All profit can’t be used to pay higher wages: FM to bank staff
Chidambaram – on higher wages and finance profit
Chidambaram – on higher wages and finance profit

New Delhi: As public sector bank employees started a two-day strike today seeking higher wages, Finance Minister P Chidambaram said the profit of banks cannot be used only to enhance salaries because there are other obligations.

“I will appeal to employees and officers of banks to recognise that banks profits, banks earnings have other claims. While claims of officers, staff and employees must be duly acknowledged, and a fair and just (wage) settlement is arrived at, there are other claimants to banks’ profit,” he said.

Chidambaram, speaking at the 78th foundation day of Indian Overseas Bank, said, “It cannot be that all profits are used to declare dividend and to provide enhanced wages and allowances to bank employees.”

A significant part of retained earnings must be used to infuse additional capital, otherwise banks will not find the amount of capital that is required over the next 5, 10, 20 years, he said.

“The capital is to take care of a number of things. Firstly, banks are obliged to declare a dividend, both to the majority owner of the bank and the other shareholders,” he said.

Another part of retained earnings has to be infused as capital in the bank for furthering its business, he added.

Public sector bank employees started a two-day strike today to press for a revision in wages.

There are 27 public sector banks in the country with a combined employee strength of about 8 lakh. There are about 50,000 branches of these banks across the country.

Chidambaram said banks are yet to finalise the amount of retained profit they will infuse as additional capital.

“They will, after the year gets over, but I sincerely hope that a significant part of retained earnings can be infused by banks as capital,” he said.

“The capital is to take care of a number of things. Firstly, banks are obliged to declare a dividend both to majority owner of the bank and the other shareholders,” he said.

Noting that banks are compliant with global capital norms Basel II, he said, “We have to be compliant with Basel III norms. Every year until 2018 or so, Basel III norms will kick in and all our banks will have to be compliant with Basel III norms.”

In the past five years and the current year, he said, the government has infused a significant amount of money in banks as its contribution to capital.

The government infused Rs 12,000 crore in 2011-12 and Rs 12,517 crore in 2012-13. The government has allocated Rs 14,000 crore for capital infusion in this financial year.

He further said that keeping in mind the “humongous amount” of capital required in the future, “all banks, all officers and all staff” should ensure that a significant amount of retained earnings should be used as capital, after paying taxes and declaring dividend.

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