Public sector banks will have to cough out Rs 12,449 crore more a year following a new wage agreement between the Indian Banks’ Association (IBA) and bank employee unions for a 17% increase in salary and allowances for five years.

The increase will be effective from 1 November 2022. It is set to benefit around nine lakh employees, including 3.8 lakh officers, of public sector banks and some old generation private banks.

"The annual increase in salary and allowances is agreed at 17% of the annual pay slip expenses for FY22, which works out to Rs 12,449 crore for all public sector banks (PSBs), including State Bank of India," IBA said.

As per estimates, the total wage bill of SBI would be Rs 57,292 crore for FY23.

The agreement was finalised after discussions were held between the IBA representing managements of banks and the authorised representatives of workmen unions and officers’ associations on wage revision for officers and workmen in banks, a joint memorandum signed by IBA and unions said.

Talks were held on 7 December 2023 and an MoU was signed. A final settlement on the wage revision will be finalised within 180 days.

The IBA has already recommended to the government for declaration of all Saturdays as holidays under the Negotiable Instruments (NI) Act for the banking industry in line with earlier negotiations with unions, according to the memorandum.

If the government agrees to this proposal, banks will work only from Monday to Friday every week.

Currently, bank branches in India are closed on second and fourth Saturdays every month.

Bank unions are also pushing for declaration of all Saturdays as holidays. “The unions/ associations urged for implementation of the same before signing of the final bipartite agreement/ joint note,” the memorandum signed by the IBA and unions said.

For the five years between 2017-2022, bank employees got a wage hike of 15% involving an outgo of Rs 7,900 crore for the banks. Both the sides agreed to implement the concept of Performance Linked Incentive scheme for the first time from the FY2020 fiscal. PSU banks reported a 57% rise in net profit to Rs one lakh crore in FY2023.

According to the agreement, the new pay scales will be constructed after merging dearness allowance corresponding to 8,088 points (average index point as applicable for the quarter of July, August and September 2021) to the basic pay as on October 31, 2022, and adding thereon a loading of 3%, amounting to Rs 1,795 crore. 

The distribution of annual wage increases between workmen and officers would be worked out separately and proportionately based on the breakup of establishment expenses for FY2022. 

“Without prejudice to the demand of unions/ associations for updation of pension for all retirees, it is also agreed that as a one-time measure applicable for the current bipartite / joint note period, monthly ex-gratia amount will be considered along with pension by PSBs to pensioners and family pensioners, who were drawing pension as on October 31, 2022,” it said.

The applicability of the ex-gratia for the retirees of the current settlement period will be discussed further. The ex-gratia amount will not attract any other allowance including dearness allowance, it said.

The memorandum said the parties will meet on mutually convenient dates to draw out a detailed bipartite settlement/ joint note on the various issues on which consensus positions are reached. The parties will endeavour to finalise the settlement within 180 days.

The statement said all other issues of the management and unions discussed during negotiations, including payment of ex-gratia to pensioners and family pensioners of PSBs and foreign banks, will be settled to mutual satisfaction.