Bank Employees' Pay Hike Talks Expedited by Government's 12-Month Deadline

Government Orders Public Sector Banks to Initiate Wage Negotiations for 13th Bi-Partite Settlement

The Indian government has directed public sector banks to begin negotiations for the 13th Bi-partite settlement in a time-bound manner, with the aim of finalizing the agreement within the next 12 months. This wage revision for employees and officers of public sector banks is expected to be implemented from November 1, 2027.

Public sector banks, along with financial institutions and insurance companies, typically revise the wages of their employees every five years. As part of the settlement process, the Indian Banks' Association (IBA) will engage in discussions with employee unions and associations to reach a mutually agreeable wage settlement.

The timely completion of the settlements is crucial for maintaining industrial harmony, according to the Department of Financial Services. In a communication dated April 20, the department advised public sector bank heads to take necessary measures to commence negotiations for the impending wage revision.

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As a reminder, the finance ministry had previously instructed IBA to ensure that all future wage negotiations are finalized before the start of the subsequent period, allowing for a smooth implementation of the wage revision from the due date. In this case, the wage revision is expected to be implemented from November 1, 2027.

In the past, consequential amendments to permanent regulations have been delayed following the settlement process. To avoid this, the Department of Financial Services emphasized the importance of completing these amendments prior to the scheduled date of the next wage settlement.

The banking sector plays a vital role in the Indian economy, and adequate compensation is essential to maintaining employee morale. Public sector banks have generated record profits in FY25 and are expected to continue this momentum in FY26. The combined profits of public sector banks crossed Rs 1 lakh crore in FY23, reaching Rs 1.05 lakh crore, before rising to Rs 1.41 lakh crore in FY24, and to Rs 1.78 lakh crore in FY25.

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The improvement in public sector bank profits has been driven by stronger asset quality, sustained credit growth, comfortable capital buffers, and rising return on assets. The banks' balance sheets continue to show improvement, with gross non-performing assets standing at a record low of 2.30% at the end of September 2025, while net NPAs were around 3%. The provisioning coverage ratio improved to 94.63%, and the capital adequacy ratio remained healthy at 15.96% at the end of the first half of FY26.

Wage settlement talks typically benefit employees of public sector banks, old-generation private banks, and some foreign banks.