AIBEA and AIBOC Oppose PLI Scheme for Senior Bank Executives

The All India Bank Employees Association (AIBEA) and the All India Bank Officers Confederation (AIBOC) have expressed strong opposition to the recently introduced Performance Linked Incentive (PLI) scheme for senior executives in public sector banks. In letters to the Department of Financial Services (DFS), both unions raised significant concerns about the scheme's implications for workforce harmony, collective growth, and organisational autonomy.

PLI Scheme Overview

The DFS notification, dated 19 November 2024, outlines a revised PLI framework applicable to Whole-Time Directors and officers from Scale IV to VIII. It mandates public sector banks, including the State Bank of India, to design board-approved policies under this scheme. The scheme aims to link performance metrics with monetary rewards for senior executives, ostensibly to incentivise individual contributions.

(AIBEA’s letter to the secretary of DFS demanding reconsideration of the PLI scheme.)

Violation of Collective Bargaining Agreements: Unions

Both AIBEA and AIBOC pointed out that existing bilateral agreements between the Indian Banks Association (IBA) and employees' unions have already established a performance-linked structure covering employees and officers up to Scale VIII. They argued that the new scheme undermines these agreements, disrupting a framework built on collective negotiations.

“The DFS directive undermines this well-established framework, violating the sanctity of collective bargaining and the bilateral settlements,” the AIBEA letter stated.

(Letter from AIBOC to the Secretary of DFS highlighting the limitations of the PLI scheme.) 

Fragmentation of Workforce

The unions criticised the selective focus of the scheme, which benefits less than 5% of the workforce, excluding the majority of employees at field levels who drive business. This, they contended, risks creating division within the workforce.

AIBOC’s letter noted, “This selective approach... is inequitable. It risks fragmentation of the workforce and impairs collective growth and harmony.”

Undermining Teamwork and Autonomy

Both unions highlighted that the PLI system prioritises individual competition over collaboration, which could erode teamwork and organisational excellence. Additionally, they argued that the directive infringes on the autonomy of public sector banks, imposing centralised control over governance decisions.

AIBEA pointed out, “The current directive... disregards governance structures and imposes centralised control, which could stifle strategic decision-making aligned with individual banks' unique challenges.”

Criticism of the Bell Curve Approach

The unions drew parallels between the PLI scheme and the outdated Bell Curve method of performance evaluation, criticising it for fostering inequity and demoralisation. They argued that the rigid ranking system fails to account for untapped potential and unfairly penalises employees in high-performing teams.

“No matter how well employees perform, the bell curve forces them into predetermined ratings, often misrepresenting their actual performance,” AIBOC observed.

Intrinsic Motivation vs. External Rewards

Both unions emphasised that financial incentives are not the primary motivator for employees, citing past examples of senior executives successfully navigating crises despite lower compensation compared to their private-sector peers. They argued that intrinsic motivation and governance are more critical to organisational success than financial rewards.

AIBEA remarked, “Excellence pulls in one direction; rewards pull in another. If our goal is excellence, no artificial incentive can ever match the power of intrinsic motivation.”

Call for Reconsideration

In their concluding appeals, the unions urged the DFS to respect public sector banks' autonomy and allow the IBA, along with managements and unions, to design compensation mechanisms that promote fairness, sustainability, and collective growth.

“We urge the Department of Financial Services to respect the autonomy of public sector banks... ensuring fairness and sustainability,” the AIBOC letter concluded.

The opposition from AIBEA and AIBOC underscores a significant divide between banking unions and policymakers regarding the effectiveness and implications of performance-linked incentives. Both unions have called for a reassessment of the scheme to ensure it aligns with organisational goals, workforce harmony, and the broader public interest.