Banking Central | Can Kerala's CSB Bank make peace with its trade unions, government?

Kerala-based private sector banks seem to be at war with themselves. Dhanlaxmi Bank, for instance, has been beset with management and board problems. The lender has seen several top-level exits while a tug-of-war, as reported by Moneycontrol, continues among investors for a seat on the board.

Over the years, more than business challenges, organisational issues and ego battles have troubled the bank. The promoters want control of the board and do not like the idea of the management being assertive in the bank’s affairs.

While Dhanlaxmi issues continue to simmer, yet another Kerala-based bank is in the middle of a raging storm. The management of the CSB Bank is at loggerheads with its powerful trade unions over a wage hike.

Employees have launched a protest as the management, so far, has refused to implement a 15 percent pay hike agreed to by the Indian Banks Association (IBA) and the bank’s trade unions.

As reported by Moneycontrol, there is a likelihood of the All India Bank Employee Association (AIBEA), the national body of bank employees, escalating the issue to the national level.

On November 11, 2020, IBA said it signed a bipartite settlement with bank unions agreeing to a 15 percent increase in the salary. The hike is for the five years between November 2017 and October 2022.

CSB used to follow the wage settlement agreed between the IBA and the trade unions but has refused to do so now, infuriating the unions. The bank, according to its website, has 417 branches and close to 3,000 employees.

But the issue is not just wage revision. Employee unions aren’t happy with the management’s shift—from a local lender, with a regional focus, to a corporate-focused bank. But the Fairfax group, backed by Prem Watsa, wants to transform the bank into a new-generation private sector bank.

The unions fear the path will be “disastrous” for the lender. “This bank has existed for hundred years by focusing on local businesses and being a mass bank to customers in its stronghold. But, the new promoters want to change its character, which is disastrous,” said AIBEA general secretary CH Venkatachalam.

A few years ago, Dhanlaxmi Bank, too, under the then CEO Amitabh Chaturvedi, went for an aggressive expansion plan that included moving to a highly lucrative corporate loan market, hiring top executives at fat salaries and moving away from the local focus.

The plan backfired when short-term costs exceeded expected gains and Dhanlaxmi had to let go of some of its top managers.

CSB employees fear a replay under the leadership of CV Rajendran, a former MD of Andhra Bank.

Unlike other states, Kerala’s private sector banks, and financial institutions like gold loan major Muthoot, are dominated by trade unions backed by political parties.

Breaking away from this culture isn’t easy, as the past has shown. There needs to be a balance.

CSB Bank wage issue has already caught the attention of the state government. On October 11, finance minister KN Balagopal told the Kerala assembly that the government was concerned that a foreign entity had taken control of the bank.

It won’t be an exaggeration to say that CSB Bank management and its promoter are staring at twin problems—wage issue and business expansion that will call for a cultural change.

Can the bank and its promoter make peace with the trade unions and the local government? Watch this space.

(Banking Central is a weekly column that keeps a close watch and connects the dots about the sector's most important events for readers.)