PSU Banks hope improved PLI and Five Day Banking Under New Government

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State-run banks in India are optimistic about receiving improved performance-linked incentives (PLI) for their employees under the new coalition government. Additionally, they are likely to advocate for a five-day banking week. Both bank unions and employee associations have been requesting a review of the current PLI scheme and approval for a shorter workweek. There is hope that the government will consider their demands and prompt the Indian Banks’ Association (IBA) to revise the existing structure.

The PLI was initially introduced in 2020 as part of the 11th Bipartite Agreement between the IBA, officers associations of banks, and employee unions. According to this agreement, bankers were eligible for a maximum of 15-days salary as PLI if the year-on-year growth exceeded 15%. However, there is a desire to modify certain parameters governing the PLI, such as basing the final settlement not solely on operating profit but also considering performance on other financial indicators.

Last year, the IBA secured an agreement with unions for the 12th bipartite wage hike settlement, which entailed a 17% increase in bankers’ salaries. This settlement will be in effect for the next five years, starting from November 1, 2022, and will result in an expenditure of ₹12,589 crore for 12 public sector banks (PSBs), including the State Bank of India.

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While banks have made provisions for the PLI outgo according to the existing matrix, it has been decided that further discussions will be held to establish a revised PLI structure, and payments will be made accordingly. Additionally, the approval of the government will be required for the revised PLI.

In the recently concluded wage settlement between unions and the IBA, an agreement was reached on implementing a five-day banking week, contingent upon government approval. The cumulative profit of PSBs exceeded ₹1.4 lakh crore in the financial year ending in March 2024, marking a growth of 35%. The 12 PSBs together earned a net profit of ₹1,04,649 crore in 2022-23.

Last month, Finance Minister Nirmala Sitharaman stated that the government will continue taking decisive measures to strengthen and stabilize the banking system, ensuring that banks support India’s growth trajectory towards “Viksit Bharat” by 2047.

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In a post on X, Sitharaman acknowledged that India’s banking sector has experienced a turnaround under the strong and decisive leadership of Prime Minister Narendra Modi. She further highlighted that the banking sector recently achieved a significant milestone by recording its highest-ever net profit of over ₹3 lakh crore.

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