FDI in Banking

Ideas and Issues International

Delhi          We had been crossing paths with the banking unions all week in Delhi. We had met a leader of the large, 230,000 member independent union from Mumbai at the UNI meeting. We had met the general officers and staff of AITUC, the union central with most of the members. We had narrowly missed a meeting with the head of the Delhi branch of the All India Bank Employees Association (affiliated with AITUC) on Thursday, and we were now in the shadow of the Parliament meeting the general officers and the general secretary from Chennai attending an executive planning session in Delhi.

We needed a better understanding of the union’s position on relaxation of foreign direct investment in banking. The major stakeholders likely included the unions representing some 750,000 largely public, state bank employees throughout the country. What was their real position? Should our ACORN India FDI Watch Campaign begin to follow this more carefully and begin to cover the activities, especially since we had often heard that 2009 would be the date for further modifications? The union leadership had supported our efforts in retail, so we wanted to make sure we gave them the same kind of consideration as we looked at the next stages of our campaign.

The union’s initial position was that they did not oppose foreign investment, and they were still monitoring any specific future proposals for 2009 that they believed were timed to World Trade Organization guidance. More carefully they explained to us that they had vigorously opposed legislation for the last two years that had been sought by international banks to give them voting rights equal to the stock they owned. Currently, foreign investors were limited to 10% voting rights.

Clearly, there are a lot of issues here, many of them riding below the water line. We agreed to join with them in studying the issues with them over the coming months to see what positions made sense for the campaign. We had already spent a lot of time earlier in discussion about credit card policies in India. We had talked about the problems of accounts and remittances. We had discussed the need for a community reinvestment act (CRA) for India. It had been an education!

The bank unions were savvy. Their demands stressed consumers and the full coverage in the rural areas of India (they have 9000 branches in the state banks compared to less than 300 for foreign banks currently). A lot of jobs might be at stake in any widespread change, but they were waving a consumer protection banner. We had something to learn from them as well.

Bank union’s list of demands