First India Central Bank Strike Since '09 May Disrupt Market

  • Settlements under RBI payment platform may be affected
  • Unions protest institutional reform, want higher pensions

Employees at India’s central bank are set to strike for the first time in more than six years on Thursday, threatening to disrupt bond and foreign-exchange markets for a day as workers protest institutional reform and demand better pensions.

Traders said the call for “mass casual leave” by the Reserve Bank of India’s four unions could affect settlements under a payment platform operated by the central bank. Bond and liquidity auctions can be scheduled around the strike and extended if needed.

“Since the RBI owns most of the settlements, the strike may lead to some disruptions in the bond markets,” said Rajeev Radhakrishnan, the Mumbai-based head of fixed income at SBI Funds Management Pvt., which manages 843 billion rupees ($13 billion). While he called it a problem, he also said he expects the central bank to have a contingency plan.

The walkout among about 17,000 employees is the first under Governor Raghuram Rajan, who is spearheading the biggest overhaul in India’s central bank history. He agreed with Prime Minister Narendra Modi’s government this year to set up a rate-setting panel, and has endorsed a plan to shift public debt management from the central bank to an independent agency. 


The unions have two main demands: For the government to stop pressuring and taking away power from the central bank, and to have their pensions readjusted to keep up with rising living costs and wage increases.

“If the government doesn’t respond to what we’re saying or RBI management doesn’t come forward, naturally the agitation has got to be carried ahead and has to be escalated,” Samir Ghosh, general secretary of the All India Reserve Bank Employees Association, said on Monday. He said everything from check clearance to foreign-exchange transactions could be affected.

Finance Ministry spokesman D.S. Malik didn’t respond to two calls on his mobile phone.

Alpana Killawala, a spokeswoman for the central bank, didn’t reply to an e-mail seeking comments on the strike’s impact and contingency plans. Bond trading was disrupted during a similar walkout in February 2009, which was the last such protest, according to Ghosh. At the time, the central bank warned people to complete transactions on the day preceding the strike while saying it would try to maintain normal service.

‘Very Unusual’

“It is very unusual and I hope it won’t happen in public interest," former central bank Governor Bimal Jalan said of the strike, adding that it would have a negative impact on markets. “Unions have a right to protest. The only thing is that we need to arrive at a consensus on what needs to be done.”

As of Tuesday, investors hadn’t received a notice on possible disruptions, according to Abhay Garg, vice president for fixed income at PNB Gilts Ltd. in New Delhi.

A draft bill released in July that would’ve given the government control over a proposed monetary policy panel was widely criticized for curtailing the central bank’s independence, prompting officials in Modi’s administration to distance themselves from it. Since then, Rajan has said he’s agreed with the government on a different proposal, while refraining from giving details.

Rajan said in June that he and the Finance Ministry were in “complete agreement” over an independent debt management agency that “will be relatively small, which will run the front and middle office that is currently or in the past being done by the RBI.”

Weakening Unions

These moves risk further reducing the RBI’s workforce and weakening the unions’ clout, as employees below the level of officer -- such as clerks and typists -- have more than halved over the past decade. This is another reason for the strike after the main demand of higher wages and benefits, said Sujan Hajra, a Mumbai-based economist at Anand Rathi Financial Services Ltd.

The RBI in August had said it’s reviewing compensation and pensions, as it is losing more junior officers than it "should be comfortable with."

"This is why a revamp of the professional challenges we offer our staff is very much needed," the monetary authority said in its annual report. "A key factor in RBI’s success has been a satisfied staff."

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