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Wednesday, August 05, 2020

Amid rising bad loans, losses and COVID disruption, bank staff to get 15% salary hike

Bank managements and unions have agreed to introduce the system of performance-linked incentive (PLI) in public sector banks for the first time.

Written by George Mathew , Sunny Verma | Mumbai, New Delhi | Published: July 24, 2020 3:19:54 am
The wage hike has come at a time when most PSU banks had reported heavy losses in the last several quarters, and losses and NPAs are expected to pile up going forward due to impact on COVID-19 pandemic on economic activity. (File)

Around 8.5 lakh bank employees will get a 15 per cent increase in their salary packages with the Indian Banks’ Association (IBA) and the United Forum of Bank Unions (UBFU) late Wednesday signing a memorandum of understanding on the salary negotiation package. The wage revision, which will cost banks around Rs 7,900 crore, will be effective from November 1, 2017. Bank managements and unions have agreed to introduce the system of performance-linked incentive (PLI) in public sector banks for the first time.

The salary hike move will benefit employees of PSU banks, old generation private banks and some foreign banks, while PLI is optional for private and foreign banks. The annual wage increase in salary and allowance is agreed at 15 per cent of the wage bill as on March 31, 2017. This works out to Rs 7,898 crore on pay slip components. While employee unions had demanded a 20 per cent hike, the final agreement came to 15 per cent.

The wage hike has come at a time when most PSU banks had reported heavy losses in the last several quarters, and losses and NPAs are expected to pile up going forward due to impact on COVID-19 pandemic on economic activity. However, industry sources said the hike won’t be a burden on banks as it was expected and made provisions accordingly.

PLI in PSBs is being introduced which will be based on the operating profit/ net profit of the individual bank. This will be optional for private and foreign banks. As per the formula, if the year-on-year growth in operating profit is less than 5 per cent, there’s no incentive; for profit growth between 5 and 10 per cent, five days salary will be given as incentive. If it is between 10 and 15 per cent, 10 days salary will be given, and in the case of 15 per cent-plus growth, 15 days’ salary. While PLI has been introduced to motivate employees, it may be difficult in reality since banks are expected to post losses in coming quarters, sources said.

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