General Studies 1: Role of women and women’s organization – women empowerment
General Studies 3: Inclusive Growth
Behind the Gender Pay Gap
India has one of the lowest female labour force participation (FLFP) rates —share of women who are employed or are seeking work as a share of the working-age female population — among emerging markets and developing countries.
At around 33 per cent at the national level in 2012, India’s FLFP rate is well below the global average of around 50 per cent and East Asia average of around 63 per cent.
An FLFP rate of 33 per cent implies that only 125 million of the roughly 380 million working-age Indian women are seeking work or are currently employed.
Monster Salary Index report on India’s gender pay gap
The gender pay gap in India stands at 27 per cent— while men earned a median gross hourly salary of Rs 288.68, women earned only a median gross salary of Rs 207.85 per hour
The highest gender pay gap was recorded in the manufacturing sector at 34.9 per cent.
The lowest gender pay gap was recorded in the BFSI (banking, financial services, and insurance) and transport, logistics, communication, equally standing at 17.7 per cent each
Information technology (IT) sector: 34 per cent (has increased from around 29 per cent a year earlier)
Prefer male employees over female employees
Promote a higher number of male employees to supervisory positions
Companies speak up—
Gender pay gap exists because of divided work-family loyalties, as women take more time off from work to care for their families, leading to long career breaks, thus, missing out on the trends and the changed environment.
Also, often women lose out through voluntary termination of service at a rate two or three times faster than men once they have attained the experienced, mid-career level— impact on the supply line for higher levels.
Almost one-third of women employees showed reluctance and have not resumed work in the absence of a support system at home to take care of the child— Flexible work policies or extended leave, stays minor enablers for those who possess career aspirations in a situation where close to 78 per cent of eligible female graduates choose not to participate in the organised workforce.
Analysis done by Economist Korn Ferry—
Analysed employees in 33 countries and found that on average, women earn 18 per cent less than men, which is of course higher than the 27 per cent overall industry pay gap mentioned by Monster India.
Korn Ferry highlighted — that the United Arab Emirates has a reverse pay gap. Women at the same level, company and function actually earn two per cent more than their male counterparts partly because fewer women (13 per cent) participate in the labour force, and those who do tend to have higher levels of education (Indian IT sector’s gender pay gap seems highly skewed)
Consider the US— For every dollar a man makes in the US, a woman earns just 78 cents for doing the same job.
Monster Salary Index (MSI)
It is an initiative by Monster India in collaboration with Paycheck.in (managed by Wage Indicator Foundation) and IIM-Ahmedabad as a research partner.
For employers, MSI is an online salary survey that aims to provide employers with practical information and helps them make informed decisions by analysing the salary market and optimizing employee remuneration.
To consolidate is the action of combining of assets, liabilities and other financial items of two or more entities into one. Bank Consolidation occurs when two or more banks (merge to) become one bank.
What are the benefits of Bank Consolidation?
Bank consolidation helps to achieve the quest to create an Indian (large) bank that will be in the league of global giants can be achieved through consolidation.
There is a need for large banks. One, as no bank in the country features in the top ten banks in the country, in terms of asset size. Two, given the huge large infrastructure needs of the country, large banks are required to finance it.
Larger PSBs can support the corporate sector better in overseas acquisitions, bigger banks are less susceptible to being taken over by outsiders and large synergies are available in mergers that could alleviate capital requirements.
Consolidation will increase capital efficiency and the merged entity will have more leg room to raise capital.
Consolidation will also improve the ability of banks to recover bad loans which are rising. (As consolidation would pave way for a common recovery programme, hence recovery will be far more focussed)
Cost rationalisation – Consolidation would result in cutting down branches, particularly in urban areas where there are too many branches of different banks in a same area.
Other benefits – Risk diversification, scale and specialization would increase, improves ratings.
Why Bank Consolidation is not an easy task?
When bank portfolios are uniformly strained, as they are today, mergers can accentuate the strains. i.e., Merger of two or more banks which have strained balance sheets can lead to a collapse.
Mergers eat up a lot of top management time — IT systems, organisation structures, risk systems, exposure limits, and product portfolios need to be aligned.
Branches need to be rationalised, customers need to be informed, brands need to be reestablished and people have to be placed in jobs. At a time when PSBs need a razor focus on cleaning up credit portfolios, mergers will be very distracting and will bring the sector to a halt.
One of the toughest challenges that the government will face while merging banks is from the employee unions and the employees who may fear identity loss.
Forced merger challenges – Technology challenges, integrating people and business processes, cultural change—HR basically, trade union issues.
Arguments against Consolidation
Experts say consolidation must not happen because there are NPAs in the system or that capital is short. Merger of two or more banks which have strained balance sheets can lead to a collapse.
RBI has done an AQR (asset quality review) and it has proposed that balance sheets will get cleaned up by March 2017. Post 2017 (after balance sheets get cleaned up), on the basis of mutual consent by all stakeholders this model can be adopted.
There are risks of creating giant banks – Global experience since 2008 has shown that large banks are not necessarily efficient banks.
For example, four of the five biggest global banks in terms of assets are now Chinese. Few see them as paragons of financial stability. There is good reason to believe that the large Chinese banks are far weaker than what the official numbers say. The US too has seen that large banks are not necessarily efficient banks.
The way ahead:
In 2010 Budget, it was announced that India will open up the banking sector for financial inclusion. Last year we saw two new banks, IDFC and Bandhan Bank. 20 more new banks, 10 small banks and 10 payments banks are yet to come up.
RBI in its recent credit policy said that it would again explore the possibilities of giving differentiated banking, whole sale banks, custodian banks. It is complicated as on the one hand we say that we need more banks, different kinds of banks and on the other hand we say we need consolidation.
India right now needs more banking competition rather than more banking consolidation. In other words, it needs more banks rather than fewer banks.
India is right now seeing the creation of new banks that could add to variety in the domestic financial system. These new banks should make the Indian loan market more competitive. The decision to merge the large public sector banks does exactly the opposite. It will likely reduce competition—and without any major efficiency gains to the economy as a whole.
The cult of size is always an attractive one. But the enthusiasm to create massive banks through mergers needs to be tempered with skepticism. The global experience since 2008 is especially important in this context. It still raises the question – “What do we need? Big banks or good banks?”
Connecting the dots:
India right now needs more banking competition rather than more banking consolidation. Comment.
What are the possible outcomes of Bank Consolidation? What are the challenges involved in its implementation?
What does India need – Big Banks or Good Banks? Critically evaluate.
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