The menace of outsourcing in the banking industry

Outsourcing in the Banking Industry – threats and challenges

Outsourcing has become the modern word in the parlance of the Managements be it manufacturing industry or service industry. The word outsource means “to arrange for somebody outside a company to do work” in terms of the Oxford Advanced Learner’s Dictionary. For the working class what is meant by outsourcing? The very meaning of the word is sheer exploitation of labour in its crude form. The crisis ridden capitalism finds several ways to overcome the same and comes out with newer methods to increase its predatory profits. One such method which has been ‘successfully’ put into practice is outsourcing of regular and permanent jobs in various sectors. Banking Industry in India is no exception to this.

If a job is done in totality in an industry, the cost is higher according to the industrialists. Therefore in order to reduce the cost, outsourcing is resorted to. In that process, the labour is divided, labourers are dissected into several groups so that their voice of dissent is suppressed. In the thickly populated country like ours cheap labour is available aplenty for exploitation. The managements see that the fragmented sections of labour are not organized. Thus the main motive of the exploiting class is to de unionise the working class which ultimately poses grave threat to the very existence of the capitalist system.

Banking Industry where nearly 25% of the total business is controlled by the new generation private banks, the indigenous and the multi national private banks, outsourcing is fully resorted to without any restriction. This gives them advantage in terms of profit and reduced man power and that too mostly in contractual form. Hence pressure is built on the public sector banks also to follow the suit. The successive Governments at the centre instead of checking the menace provide a congenial climate for public sector banks to adopt the same policy. Thus the disease spreads everywhere.

Almost all the core jobs are outsourced in the private sector banks. For instance credit card marketing, issuance of cards, maintenance of accounts, settlement of bills, enhancement of limits, recovery etc. are all outsourced to several agencies which absolutely do not have any interconnectivity. Thus the end users are put into untold sufferings as they are made to run from pillar to post to redress their grievances. The same methodology is copied by the public sector banks also thus plugging the decent job opportunities for hundreds and thousands of the unemployed youth. State Bank is a classical example for this. There is no Head Quarters for SBI credit card department. . No personal interaction is possible for any credit card holder to take up their grievances. Letter correspondence through drop box or post box or e mail is only possible. Resultantly letters or legal notices cannot be sent through any registered post. Thus the clients are placed in a hapless situation due to this system.

Several courts including the Supreme Court passed severe strictures against the ICICI Bank for its unlawful acts through its outsourced agents. One Shri Yadiah was reportedly done to death by the goons engaged by the ICICI Bank at Hyderabad for alleged default of a paltry sum. Shri Prakash Sarvankar in Mumbai was abetted to commit suicide and his three small girl children stood witness for the crime committed by the agents of the ICICI Bank. A youth totally unconnected with ICICI Bank was reportedly beaten on his head severely using iron rods by the ‘recovery agents’ of the same bank in Delhi in January 2007. These are a few of the crimes that have come to surface. Several hundreds have been swept under the carpet due to the money and muscle power of the Bank. The irony is that instead of booking the chief of ICICI Bank, Mr.K.V.Kamath for these criminal activities committed by their agents, he is awarded with Padma Bhushan on the Republic Day for ‘the best banker’. Earlier Mr.Ramesh Gelli, the then Chief of Global Trust Bank, which also outsourced many of its key functions, was awarded with Padma Sri for ‘innovative banker’ by the previous NDA Government. Thus the message of the successive Governments at the centre is that public sector banks also should tread the path of the new generation private banks.

Recently, the IBA has black listed 22 outsourced agencies out of which 13 have been engaged by ICICI bank and 9 by HDFC bank. The reasons pointed out by IBA for black listing are "submission of forged documents indicating dishonesty and lack of integrity, leakage of customer data, failure to meet statutory liabilities, involvement in frauds etc." Still learning no lesson from the past experience, the bankers-government combine are very adamant in outsourcing bank jobs.

The managements of the public sector banks which have already resorted to outsourcing many functions which are continuous and perennial in nature and which form an integral part of the day to day banking are encouraged by the Government to resort to further outsourcing. The cleaning of the premises, security guards for the ATMs and bank branches, issuance of credit and debit cards, filling up of cash in ATMs, data entry, filling up of account opening forms, capture of customers’ signatures, transportation of cheques to the service branch from the branches and vice versa, data entry are some of the jobs that are handled by the outsourced agents in the Banking Industry. The list is only illustrative and not exhaustive. Thus through these acts, several thousands of permanent jobs are rendered surplus in the industry.

The eighth bipartite settlement provides for outsourcing of only IT related activities where in-house capability is not available. Therefore whatever outsourcing that has been resorted to by the banks is clearly in violation of the industry wide settlement and hence the management of these banks is liable to be prosecuted under section 29 of the Industrial Disputes Act, 1947. But the Government of India and Reserve Bank of India are clearly behind these banks for their blatant violation of the industry level bipartite settlements. Rather they encourage and guide them to indulge in more such violations. RBI guidelines in January 2006 with regard to engaging business facilitators or business correspondents for doing key functions of the banking industry like opening of accounts, deposit mobilization, disbursement of small credits, issuance of credit and debit cards, recovery of loans in the name of financial inclusion are clearly aimed at rendering thousands and thousands of permanent jobs in the industry surplus and exploitation of cheap labour available in the market. Besides that, the customers’ money is also not safe. That is why UFBU resolutely opposed such move and conducted various agitations including four days’ industry wide strike against the same during the past two years.

But the managements of several banks have decided to follow the RBI guidelines blindly despite stiff resistance and started appointing business correspondents in large numbers. State Bank of India, as usual, is in the lead. This bank plans to recruit one lakh business facilitators in one year period and has already appointed more than 5000 such persons for a paltry sum of fixed amount and commission amount based on performance. The retired officers are appointed to supervise them. When interviews were conducted for recruitment of retired officers by the State Bank Management in Trivandrum, Coimbatore and Chennai BEFI and DYFI (Democratic Youth Federation of India) cadres conducted massive demonstrations and DYFI cadres staged dharna inside the premises forcing the management to call off the interviews.

But the danger continues. The honourable Finance Minister in his budget speech on 29^th Feb 2008 has made the following observations “to allow individuals such as retired bank officers, ex-servicemen etc to be appointed as business facilitator or business correspondent or credit counselor”. Thus the Government at the Centre is determined to resort to outsourcing of the core functions of the public and private banks. Therefore there is an uphill task before the bank employees to fight out the menace of outsourcing fully supported by the Government of India.

The strike actions of 25^th and 26^th Feb 2008 were withdrawn and the minutes that followed assured of discussion on outsourcing. The minutes between the IBA and the UFBU on this subject read as given below: “On Outsourcing, it has been agreed between IBA and UFBU that discussions will be held on 18.03.2008, and the discussions should be completed within the next 6 weeks.”

During the discussions between UFBU and IBA on 18.03.08, the UFBU has taken up the following stand:

*No outsourcing of jobs beyond what has been agreed in the 8^th bipartite settlement

*No employment of the bank staff on contractual basis

*All the bank jobs of regular, permanent and perennial nature must be entrusted to the permanent employees and officers and not outsourced or given on contract

*The outsourced jobs should be in sourced immediately

*All the existing contract and outsourced employees should be regularized and absorbed as permanent staff of the bank

The earlier such assurance in March 2007 was observed in breach by the IBA. Now it has to be seen whether any seriousness has dawned on the IBA due to the successful observance of one day strike in Jan 2008 and the serious preparations for the two days’ strike in Feb.2008.

In essence outsourcing is a serious threat not only to the job security of the existing bank employees but also to the lakhs of the educated unemployed youth waiting for a decent job. The surveys conducted in several countries reveal that crime rate is directly proportionate to the magnitude of the unemployment in that country. Every adult is entitled for a decent job and income. When that is denied the society faces a lot of problems which could be avoided by employing them gainfully. The very fact that 2.11 crore households from 200 districts demanded minimum wages (Rs.80/- per day for 100 days in a year) under the NRGEA (National Rural Guarantee Employment Act) in 2006-07 is indicative of the extent of joblessness and distress prevailing in the rural areas. The rate of unemployment has increased from 6.1% in 1993-94 to 8.3% in 2004-05. These figures clearly establish the magnitude of the unemployment in our country both in rural areas as well as urban areas.

Systematic reduction of manpower, introduction high technology and outsourcing has already reduced the wage bill of the banks. Similar is the case of the several organized sectors. According to the Eleventh Plan Document, wage share in the organized industrial sector has halved after 1980s and is now among the lowest in the world.

Thus outsourcing poses a serious challenge before the working class in general and the bank employees in particular. Stiff resistance has to be developed and sustained movement including struggles has to be built along with the youth of the country and with the support of the public at large to check the menace of outsourcing.