Bank unions are on a suicide mission
6% when public sector banks have reduced savings bank rates to 3.5 %. Small borrowers, who pay the highest rates on borrowings, will increasingly be wooed by small finance banks.
Another big disruption heading at the speed of light towards stodgy public sector banks is digital banking. With demonetisation giving a push to e-payments and mobile banking, banks need fewer branches and ATMs in future. Even cheques are largely redundant for large payments. At some point, if e-wallets, online payments and mobile banking spike, even credit and debit cards will be less and less indemand.Thismeansthemostcost-competitive banks will not be those with lots of branches or ATMs or card customers, but those who can keep overheads lean and focus on digitising customer transactions. An Airtel with over 300 million mobile customers does not need too many branches to reach new customers. The Post Bank of India, with nearly 1.5 lakh branches, will be able to reach more customers in rural areas than any public sector bank – in fact, all of them put together.
Nandan Nilekani, former chairman of the UIDAI, says banks will have to learn to earn money from data – the information they already have on millions of their customers, which they can use to cross-sell products like mutual funds. Thus fee income from crossselling products will be key to profits, not just plain vanilla lending.
Given the changing nature of the challenges facing banking, public sector banks are on a losing wicket where they will have to shed labour rather than maintain current manpower strengths. Employment in banks will grow, but not of the kind which will join unions. The future of banking employment lies in those who manage bank technology and networks, those who focus on cyber frauds, and those who can sell and market products, and those who can offer customised services. But unionised banks are not the best advertisements for customer service. New banks will increasingly seek to replace manpower with technology.
In this scenario, what should unions do to stay relevant? The answer is simple: Demand skill upgradation courses to enhance their careers; and better voluntary retirement schemes for those who are too old to retrain.
The last thing they should be doing is going on strike and weakening the very banks that provide them a livelihood right now. They are cutting the branches they are sitting on.