Latest Bipartite Settlement News - Finmin asks IBA to finalise wage revision of bankers of PSU banks by December 1
The government has asked the Indian Banks' Association (IBA) to initiate the process of negotiations for the 12th Bi-partite settlement in a time-bound manner and to finalise it by December 1, 2023, said a senior official.
The wage revision for employees and officers of the public sector banks is due from November 1, 2022.
The early wage revision would help improve working conditions and incentivise the banking sector employees, the official said.
Further, the official said, the finance ministry has asked IBA to ensure that all future wage negotiations should be finalised before the beginning of the subsequent period so that the wage revision could be implemented from the due date itself.
As a part of the settlement, the IBA is expected to engage in dialogues with the employees' Unions/ Associations and work out to arrive at a mutually agreeable wage settlement.
The government has stressed the importance of fairness and equity in the revision, ensuring that the compensation structure remains competitive with other players in the banking industry, the official said.
"Wage settlement for banks has always been a tedious and time-consuming process with bank managements, represented by IBA, and employees' unions engaging in tough negotiations. Historically, delays of 2-3 years in wage settlement have led to a substantial accumulation of arrears, which are eventually disbursed in a lump-sum.
"This contrasts with the more sustainable approach of integrating the revised wages into the regular monthly salaries," said the official.
Highlighting that the banking sector is the backbone of the Indian economy, the official said it is incumbent upon the management of banks to ensure that employees are adequately compensated and it is necessary for the health and stability of the entire economy as well.
It also comes at a time when the financials of the Public Sector Banks are healthy with the net profits almost tripled to Rs 1.04 lakh crore in FY'23 as compared to Rs Rs 36,270 crore earned in FY'14.
At the same time, the Return on Assets (ROA) in PSBs rose from 0.51 per cent in FY'14 to 0.78 per cent, while Net Interest Margin (NIM) has also increased from 2.73 per cent to 3.23 per cent in FY'23.
Wage settlement talks normally benefit employees of public sector banks, old generation private banks and some foreign banks.
In the previous agreement, 12 state-owned banks, 10 old-generation private sector banks and seven foreign banks signed up. New-generation private banks like HDFC Bank and ICICI Bank are not part of these settlement talks.
The last 11th Bipartite Wage Negotiations concluded after three years of negotiations in 2020 agreed for 15 per cent pay revision for PSBs employees.
Almost 3.79 lakh officers and close to 5 lakh bank employees of PSBs, old-generation private banks and foreign were covered under the wage hike due from November 1, 2017.
FM Nirmala Sitharaman to meet chiefs of PSU Banks today; here's what's on agenda
Finance minister Niramala Sitharaman on 25 March will meet managing directors of public sector banks (PSBs) in order to review performance against the backdrop of the failure of a few banks in the US and the liquidity crisis faced by Credit Suisse.
Sources told news agency PTI that the meeting is going to take stock of the progress made by banks in achieving targets set for the various government schemes including: Kisan Credit Card (KCC), Stand-Up India, Pradhan Mantri Mudra Yojana (PMMY), emergency credit line guarantee scheme (ECLGS) to help businesses affected by COVID-19.
This will be the first full review meeting after the presentation of Union Budget 2023-24 on 1 February. The banks would also be asked to focus on the areas highlighted by the Budget, including credit flow to productive sectors.
Sources further added that the finance minister will review financial inclusion, credit growth, asset quality, and capital raising and business growth plan of banks for the next financial year. Discussion will also be held on non-performing assets (NPAs) of ₹100 crore and the recovery status.
This meeting comes against the backdrop of global concern over the failure of banks due to aggressive monetary tightening.
The US Fed on Wednesday hiked interest rates by 25 basis points to tame high inflation despite the banking crisis. To fight the persistent hot inflation, the Fed has so far increased rates from zero to 4.75 to 5 per cent, all in just one year.
Taking a cue, both, the Bank of England and the European Central Bank (ECB) have also raised their benchmark interest rates.
Meanwhile, policymakers and experts have said that the Indian banking system is in good shape and can handle the situation caused due to monetary tightening.
Various reforms undertaken by the government have resulted in significant improvement in the asset quality of public sector banks, with the gross NPA ratio declining from the peak of 14.6 per cent in March 2018 to 5.53 per cent in December 2022.
All PSBs are in profit with an aggregate profit of ₹66,543 crore in 2021-22, and that further increased to ₹70,167 crore in the first nine months of the current financial year.
At the same time, resilience has increased with the provision coverage ratio of PSBs rising from 46 per cent to 89.9 per cent in December 2022. The capital adequacy ratio of PSBs improved significantly from 11.5 per cent in March 2015 to 14.5 per cent in December 2022.
The total market capitalisation of PSBs (excluding IDBI Bank, which was categorised as a private sector bank in January 2019) increased from ₹4.52 lakh crore in March 2018 to ₹10.63 lakh crore in December 2022, he said.
The government implemented a comprehensive 4R strategy of Recognising NPAs transparently, Resolution and recovery, Recapitalising PSBs, and Reforms in the financial ecosystem.
Major banking reforms undertaken by the government over the last eight years ensured credit discipline, responsible lending and improved governance, besides the adoption of technology, amalgamation of banks, and maintaining general confidence of bankers.
Yesterday, the Lok Sabha passed the Finance Bill, 2023 with some amendments. Union Finance Minister Nirmala Sitharaman tabled ‘The Finance Bill, 2023’ in the lower house amid sloganeering by Opposition MPs demanding a JPC inquiry into the Adani Group issue. She introduced 64 official amendments to the Finance Bill which was tabled in Parliament on February 1 along with the Budget proposals.
IDBI Bank Privatisation: Govt Likely to Invite EoIs in July-End After Discussions with RBI
The central government has been mulling the privatisation of IDBI Bank for quite some time now, and has kept the lender in its list of companies for divestment. The Department of Investment and Public Asset Management (DIPAM) is currently holding roadshows in the US for the sale of the bank, which is set to be another important landmark in reaching India’s divestment targets. The actual quantum of government stake sale at the IDBI Bank will be known once the roadshow is over, the Centre had said earlier in April.
Currently, the government is in the process of holding roadshows in the US, an official was quoted by PTI as saying, on June 10, Friday. After a few more such investor meets, it will finalise the contours of the IDBI Bank stake sale, the official added.
“We may need one more round of discussion with RBI on IDBI strategic sale. The expression of interest (EoI) may be invited by July-end," the official said. It was earlier confirmed by sources that the government may invite EoIs in May for selling its stake in IDBI Bank and expects to complete the disinvestment process in the current financial year 2022-23.
The official said while the quantum of stake dilution of both the government and LIC is yet to be decided, the management control in IDBI Bank will be transferred in the strategic sale.
DIPAM secretary Tuhin Kanta Pandey had in April also said that the EoIs will be invited once the meetings with investors were over. “The quantum of exit will be known post roadshow and then the structure of Expression of Interest will be finalised. One thing is very sure that management control will be passed on. Currently, it is with LIC. But, management control at what level of equity will have to be decided when we have decided the structure of EoI,” Pandey had said in Delhi during an event on LIC IPO roadshow.
The government holds 45.48 per cent stake in the bank, while LIC owns 49.24 per cent. Necessary amendments to the IDBI Bank Act have already been made through the Finance Act 2021, and transaction advisors have been appointed.
The Cabinet Committee on Economic Affairs had given in-principle approval for strategic disinvestment and transfer of management control in IDBI Bank in May last year. “CCEA has given an in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd”, a government had statement said.
In January 2019, IDBI Bank became a subsidiary of LIC, following the acquisition of additional 8,27,590,885 equity shares. In December 2020, IDBI Bank was classified as an associate company due to the reduction of LIC shareholding to 49.24 per cent. The IDBI Bank privatisation efforts come during a time when the government has put off similar plans for Bharat Petroleum.
Bank privatisation not in one go, govt may retain at least 26% in 2 PSBs
The government may not fully exit from the two state-run banks that are to be privatised and instead retain at least a 26% stake for the first few years. A senior official said the extent of the stake sale will depend on interest from investors and market conditions.
The government will introduce a bill in the winter session of parliament to make the changes needed before privatising the two banks. The Central Bank of India and Indian Overseas Bank have reportedly been shortlisted by Niti Aayog for disposal. However, a final decision is yet to be taken.
"The upcoming bill will clear decks for regulatory approvals required for privatisation of two PSBs (public sector banks) but we may like to retain some stake and dilute it at a later stage," the official said, reasoning that the government may like to cash in on the upside in valuation after the stake sale.
Banking on Better Valuation
A similar strategy is being pursued in the case of state-run BEML (formerly Bharat Earth Movers Ltd), where the government is divesting 26% equity along with management control of the Bengaluru-based company. The government has a 54.03% stake in the company. "The required changes in the (banking) laws have been vetted by the law ministry. We will soon take it to the cabinet so that it can be taken up by parliament," said the official cited above.
The Banking Laws Amendment Bill, 2021, will make changes to the Banking Companies Acquisition and Transfer of Undertakings Act, 1970 and 1980, and incidental amendments to the Banking Regulation Act, 1949.
"In case of IDBI Bank as well we have said that the extent of respective shareholding to be divested will be decided at the time of structuring of transaction in consultation with the Reserve Bank of India," said another official aware of developments. IDBI Bank is also on the government's asset-sale list.
He said parallel consultations are on with the banking regulator, the Reserve Bank of India (RBI), for relaxations in ownership and management criteria. These are aimed at allowing the banks being divested to make room for a wider pool of bidders such as non-banking finance companies (NBFCs) that are owned by corporate groups.
Finance minister Nirmala Sitharaman had announced the privatisation of two state-run banks as part of the government's disinvestment programme in her February budget speech. "Other than IDBI Bank, we propose to take up the privatisation of two public sector banks and one general insurance company in the year 2021-22," she had said.
Govt to amend banking laws to facilitate privatisation of two PSU banks
To facilitate privatisation of two public sector banks (PSBs), the government is all set to introduce a banking laws amendment bill in the upcoming Winter Session starting Monday. Finance Minister Nirmala Sitharaman while presenting Budget 2021-22 earlier this year had announced the privatisation of PSBs as part of disinvestment drive to garner Rs 1.75 lakh crore.
The Banking Laws (Amendment) Bill, 2021, to be introduced during the session is expected to bring down the minimum government holding in the PSBs from 51 per cent to 26 per cent, sources said.
However, sources said a final call in this respect would be taken by the Union Cabinet when it would vet the proposed legislation.
“To effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 in the context of Union Budget announcement 2021 regarding privatisation of two Public Sector Banks,” according to the list of legislative business for the Winter Session.
These Acts led to the nationalisation of banks in two phases and provisions of these laws have to be changed for the privatisation of banks, sources said.
In the last concluded session, Parliament passed a bill to allow privatisation of state-run general insurance companies.
The General Insurance Business (Nationalisation) Amendment Bill, 2021, removed the requirement of the central government to hold at least 51 per cent of the equity capital in a specified insurer.
The Act, which came into force in 1972, provided for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business.
Government think-tank NITI Aayog has already suggested two banks and one insurance company to Core Group of Secretaries on Disinvestment for privatisation.
According to sources, Central Bank of India and Indian Overseas Bank are likely candidates for the privatisation.
As per the process, the Core Group of Secretaries, headed by the Cabinet Secretary, will send its recommendation to Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by the Prime Minister for the final nod.
The members of the Core Group of Secretaries include economic affairs secretary, revenue secretary, expenditure secretary, corporate affairs secretary, legal affairs secretary, Department of Public Enterprises secretary, Department of Investment and Public Asset Management (DIPAM) secretary and an administrative department secretary.
IDBI Bank disinvestment: Govt approves 100% stake sale by Centre, LIC
The government has approved the sale of its entire stake, and that of the Life Insurance Corporation of India (LIC), in IDBI bank.
On July 9, the Department of Investment and Public Asset Management (DIPAM) said the Cabinet Committee of Economic Affairs (CCEA) has given its go-ahead to the government and the LIC to offload 100 percent of their entire stakes in IDBI Bank, along with a transfer of management.
At present, IDBI Bank is classified as a private sector bank by the RBI with the government's shareholding at 45.5 percent, LIC's shareholding at 49.24 percent and the non-promoter shareholding at 5.29 percent.
However, DIPAM has said that the exact quantum of stake to be sold will be decided based on a number of factors. "It will be determined, as we go through the transaction, and ascertain investor's interest," it said.
The Department has also clarified that since LIC's stake will be sold alongside the government's shareholding in this transaction, there will be only one transaction advisor.
the Centre's plans to offload atleast 26 percent of its stake. It had also reported that the entire stake may be sold.
DIPAM, in the RFPs issued, had said that the bids by interested investment banks, financial institutions, consulting firms and law firms should be submitted by July 13.
Responding to the queries raised by bidders on the RFP, Dipam has said the broad quantum of primary infusion expected in the bank, and the timeframe for such infusion has not yet been decided. It has also clarified that consortium bids are not allowed.
LIC completed the acquisition of controlling stake in IDBI Bank in January 2019 making it the majority shareholder of the bank. Subsequent to the enhancement of equity stake by LIC, the RBI clarified that IDBI Bank stands re-categorised as a private sector bank.
The Cabinet Committee on Economic Affairs had cleared the 'strategic divestment' of IDBI in early May. LIC will reduce its shareholding in IDBI Bank in parallel with the central government, and with an intent to relinquish management control.
For 2021-22, the Centre has set itself a divestment target of Rs 1.75 lakh crore, on the back of the planned privatisation of Air India, Bharat Petroleum, Shipping Corp, Concor, two state-owned banks (yet to be decided) and the initial public offering of LIC Ltd.
Government mulls bank merger before privatisation
The government will look into the balance sheet of banks in the first quarter of next financial year and may consider merger of two public sector banks, before going ahead with privatisation. According to sources in the Finance Ministry, the government has not yet shortlisted any bank so far and it would be done only after examining the balance sheet.
“Lots of names are floating but we have not shortlisted anything yet. It will be decided after taking into account performance of the Q4 (Jan- March 2021) and Q1 of FY22 ( April to June 2021) after consultation with the RBI. If required, the PSBs can be merged before privatisation,” a senior official with the finance ministry told TNIE.
The finance minister, in her budget speech, had announced that two state-run banks will be privatised in the next fiscal. “Other than IDBI Bank, we propose to take up the privatisation of two public-sector banks and one General Insurance company in the year 2021-22,” Nirmala Sitharaman had said. Other banks including Bank of India as well as Punjab and Sind Bank were also doing the rounds in various media reports. However, the official added that it may not be the “weakest” bank which will go for privatisation.
“The decision will be taken on the basis of unlocking the valuation and not on which is the weakest Bank. It is a more complex process. A lot of factors may go into the decision making and also on the appetite of the investor,” the official argued. On the timeline, the official ruled out the process would be initiated in the first half of the next financial year.
“There are many legal processes which need to be followed to facilitate privatisation and it requires certain amendments. All these will take some time,” the official said. The government is likely to bring amendments to two legislations later this year. Finance ministry sources said that amendments would be
required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 to facilitate the privatisation.
Government is considering mid-sized to small banks for its first round of privatisation.
Government has shortlisted four mid-sized state-run banks for privatization, under a new push to sell state assets and shore up government revenues, three government sources said.
Privatisation of the banking sector, which is dominated by state-run behemoths with hundreds of thousands of employees, is politically risky because it could put jobs at risk but Prime Minister Narendra Modi's administration aims to make a start with second-tier banks.
The four banks on the shortlist are Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India, two officials told Reuters on condition of anonymity as the matter is not yet public.
Two of those banks will be selected for sale in the 2021/2022 financial year which begins in April, the officials said. The shortlist has not previously been reported.
The government is considering mid-sized to small banks for its first round of privatisation to test the waters. In the coming years it could also look at some of the country's bigger banks, the officials said.
The government, however, will continue to hold a majority stake in India's largest lender State Bank of India, which is seen as a 'strategic bank' for implementing initiatives such as expanding rural credit.
A finance ministry spokesman declined to comment on the matter.
India's deepest economic contraction on record caused by the pandemic is driving the push for bolder reforms, economists say.
Government also wants to overhaul a banking sector reeling under a heavy load of non-performing assets, which are likely to rise further once banks are allowed to categorise loans that soured during the pandemic as bad.
PM Modi's office initially wanted four banks to be put up for sale in the coming fiscal year, but officials have advised caution fearing resistance from unions representing the employees.
DFS has approved the 11th Bipartite Wage Settlement, Arrears will be paid this month only
Ministry of Finance, Department of Financial Services had approved the 11th Bipartite Wage Settlement and give the Non Objection on behalf of the Government to Public Sector Banks to make arrears and revised salary payment to existing employees.
They have also provided the NOC for paying enhanced pension or family pension as per the 11th BPS settlement terms.
The Arrears and revised salary will be paid from the month of December 2020.
A mixed response from the bankers as they waited for long 3 years for this. The hike given to them was not appreciating i.e. 15%, if compare with the risk and work pressure.
The signed NOC by DFS to IBA :
Cabinet approves RBI's proposal to merge Lakshmi Vilas Bank with DBS Bank, all branches to function as DBS Bank, says RBI
Union Cabinet on Wednesday approved the merger of capital-starved Lakshmi Vilas Bank (LVB) with DBS Bank India. The Reserve Bank of India on 17 November proposed the merger of the 94-year-old lender with the Indian arm of Singapore’s DBS Bank. As part of the amalgamation, DBIL will infuse fresh capital of Rs.2,500 crore into LVB.
The central bank on 17 November placed Lakshmi Vilas Bank under one-month moratorium, superseded its board and capped withdrawals at Rs.25,000 per depositor. "With the merger, there will no further restrictions on the depositors regarding the withdrawal of their deposit," Union minister Prakash Javadekar said.
Analysts and global credit rating agencies have applauded RBI's move and said that it will benefit both parties. "The quick action taken by the RBI in the Laxmi Vilas Bank matter affirms the faith of the depositors in the banking system," Ajay Shaw, Partner, DSK Legal.
"LVB merger with another bank is a very prudent step in order to save the depositors and to mitigate the systematic disruption associated with it. The image of government and regulator gets enhanced by such timely action and response," said S Ravi, former chairman of Bombay Stock Exchange (BSE) and Managing Partner of Ravi Rajan & Co.
DBS was the first foreign bank to receive a banking licence after the central bank allowed foreign banks to set up a wholly owned subsidiary in 2014. "With DBS likely to use digital capabilities to enhance its physical footprint in India, the proposed deal could lead to a 30-40% increase in Indian assets of DBS," said JPMorgan analysts Harsh Wardhan Modi and Saurabh Kumar.
The regulator had put LVB under Prompt Corrective Action in September 2019. The lender earlier reported widening of its net loss at Rs.397 crore in the second quarter ended September 2020 due to rise in bad loans and provisions. On 25 September, the shareholders of the bank had voted out seven members from the board, including the then MD and CEO S Sundar. The RBI on 27 September appointed the CoD composed of three independent directors Meeta Makhan, Shakti Sinha, and Satish Kumar Kalra, being headed by Meeta Makhan.
Moody’s said the merger will strengthen DBS’s business position in India by adding new retail and small and medium-sized customers.
Govt may sell stake in IDBI Bank in FY21 but no decision yet on other banks
Moratorium extension of 3 months by RBI has two sides; the second one is ugly for banks
On the positive side, the moratorium extension gives more time to customers (professionals, small businesses, MSMEs and corporates) for recovery in earnings/repayment capacity in an easing lockdown scenario. Thus, the probability of them slipping buckets after the end of moratorium on August 31 diminishes, and therefore the NPL spike for lenders could be lower than what is anticipated now.
The moratorium extension also gives time to lenders to strengthen their collection infrastructure for retail products as restrictions on physical collection/follow-up eases out and collection agencies would have had their migrant workforce back.
For working capital facilities, interest payment has been deferred by another three months, in line with extension of moratorium on terms loans. The accumulated interest for the deferment period can be covered into a funded interest term loan payable be end of the current fiscal. Thus borrowers need not pay accumulated interest in one shot immediately after the deferment period, which is a big relief for them.
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