UCO BANK EMPLOYEES’ ASSOCIATION
(Registration No.795 & Registered under Indian Trade Union’s Act)
[Affiliated to Bank Employees Federation of India]
10, Biplabi Trailokya Maharaj Sarani, 3rd Floor, Kolkata-700001
---------------------------------------------------------------------------------------------------------------------Tel: 033-22342990
Fax: 033-22341426
E-mail: ucbea_cal@vsnl.net
---------------------------------------------------------------------------------------------------------------------Circular No.23/2006
18th October, 2006
To All Members
Dear Comrades,
Reproduced hereunder is the full text of the Report on Outsourcing which has been adopted in
the Central Committee meeting of BEFI held on 9th & 10th October, 2006 at Kolkata.
We call upon our Units to go through the Report accordingly.
With warm greetings,
Comradely yours,
(JAYDEB DASGUPTA)
General Secretary
A Report on Outsourcing of Jobs adopted in BEFI CC meeting
dt. 9 & 10th Oct.’06 at Kolkata
Outsourcing has been assuming a menacing depth as the central banker and the commercial
bankers are completely bent upon to appoint external agencies for getting much of the banks'
jobs and functions including the core central banking functions and core commercial banking
services done by them. The technology upgraded and so to say the infrastructure built up has
enabled the banks to keep almost entire jobs and functions within their own institutional
structure/network. In the commercial banks, the tendency of the bankers even to cross the area
as mutually agreed upon by the unions and managements through the bipartite settlements is
growingly manifest.
In new generation private sector banks, all banking jobs are being done on contractual basis by
the outsourced agencies. The employees are not regular employees of such banks excepting
for very few posts on contract basis.
Moreover, the outsourcing of banking functions has been modeled and sent to banks as
directive. This model is packaged under the veil of Financial Inclusion so as to make it
acceptable to public. In view of undertaking the job of financial inclusion as envisaged by RBI,
on 25 January this year, the Central Bank of the country issued a circular to the Chairmen of all
scheduled commercial banks including the RRBs and have advised them to use the services of
NGOs/Farmer's Club, microfinance institutions (MFI), self-help groups, the private vendors, IT
enabled rural outlets of corporate entities, Post offices, Insurance agents etc. as intermediaries
in providing financial and banking services as business-facilitator and business-correspondent
models. The former would include the services namely (1) identification of borrowers and
fitment of activities, (2) collection and preliminary processing of loan applications including
verification of primary data/information, (3) creating awareness about savings and other
products and education and advice on managing money and debt counseling, (4) processing
and submission of application to banks (5) promotion and nurturing self-help groups/joint
liability group, (6) Post sanction monitoring, (7) follow-up for recovery. According to RBI the
services stated are not intended to conduct the core banking business by the proposed
business facilitator. For using these intermediaries as service provider no approval is required
from RBI. This is highly apprehensive as such risk-prone jobs may be usurped by the
formidable network of rural money lenders with related adverse implications on the rural poor.
The latter as envisaged by RBI will also include registered NBFCs not accepting public
deposits and post offices. The business correspondents as termed by RBI will also undertake
the activity, such as (1) disbursal of small value credit, (2) Recovery of principal/collection of
interest, (3) Collection of small value deposits, (4) Sale of micro insurance/mutual fund
products/pension products/other third party products and (5) receipt/delivery of small value
remittances/other payment instruments.
To-day outsourcing is increasingly used as a means of reducing cost and maximizing profit.
The potential impact can be seen all over the world across many business activities, including
IT (application, development, programming, coding) specific operations (various aspects of
finance and accounting, back office activities, processing and administration) and contract
functions (e.g. call centres) etc. The outsourcing institute of USA has conducted a survey of
various companies and organizations on their outsourcing practices. The report (30 March
2004) presented to the Board of Governors of the Federal Reserve System captioned as 'offshoring and cross-border outsourcing by banks' estimated that 356 billion U.S. dollars of the
U.S. financial industry services would be outsourced. This huge amount is only 15% of the
industry's cost base. A flow from high-wage to low-wage is the universal feature. Bank for
International Settlement (BIS) under the auspices of last year a joint exercise by international
committees like Basel Committee on banking supervision (BCBS), the International Association
of Insurance Supervision (IAIS) and the international organization of securities commission
(IOSCO) on outsourcing of financial services was made. They could not ignore the key issue
emerging as insufficient controls and checking mechanism between the third party provider and
the institution to debilitate the age-old customer relations and the business profile of the banks
in a realm of cut-throat competitiveness. In a case study it was found that in Germany, a credit
institution wanted to outsource not only the servicing of loans, but also the decision to grant a
loan. The result of the assessment by the supervisor was that the credit institution was unable
to monitor and oversee the loans granted by the loan factory (un-regulated service provider to
whom credit institutions outsource the loan handling). Interestingly, the business is run by the
credit institution which bears the risk emerging from it, the decision on granting the loans had
been made by the service provider. In another case the office of the Comptroller of Currency in
the USA took enforcement action against a Californian bank and a third party service provider
to the bank on the charge of failure to exercise sound oversight. There are uncountable
examples. Regarding the motives for outsourcing, apart from Joint Forum's survey, the survey
of European Central Bank 2004 too admitted that cost reduction is the basic motive which
prompts the industries to go for outsourcing. There are other reasons also.
There is wide spread outsourcing of vital functions of RBI too. However, the context of
outsourcing of the Central banking functions is not the cost factor. Consequent upon the policy
of financial sector liberalization, the role of RBI as a central bank in monetary management of
the country and its role as 'banker of the banks' are being redefined. The monetary
management which is core area of functioning of RBI have been set to undergo changes at
the behest of global operators (WB/IMF) .Needless to mention, the concept of supervision over
banking and non-banking financial activities or foreign exchange management shall have to
incorporate necessary changes so as to allow the market instruments operate efficiently in the
financial sector of the liberalized economy. Revealingly, target is to disarm RBI so that it
cannot intervene properly as the crisis mounts up in the economy. RBI, as the central bank of
the country is duly assigned to perform the core central banking functions like monetary
management, currency management, foreign exchange management, regulation and
supervision of financial system, payment and settlement system, Banker to banks, Banker to
Govt., Public debt management and spectacularly its developmental role. But it is gradually
withdrawing itself from the historically assigned role. In such style of outsourcing of jobs and
functions coupled with abdication of central banking role, RBI very often advances a logic of
"conflict of interest".
The Report on trend and progress of banking in India says, "A well functioning payment and
settlement system is crucial for successful implementation of monetary policy and maintaining
financial stability". Now, conduction of monetary policy and role of fiscal responsibility are the
functions of RBI. Hence, payment and settlement system being a crucial role for a central bank
should within RBI as hitherto with all operations related thereto. In a note given to
parliamentary standing committee of finance RBI has admitted that an enormous progress has
been achieved by RBI in modernising and expanding the payment system. SBI has already
built up the back up system. Some other banks are also in a position to build up system and
provide staff, because they are quite big. They are always amenable to guidelines and
instructions issued by RBI. However, newly created Board for regulation and supervision of
payment system (BPSS), Department of Payment & Settlement System (DPSS) with a
technical committee inside RBI with its experience and expertise can very well facilitate
uniformity in structure, operation and procedures of extant system of clearing operation. For
this there is no need of any new entity, what is required is to strengthen and appropriately
empower BPSS and DPSS to enable them to undertake the work effectively. Only very
recently noted economist Dr. Amiya Bagchi has commented, "I shudder to think what might
happen with the proposed outsourcing of cheque clearance operations. You cannot trust
people's money to virtually unregulated private organisations". He also said, “It cannot
outsource some of the basic functions of a central bank to a private body in a country like India
where we have enough experience of how private banks and private bodies of other' kinds
have played drakes and ducks with people's money”.
There is a definite move of the vested quarters inside and outside to bring RBI out of the
accountability of the parliament and make it an independent monetary authority. Obviously this
is difficult. Hence, outsourcing of role and functions are in the agenda to dismantle the Central
Bank of the country.
Under the circumstances the PSBs and other commercial banks are in the process of opting for
outsourcing of the following jobs:
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
Mobilisation of deposits and opening of S/B Account etc.
Cash remittance from branch to chest and from chest of RBI.
Marketing of products like Credit Card, Loan etc.
Filling cash in ATM through private vendors.
Listing of clearing cheques, balancing of Books & Registers etc. in various
branches in different centres.
Installation of computer system with the help of private agencies, development
of software packages, management of computer related problems.
All kinds of despatching job including cheques pertaining to inward clearing,
outward clearing by engaging Courier service.
Security and armed guard arrangement of branches/ ATMs.
Maintenance of branch premises/cleaning and sweeping of bank branch
offices.
Outsourcing of submission of returns on TDS.
The trade unions of RBI and commercial banks and financial sector must try to mobilise the
people at large, the parliamentarians, members of State Legislatures, the trade unions, mass
organisations, economists, experts, intellectuals and thinkers in this great fight against
outsourcing of commercial banking services and core central banking functions for the greatest
interest to save our economy and people from impending disaster. We happily note that
outsourcing and recruitment have already become vital issues to all the central trade unions of
the country. In banking sector, this issue of recruitment has to be further emphasised and make
a live issue for bank employees' struggle. These are main issues on which working class will go
for strike on 14th December 2006. The issues of the trade union movement, if furthered
properly, will soon be linked with the democratic movement. Anti- outsourcing movement,
needless to mention, will be able to make a breakthrough if the movement gets closely linked
with the movement of the vast unorganized sections of the masses who are in a grim struggle
to improve their living conditions, wages and salaries. Several hundreds contract labours are
already working in the banks, even in some sensitive areas. So far bank unions do not pay
serious attention to them. It requires no mention that we must take a conscious decision to
organise them and integrate them with general bank employees movement. Some beginning
has been made in some banks. This issue is strategically linked with our struggle against
outsourcing. We must be on the job right now.