IBA agrees on second pension option, wage hike

Excerpts from India Business Hour on CNBC-TV18 Watch the full show » RELATED NEWS Bank mgmt, unions face off over pension scheme FM admits differences within UPA on insurance reforms Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

The Indian Banks Association has finally signed a wage agreement with the United Forum of Bank Unions (UFBU) - the union, which covers officers and clerical staff.
The new agreement provides for an annual wage increase amounting to Rs 4,816 crore from November 1, 2007. It also includes a second pension option to bank employees. The total package is estimated to cost the banks an additional Rs 6,300 crores.
In an interview with CNBC-TV18, K Ramakrishnan CEO of IBA spoke about the broad agreement with bank unions.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Will there be more stress banks?

A: Not exactly because if the banks are doing well and if they are performing well, it is because of the workforce was supporting them. It is very essential that we take care of their interest. One area certainly that warrants interest is periodical wage increase and that is what we have done precisely.

Q: What about this pension proposal that you have come up with? Can you give us details of that?

A: What actually happened was that in 1993, when the pension scheme was introduced, when the option was given, many employees didn't opt for pension at that point of time and much later this was one of the demands, which was being raised by the unions from time-to-time that then one more option would be given to them. So having considering all the aspects of the case that there are merits for actually giving another option. It was decided that we will give them a second option and that is what has actually happened at this point of time.

It is an option, which is given on a condition that there will be a contribution, which would be made by the employees who were going to opt for pension from the existing employees as well as those who have retired. So they are going to contribute substantially to the pension fund and with this amount, the fund will be stronger and then they we will be able to take care of the requirements.

Q: This move comes in the wake of talk of bank consolidation by the highest authorities in the government. Is this being done basically to keep all employees happy before some mergers happen?

A: This maybe totally related issue because the pension demand of the unions have been now going out for several years and consolidation is something what we have been talking in recent maybe couple of weeks.