IDBI Bank Acquisition: Concerns Mount Over Bidder’s Control of CSB Bank
Fairfax Financial Holdings’ management of CSB Bank is raising red flags as it seeks to acquire a stake in IDBI Bank. Issues like high employee attrition, altered banking practices, and a shift to contract-based employment are sparking concerns among stakeholders and union leaders.
Author: Abhivad
Published: August 27, 2024
The acquisition of the Catholic Syrian Bank (now CSB Bank) by Fairfax Financial Holdings-backed FIH Mauritius Investment Ltd in 2018 has led to significant changes in the bank's operations and employment practices. As Fairfax now bids to acquire a majority stake in IDBI Bank, concerns are being raised regarding its suitability to manage another financial institution, given the ongoing issues at CSB Bank.
Fairfax's Entry into Indian Banking
In 2018, the Reserve Bank of India (RBI) approved the acquisition of a 51% stake in Catholic Syrian Bank by FIH Mauritius Investment Ltd, a company backed by Prem Watsa's Fairfax Financial Holdings. The century-old bank, established in 1920 and headquartered in Kerala, was rebranded as CSB Bank in 2019 following the acquisition. Initially, all employees were hired under regular terms as per Indian Banks’ Association (IBA) guidelines. However, the employment culture has since undergone significant changes.
Alarming Attrition Rates at CSB Bank
According to CSB Bank's 2023-24 annual report, the bank currently operates 779 branches nationwide and has a workforce of 7,863 employees, including 2,474 women. Despite hiring 4,562 new employees in the last financial year, the overall workforce only grew by 14.94%, indicating a high rate of attrition. The average age of the workforce is 33.4 years, and only 754 employees have more than ten years of experience, further highlighting the instability within the bank’s workforce.
A leader of the CSB Staff Federation, speaking to Kanal on condition of anonymity, cited poor working conditions, low wages, and high work pressure as the primary reasons for the high attrition rates. "Young, inexperienced graduates are given jobs on contract for meager wages. Due to the very poor working conditions, work pressure, and low wages, they seek better career options within three or four months," the leader said.
Shift to Contract-Based Employment
Since the acquisition by Fairfax, CSB Bank has halted regular recruitment through the Institute of Banking Personnel Selection (IBPS) and shifted to hiring on a Cost-to-Company (CTC) contract basis. This move has effectively reduced the number of employees hired under IBA terms, with only around 1,000 staff members remaining on regular employment terms, including approximately 350 workmen.
Contract employees at CSB Bank are reportedly earning as little as ₹17,500 per month, with limited benefits such as leave and allowances. The CSB Staff Federation leader pointed out that new hires are often designated as officers, which excludes them from union rights and protections under trade union laws. "This is nothing but deceptive tactics to exclude employees from unionising and all the protection of trade union rights," the leader added.
Shift from Mass Banking to Exclusivity
Another significant concern is the shift in CSB Bank's banking practices, which now appear to favour class banking over mass banking. For instance, the bank requires an initial remittance of ₹10,000 to open an account, potentially excluding many customers from rural and urban areas. The bank’s focus has also shifted towards gold loans, which now constitute over 50% of its advances. These loans come with high interest rates, processing fees, and pre-closure charges, which could deviate from traditional banking norms and reduce the bank’s role in supporting priority sectors.
Fairfax’s Bid for IDBI Bank Raises Alarms
As Fairfax now eyes a majority stake in IDBI Bank, stakeholders and union leaders have voiced concerns over the implications of such a move. The Reserve Bank of India has initiated the vetting process under the "Fit and Proper" criteria following bids from CSB Bank, backed by Prem Watsa, and two other entities to acquire IDBI Bank. However, past experiences with CSB Bank under Fairfax's control have raised doubts about the company's suitability.
Vithal Koteswara Rao, the General Secretary of the All India IDBI Officers’ Association (AIIDBIOA), expressed his concerns over the impending move for privatisation. “The wealth created by the union government with people's money over the last 60 years is now being privatised, which is against the national interest. Social causes are being compromised, and national assets are being wasted. Fairfax’s previous history with CSB Bank is adding to the worries”, he told Kanal.
The Bank Employees Federation of India (BEFI) also expressed its reservations in a letter to the Secretary of the Department of Financial Services. The letter highlighted several governance and transparency issues at CSB Bank under Fairfax’s management, including failure to implement industry-level wage settlements, questionable terminations, reductions in retirement age, and an overall shift in banking practices that prioritise profit over customer and employee welfare.
(BEFI’s letter to Secretary of DFS objecting the Privatisation of IDBI bank)
The potential acquisition of IDBI Bank by Fairfax-backed CSB Bank has sparked significant concerns among stakeholders, union leaders, and the broader banking community. With ongoing issues at CSB Bank, including high employee attrition, a shift towards contract-based employment, and changes in banking practices, many are questioning Fairfax's ability to manage another financial institution responsibly. As the vetting process continues, these concerns will likely play a critical role in determining the future of IDBI Bank.
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