What Are Bank Strikes and Why Do They Happen?

Banks often have to temporarily stall operations in times of a major policy change that affects the common people of the nation. The repercussions are felt within the precincts of the bank and materialise through bank strikes. The most recent bank strike on August 28, 2024, occurred when the All India Bank Employees Association (AIBEA) called for a nationwide strike when 13 Bank of India (BoI) employees were charge-sheeted by the bank management. Although this strike was called against political interference in banks, bank strikes are also called so that the voices of bank employees against contentious government policies like farm bills and privatisation of banks, are heard.

• Bank strikes adversely affect profit-making in the short term.
• The stock market feels temporary shockwaves because several investors prefer to invest in banking stocks.
• The general public also suffers as basic banking services get disrupted.

During a bank strike, all operations across banks are disrupted for the entire duration of the strike. The grievances of the bank employees against imminent structural policies of the management or the government are criticised through the strike. Recent bank strikes were also called as a response to the government strategy of disinvestment, which saw them retrenching PSU stakes.

Such threats to the job security of bank employees often trigger strikes. These disrupt basic banking services and cause customers to even face issues with depositing and withdrawing money. Important investment-related work also has to be deferred, causing an economic precarity that is waiting to snowball into bigger consequences.

Impact on banks

A lot of issues depend on the nature of the strike. In some cases, private sector banks do not bear the brunt because resentments on PSU policies mostly affect state banks. However, with stock-level collaborations in place between PSUs and the private sector, the shockwaves are felt throughout. Loss of business hours takes a toll on the daily revenue, impacting their performance in the stock market. The situation is aggravated when the bank strikes are supported by the private sector employees as well.

Impact on customers

Since bank operations are closely coordinated, customers might find themselves in a soup when ATMs run out of cash. A good way to avoid this issue is to keep ahead of bank strike notifications and keep enough cash to see you through the day.

However, an abrupt call for a strike can cause the customer to fail to meet financial obligations. The transfer of funds that had already been initiated might also be delayed till banking services resume. Furthermore, it is common knowledge that the market is kept alive by debt. If the banks are not operating, loans cannot be approved, thus potentially causing a domino effect on the expected financial growth.

The best way to bypass all these issues is to familiarise yourself with the net banking services that are now offered by every bank. These services will carry you through such days unless you are in urgent need of cash.

Impact on the market

The stock market generally remains unscathed due to bank strikes, as all operations are handled digitally, without dependence on physical space. However, the possibility of a cash crunch might introduce a risk factor among stakeholders, thus having an adverse effect on the daily affairs of the stock market.

Furthermore, the banking sector stocks also might fall on the affected days, thus causing a feeling of doubt among traders and stockholders. Apprehensions of price cuts bring discernible changes to trading patterns as a lack of confidence kicks in. Banks are resilient investors in the stock market, and their partial inaction is bound to affect the market negatively.

Lastly, the lack of liquidity in the market hampers day-to-day transactions, causing a temporary delay in investments to take effect.

Impact on the economy

A considerable sector of the debt market depends on liquidity. If banks are unable to disburse amounts at a crucial time, transactions would be stalled for the time being, thus causing a credit crunch of large proportions. The overall stability is disrupted as credit bills on imports and exports are hampered. Furthermore, bank strikes definitely take a toll on productive work, thus taking down the profit levels, although for a short period of time. Finally, strikes have an unseemly effect on the Indian administration before the world, putting a question mark on its long-term viability.

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