India banking sector hit by strike

By agencies   |   Friday, 28 July 2006, 07:00 Hrs
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MUMBAI: Nearly half a million bank workers in India staged a one-day nationwide strike to protest against privatization of government-owned assets and a planned electronic cheque-clearing system they fear will cost jobs, denting bond trade.

The strike, called by the All India Bank Employees Association and two smaller unions, affected about half the country's million-plus banking workforce.

But India’s biggest bank, the State Bank of India which has around 200,000 employees, was not affected by the stoppage as its workers do not belong to the union, officials said.

The central bank, the Reserve Bank of India, has said it will allow banks to outsource banking services to a new payments firm owned by public and private sector banks in a bid to create a central payments system. The move is aimed at streamlining payments methods that currently are a mix of electronic and antiquated paper based systems.

Unions fear that RBI’s move to allow a separate firm to handle retail payments like cheque-clearing operations will result in job losses and say client privacy will be affected if cheque clearing is pooled.

The new payments firm, the National Payments Corp., in which many state-run, foreign and private sector banks hold stakes, was formed earlier this year by the banks and the RBI to create a central retail payment system. The existing system is a mixture of paper-based transactions and electronic systems shared around over 1,000 clearing houses. Finance Minister P Chidambaram told parliament a payments firm would bring more efficiency and service standardization.

The government has also announced plans to allow foreign banks to set up wholly owned units or to buy stakes in private domestic lenders. Previously, foreign banks were only allowed to set up branches.

Banking unions said the privatization and outsourcing moves by the government would lead to job losses.

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