Bank unions miss the point

When the unions cite the risk of ‘de-regulation' to justify their opposition, they miss the point that entry of more players need not mean unfettered freedom

Even as the Reserve Bank of India plans the next phase of liberalisation in the banking sector, employees' unions are getting ready to flex their muscle to oppose what they term ‘de-regulation' of the industry. Last weekend, the president of the Bank Employees' Federation of India announced that it would call for a strike on July 6 to oppose the entry of corporate houses into banking and the outsourcing of some banking activities, among other issues. So far, the other federations representing the rest of bank employees and officers have not announced support but they could join in to paralyse banking activity that day. The strike could trigger a wave of protests from organised employees who view ‘deregulation' as a threat to their jobs. Less than a decade ago, the opposition to computerisation bogged down public sector banks, setting them back in the race to modernisation with new private banks. The unions' fears were the same: displacement of their members by the new technology. That fear died a slow and protracted death, with many PSU banks still to complete the core banking processes. The issues are now different and together reflect an opposition to the strategic vision of policymakers for banks. The efforts of the RBI and North Block are aimed at expanding and deepening banking activity in order to increase intermediation in areas still ‘under-banked.' The unions need to remember that more than half the population is still beyond the pale of the banking system. If banks are to expand to reach out to the unbanked, there will be more jobs created, not fewer. More banks would mean more capital is available for short-term needs — as well as for long gestation projects in a country still short of capital for its infrastructure — and new growth sectors such as agriculture. Letting in more players is not the same as ‘de-regulation'; when the BEFI uses the term to justify its opposition, it misses the point that more players need not mean granting unfettered freedom of the kind that American banks enjoyed till September 2008, as a result of systemic deregulation since the early 1980s. Even so, the Wall Street crash has put the world wise to the perils of providing foreign banks and corporate houses a free rein in sensitive operations — such as deposit-taking, for instance. One can only hope that the unions will allow better sense to prevail, that they will read the script for reforms more carefully to locate loopholes in the current regulatory framework so as to ensure that freedom for more players does not turn into the ‘deregulation' they mistakenly apprehend is at the heart of the proposed reforms.

Business Line