The United Forum of Bank Unions (UFBU) has been pushing for a five-day work week since March 2024, when the Indian Banks' Association (IBA) agreed to the proposal as part of the 12th Bipartite Settlement. Under this arrangement, banks would close all Saturdays while extending weekday hours by 40 minutes. However, despite IBA's recommendation, government approval remains pending more than two years later.
The cost implications are nuanced. On one hand, PSBs could see reduced energy and fuel costs from closing branches an additional day each week. Employees commuting one less day weekly would save transportation expenses, while decreased absenteeism—currently exacerbated by staff cramming errands into single day-offs—could improve productivity. On the other hand, extended daily hours might increase utility and security costs, while rural branches serving populations with limited digital access could face service delivery challenges.
Transaction volumes present another complexity. Currently, banks operate on first, third, and fifth Saturdays. Moving to complete Saturday closures would shift these transactions to weekdays, potentially creating congestion during peak hours. However, with UPI transactions growing from 17.89 billion to 22.64 billion monthly between April 2025 and March 2026, digital channels increasingly absorb routine transactions that once required Saturday branch visits. The real risk lies in fee-based income from counter services and government transactions that could decline without Saturday operations.
The Department of Financial Services' November 2024 revised Performance Linked Incentive framework represents a dramatic shift from the previous uniform model. Under the old system, all employees up to Scale VII received a maximum of 15 days' basic pay plus dearness allowance based on overall bank performance. The new framework introduces individual performance-based payouts ranging from 70% to 100% of annual basic pay for officers in Scale IV and above.
The financial impact is substantial. UFBU estimates this could result in payouts up to 365 days' basic pay for senior officers—nearly fifteen times the previous maximum. For a Scale IV officer with average annual basic pay of ₹13.2 lakh, this means potential PLI of ₹9.24 lakh compared to the previous ₹65,000 maximum. The scheme caps total payouts at 5% of the previous year's Profit Before Tax, with 65% funded from 3% of PBT and 35% from 10% of incremental PBT.
The new framework evaluates banks on four equally weighted parameters: efficiency, business, asset quality, and financial inclusion. This creates direct causal links between performance metrics and profitability. Improved asset quality (Net NPA at 1.5% or 25bps reduction) and better cost-to-income ratios (not more than 50% or year-on-year improvement) should enhance net interest margins and reduce credit costs. Stronger business growth and financial inclusion metrics would diversify revenue streams beyond traditional interest income.
For talent retention, the revised framework addresses a critical gap. Private sector banks have expanded their workforce from 1.12 lakh to 8.3 lakh employees since FY10, while PSBs grew only modestly from 7.28 lakh to 7.6 lakh. The enhanced compensation for senior executives could help PSBs compete for talent, though it risks creating internal divisions—more than 95% of employees remain under the 15-day PLI structure while a small elite segment receives dramatically higher payouts.
The pension demands carry potentially devastating long-term financial implications. UFBU seeks periodic pension updates for retirees from 1986 to 2017, aligned to pay scales under the 11th Bipartite Settlement, plus a uniform dearness allowance formula linked to the 8088-point index. Additionally, they want NPS-covered employees to switch to the Old Pension Scheme.
The balance sheet impact would be severe. RBI analysis shows state government pension expenditure increased from 0.6% of GDP in the early 1990s to 1.7% in 2022-23, with some states exceeding 25% of own revenue receipts. For PSBs, similar patterns would emerge. Pension obligations would increase by an estimated 200-300%, requiring formal recognition of liabilities that currently may be partially off-balance sheet. This would deteriorate debt-to-equity ratios and reduce capital buffers.
The NPS to OPS conversion presents even greater risks. RBI studies indicate the cumulative fiscal burden under OPS could be 4.5 times that of NPS, with additional burden reaching 0.9% of GDP annually by 2060. For PSBs, this would mean recognizing unfunded liabilities that could reduce Tier 1 capital ratios below regulatory minimums. A PSB with ₹10,00,000 crore in risk-weighted assets and 7% CET1 capital could see its CAR drop to 5.5% after recognizing ₹15,000 crore in pension obligations, requiring ₹15,000 crore in fresh capital to restore compliance.
UFBU has announced a phased strike program: September 11 (nationwide), September 28-30 (three-day strike coinciding with half-yearly closure), and an indefinite strike from October 26 if demands remain unaddressed. This timing couldn't be worse—September strikes target half-yearly closure while October's indefinite action begins during Q2 quarter-end.
The operational impact will be severe. Loan disbursements requiring manual approvals and document verification will halt. Home loan processing, property payments, and trade documentation will face delays. Deposit mobilization will suffer as cash deposits, FD renewals, and account opening processes stall. Treasury operations including government treasury functions and money market operations will be disrupted.
Financial losses could be substantial. Historical data from May 2018 shows nearly 10 lakh employees from 21 PSBs participating, with Maharashtra alone seeing 60,000 employees handling ₹40 lakh crore of business on strike. Daily revenue losses could reach ₹800-1,250 crore across interest income, fee-based income, and treasury operations. An indefinite October strike could cost ₹24,000+ crore over 30 days, plus additional penalty costs for delayed settlements and customer compensation.
The credit rating implications are concerning. ICRA and other rating agencies evaluate operating environment and regulatory compliance as key factors. Prolonged industrial disputes could trigger outlook revisions from Stable to Negative, rating downgrades, or watchlist placements. Banking sector stocks typically fall during strikes as apprehensions of price changes affect trading patterns and investor confidence.
The root causes of this crisis lie in broken processes and unilateral actions. The five-day banking proposal, despite IBA's recommendation and recorded agreement in March 2024, remains stuck in bureaucratic approval processes requiring Finance Ministry, RBI, and legislative clearances. The DFS has prioritized EASE reforms, NPA reduction (GNPA ratio declined from 11.18% in 2018 to 2.22% in 2025), and digital transformation over employee welfare measures.
More damaging is the DFS's unilateral November 2024 PLI framework introduction without bilateral negotiations. This undermines six decades of bipartite industrial relations that have sustained constructive labor relations in banking. The government issued implementation directives just nine days after a March 9, 2026 conciliation meeting where PLI for Scale IV-VII officers was "under active consideration". UFBU argues this renders the conciliation process nugatory and violates the status quo obligation during proceedings.
The Chief Labour Commissioner's conciliation process offers a potential moderating mechanism. Under the Industrial Disputes Act, the conciliation officer investigates disputes and facilitates fair settlements. Historical precedents show conciliation success—strikes in March 2025 and January 2023 were postponed following conciliation meetings. However, the process faces limitations: it relies on voluntary compliance, and the government can proceed with policy decisions despite ongoing proceedings.
The phased strike approach creates multiple intervention points for resolution before the October 26 indefinite deadline. However, with the Delhi High Court scheduled to hear the PLI challenge on May 25, 2026, and the government showing little urgency on five-day banking approval, the path to resolution remains uncertain.
Public sector banks stand at a critical juncture where industrial relations challenges directly threaten financial stability. The outcome of these disputes will shape not just compensation structures and working conditions, but the very model of collective bargaining that has governed India's banking sector for generations.
