixing benchmark standards, E-governance and good corporate governance.

Definition of Banking U/s 5(b) of Banking Regulation Act, 1949 will be amended to enable integration of banks with Non Bank Financial Intermediaries (NBFIs).

RURAL & SOCIAL BANKING ISSUES

Narashimham Committee recommendations for phasing out mandatory, directed lending has not been accepted as such. But bank’s approach to rural lending will be guided manily by commercial considerations in future.

Co-operative sector will be brought under RBI. The RRBs as a group proposed to be made structurally stronger. The Committee desires that NARARD takes the initiative to consolidate all the RRBs into a strong rural development entity.

HUMAN RESOURCE MANAGEMENT

In order to meet global standards and to remain competitive, banks will have to recruit specialists in various fields such as treasury management, credit, risk management, information technology (IT), related services, human resource management etc.

• Promotions will be fast track and merit-performance based, so as to injunct dynamism and youthfulness in the workforce.

• Talents will be spotted, recognised and nurtured. A system of reward and compensation will be evolved.

• Skills of the banks staff will be continuously upgraded by appropriate training, seminars etc.

• Committee proposes banking industry to be kept out of the jurisdiction of Central Vigilance Commission (CVC), so as to enable higher officials to perform better and take commercial decision without fear.

NO MANDATE

The SC Gupta Committee formulated its vision document based on the vision-2020 outlined by the Planning Commission. Significantly vision-2020 ignores the socio-political and cultural realities of India. The projections and assumptions are too ambitious and illusory. The documents presuppose uninterrupted political mandate in favour of liberalisation, privatisation, globalisation (LPG) reforms for a period of 20 years. This is perhaps to totally denounce the democratic traditions of the country and to byepass the role of innumerable struggle unleashed by the trade union movement and the deprived classes, ever since reforms were set in motion in the year 1919. The very fact that Lok Sabha elections May 2004 have dethroned the NDA regime at the centre and pro-reform governments in certain states manifests the fallacy in predicting a dream world with 40 per cent prosperous urban population by 2020. The vision-2010 document of Indian Bank Association is therefore basically untenable.

As it is, many banks both in the public sector and the private, have initiated the process of implementing the vision document, despite serious reservations expressed by the unions. Equity ranging upto 38 per cent are already disinvested by public sector banks and some of them have again announced their move to proceed further. This move shall not go unopposed. Likewise any move to raise ceiling and allow free hand to international players will be resisted.

APPROPRIATE TECHNOLOGY

As regard technology upgradation and Core Banking Solution (CBS) the IBA’s vision-2010 document admits that these involve the heavy cost and the risk of obsolescence. A series of cost cutting measures are proposed in the form of M&As, strategic alliance, etc. Rationalisation of branches and installation of ATMs and kiosks are other alarming remedies. Bank assurance takes the form of selling products of discredited foreign insurance companies with dubious track record, utilising the faith people have in public sector banks. The innovative products are invented to be marketed beyond the four walls of bank branches. It is stated that non-strategic functions will be outsourced. The definition of non-strategic function is not available.

Instead of upgrading technology with abundant caution and in phased manner depending on actual requirement, the horse is put behind the cart and banks are resultantly, made to suffer in myriad ways. The workforce thus rendered surplus will be retrenched again by way of VRS or redeployed. There will be a halt to recruitment. Even specialised category officers are recruited on contract basis. Nepotism and favouritism of the pre-nationalisation era finds reappearance. All these will lead to total anarchy in the banking sector. The trade unions will indeed have to reject the vision document lock, stock and barrel.          

DISTURBING TRENDS

Although directed lending is to stay, agricultural lending will be done on commercial considerations. These functions are proposed to be entrusted to intermediaries or franchise agents so as to reduce transaction costs. The vision document is not in favour of stepping up agricultural lending. But the changed political scenario has at least temporarily sought to reverse the trend. Agriculture however is being redefined as agri-industry and agri-business of the Monsanto or Kargil variety. This will alienate the real tillers from the land.

Truncating the supervisory functions of RBI is another disturbing feature of the vision statement. Doing away with on-site inspection will lead to untoward consequence in the banking industry, wherein unscrupulous bureaucrats dealing with public money can misuse and abuse their delegated power. Banks are sought to be insulated from the jurisdiction of Central Vigilance Commission (CVC) in the name of commercial decisions.

In the realm of human resources management, the system of spotting and recognising talent by means of reward and compensation and also by universalisation of fast track, performance based promotions will cut the root of trade union movement and hence will have to be opposed.

WHAT SHALL WE DO?

1. Bank unions shall collect data and statistics regarding the level of implementation of various tenets of the vision-2010 document from different banks so as to ascertain the evil impact on the customers, employees and the nation. Data also should be collected regarding the actual inflow of foreign capital and business. Similarly, various aspects of technology application including the cost of import, installation, maintenance and obsolescence are also to be analysed. How far the softened rate of interest has helped in stepping up private, corporate investment in the country should also be a subject matter of study.  

2. The depth and extent of manpower reduction effected by banks is a matter of serious concern. The unions shall demand recruitment of award staff to fill up vacancies arising on account of promotion and retirement.

3. The scheme of the vision document for selectively rewarding the performance of individual employees has to be resisted. The super profits earned by banks is a collective achievement. The reward for enhanced productivity must be common for the entire workforce and must be reflected in the wage settlement.

4. The Unions shall oppose any further disinvestments with all their might.

5. There is a tendency to transfer the entire user charges and cost of sophisticated technology in to the shoulders of customers. Fees, rates, services charges and commission are sought to be enhanced exorbitantly. Some of the new generation Hitech Banks are already charging for ATM transactions. Boston Consultancy Group has recommended exactly the same idea for Union Bank of India. This has to be exposed.

6. Various public sector banks are sponsoring and marketing in ugly haste, products of tainted foreign insurance companies like Alliance, Sun, Aviva, Metlife etc, using the goodwill of bank and the staff. Any deficiencies of service on the part of the insurance companies and consequential claims for damages will expose the banks and make their position vulnerable. Bank Unions must immediately address this issue with the assistance of Unions in the insurance sector.

7. Abysmally low rate of interest for bank deposits while rate of inflation crosses the 8 per cent mark must be another important campaign point in the scheme of programmes.

8. Materials collected as above may be utilised for documentation and leafleteering with the aid of experts. A series of seminars may be organised at Delhi and important state capitals. Along with, appropriate innovative campaign programmes best suited for each centre are to be chalked out. These programmes must attract the attention of the class and mass organisations.

Our goal must be to transform the agenda of struggle as the common agenda of the people eventually.