Indian financial sector paralyzed by strike

Indian financial sector paralyzed by strike

BOMBAY (Reuter): A strike by 1.5 million bank and insurance industry employees yesterday virtually paralyzed India's financial sector amid mounting union opposition to New Delhi's economic reforms.

Few deals were possible in India's money and foreign exchange markets and checks totaling nearly 10 billion rupees (US$320 million) were held up in the clearing house as central bank employees joined the one-day stoppage.

Bank employees stood in front of bank offices in Bombay, India's commercial capital, waving red flags and shouting slogans. They were scheduled to hold a demonstration later. The strike was called by around 20 financial-sector unions and labor associations.

The workers were protesting against reforms in the financial sector seeking to increase competition for the nationalized and over-manned banks by allowing the closure of some branches and the setting up of new private banks.

"We are protesting against the privatization of banks, closure of branches and for higher wages," a union leader said.

"If banks are allowed to be privatized, many of us will be losing our jobs as we will be employees of a select rich group of industrialists, and we do not like that," said a senior leader of the All-India Bank Employees Association (AIBEA), the main union of the bank employees.

AIBEA President D.P. Chadha accused the government of caving in to pressure from the World Bank and International Monetary Fund in allowing the entry of the new foreign and private-sector banks.

It was the fourth time financial-sector employees had gone on strike in the last 12 months to protest against the government's move towards privatization and to demand a new wage scale.

The latest strike was staged a few days after India's opposition parties launched widespread protests against India's plans to sign the new General Agreement on Tariffs and Trade.

India launched radical market-oriented economic reforms in July 1991 after it came close to defaulting on its external borrowings following a severe balance of payments crisis.

Foreign exchange reserves have since risen dramatically to more than $19 billion from a recent low of $2.23 billion in March 1991.

But bank employees long used to working in a protected environment with socialist-style policies under which 21 banks were nationalized in 1969 and 1978, launched an offensive fearing a loss of jobs under the reforms.

Senior bankers say over-staffing and lack of accountability were among the prime causes the banks had huge losses in the last two decades.

Under the reforms the banks will have to raise their capital bases to international standards and face more competition.

Ironically on the day of the strike, a leading London-based expatriate Indian, S.P. Hinduja, was scheduled to launch the country's first private-sector commercial bank, IndusInd Bank. India has authorized seven private-sector banks to be set up as part of the reform program, the first private banks in India in two decades.