It is Finance Minister P Chidambaram's meeting with leaders of public sector bank unions that averted the three-day bank strike proposed from March 28.
The bone of contention between the unions and the Indian Banks' Association, the banks' trade body, is employees' demand for a second chance to opt for pension, instead of provident fund.
Chidambaram, a lawyer-cum-politician, successfully made the unions see reason in agreeing to a discussion with the IBA by arguing that they should not make the government decide to allow the process of law to arbitrate on their demand.
The unions had no option but to agree for talks for fear of the matter getting entangled in the process of law which would be a time-consuming affair.
IBA officials refused to talk on the matter and said that the ball was now in the bank unions' court.
According to bankers, the IBA had a long meeting with the chairmen and managing directors of select public sector banks to assess the likely shortfall in the pension corpus if employees who had not earlier opted for the retirement benefit way back in 1995 were given another chance.
IBA calculations suggest that the shortfall is estimated to be around Rs 16,000 crore (Rs 160 billion). A detailed report with all the calculations has been submitted to the unions for them to check the verasity of the numbers.
Reacting to the IBA report, All India Bank Employees Association General Secretary C H Venkatchalam said, "IBA's estimates are complex and highly technical. Unions will take help of 3-4 actuaries to arrive at estimates for additional financial provision for pension to about 2.8 lakh employees."
Bank unions call off proposed strike
"The factors like age profile, stage in salary scale and projected salary revisions will have to be taken into account while arriving at estimates (of pension money). It will take about a month to prepare estimates, he added. Venkatchalam refused to give any details of the bank unions meeting with the FM.
The unions in the past had proposed to share the burden of the shortfall in the pension corpus. However, bankers are in no mood to contribute any more to pension corpus as they say that with the coming into force of accounting standard 15 with effect from 2007-08, the provisioning requirement on account of employee liabilities would sharply increase.
The provisioning on account of existing employee liabilities would in itself have a huge impact on the profits of banks.
"For argument sake if the employees decide to contribute 50 per cent of the estimated Rs 16,000 crore cost and also decide to forgo three wage revisions, employees would still not be able to meet the shortfall. Hence, this proposal of the unions is a non-starter,'' said the chairman of a public sector bank.
In 1995 when the pension scheme was introduced, bank employees were given the chance to opt for provident fund or pension. At that time, over 50% of bank employees opted for pension scheme and the rest opted for PF, as the average rate of return on PF was then around 10-12%.
They held the view that when they retire they would get around Rs 35-40 lakhs (Rs 3.5 to Rs 4 million) in hand. However, in the last two years, the return on investment has dipped and hence they are now looking to opt for pension.