Banking operations across the country came to a standstill on 28 July 2006 when nearly 5 lakh bank employees of foreign, private and public sector banks went on a one-day strike to protest against the central government’s policy of bank privatisation and outsourcing. Protest demonstrations, rallies and sit-ins were organised in all states as part of the strike.

The strike, jointly called by the All India Bank Employees` Association (AIBEA), All India Bank Officers` Association (AIBOA) and the Bank Employees` Federation of India (BEFI), vehemently opposed the RBI’s circular instructing the banks to outsource many of the normal banking services to private agencies on commission and contract basis. The State Bank of India, its associate banks, the Bank of Baroda and the Indian Overseas Bank employees extended their moral support but did not participate in the strike.

RBI Circular dated 25.01.2006 on extension of banking services by use of Business Facilitators and Business Correspondents states that the outside private agencies can be appointed by the Banks on commission basis. The agencies identified by the RBI are NGOs, Farmers Clubs, Co-operatives, Community Organisations, Corporate entities, Post Offices, Insurance Agents, Panchayats, Village knowledge Centres, Societies, Trusts, Section 25 Companies and Non Banking Finance Companies. The circular further states that the following regular and normal banking services like Identification of borrowers, Collection of Loan applications, Processing of loan applications, Verification of primary information about borrowers, Creating awareness about our saving products; Post-Sanction monitoring; Monitoring of Self-Help groups; Follow up for Recovery of loans; Disbursal of small value loans; Recovery of principal and interest; Collection of Deposits; Sale of various products of Banks; Receipt of small value remittances; Delivery of Small value payments and other payment instruments etc can be outsourced to them.

According to RBI circular, the above activities would be conducted outside the bank premises but would be considered as having been done in the normal course of banking business. Banks can fix and pay Commission/Fees to these private agencies for doing these jobs. But, banks will be responsible for all the acts of commission and omission of the outsourced agencies and Banks will be accountable to the customers. These private agencies will not be made responsible.

Following the circular of RBI is equivalent to all basic banking services being outsourced. According to the unions, this will not only affect the jobs of the bank employees but endanger the secrecy and security of the customers’ transactions. Further, it may result in exploitation of cheap labour at very low wages for undertaking the existing permanent and perennial jobs.

The unions on strike demanded the filling of nearly 1 lakh vacancies through proper recruitment policy in public sector banks. The unions criticised the impasse with the government, regarding the filling up of vacancies, despite the fact that the volume of business had gone up enormously. The press statement issued by the employees stated that the deliberate ban on recruitment and the non-filling up of the vacancies is unjustified, particularly when there is huge unemployment in the country.