Bank staff strike in India against reforms, markets hit

Reuters: About one million Indian bank employees began a two-day strike on Wednesday to protest against reforms that could ease mergers rules and allow more private capital into the sector, hitting banking transactions and some market trading operations.

The strike, involving mainly the staff of state-run banks that make up around 70% of the sector, came a day ahead of an expected parliamentary approval to some changes in rules to allow bigger role for investors in banks.

Foreign ownership of Indian public sector banks is capped at 20%, and some global banks have been pitching for a hike in their holding limit to help them expand their presence in Asia’s third-largest economy by acquiring the smaller regional banks.

India has struggled to reform and liberalise key sectors such as banking, retail and insurance, partly because of political opposition and fears of the exploitation of domestic interests by foreign investors.

The strike, which forced No. 1 lender State Bank of India to halt trading in onshore spot foreign exchange markets, comes as another blow to the economy that faces its worst slowdown in almost a decade.

Parliament is likely to approve on Thursday amendments to banking laws that include raising shareholders’ voting rights limit in private banks to 26% from 10%, a senior government source said.

The amendments, which were earlier expected to be approved on Wednesday, will meet a major demand of foreign investors seeking more say in the country’s financial system, though it is unlikely trigger fresh private investment in the sector and the 20% cap on foreign ownership in public sector banks will not change. It was not immediately possible to assess the financial losses due to the strike, though trading volumes in government bonds were thin at 23.6 billion rupees as against the average 40-50 billion rupees in the first hour of trade.