This is for the first time the bankers' body has decided to implement the wage pact with prospective effect. In other words, bank employees will be entitled to a new wage structure from the day the bipartite deal is signed and not from November 1997 on the expiry of the sixth bipartite wage settlement.

"Banks' profitability has been adversely affected and with that the capacity to pay has decreased. The wage settlement cannot be implemented with retrospective effect," IBA secretary and CEO MN Dandekar said. Some of the profit-making public sector banks like State Bank of India and Bank of Baroda have, however, already madeprovisions in anticipation of the wage hike.

During the last bipartite settlement, the wage hike for bank officers were implemented nine months after the expiry of the previous settlement although bank staff had received their raise with retrospective effect (November 1, 1992).

"The policy of making the new wage settlement with prospective effect will put pressure on unions as any delay in signing the pact will adversely affect the bank staff," a banking sector analyst said.

The IBA on Monday made its final offer of 8 per cent wage hike to the officers associations. "This is the best offer the industry can make as banks' capacity to pay is under severe strain. There is no question of revising this offer upwards," Dandekar said.

Bank unions and officers body are meeting to chalk out a joint strategy to thwart the IBA move. The unions have demanded 25 per cent wage hike. At the last five-year wage settlement -- which expired in November 1997 -- bank employees and officers had got a 10.5 per centhike.

Dandekar justified the proposed 8 per cent wage hike saying on a relatively higher base the quantum of hike would be a decent one, particularly in the context of the present economic scenario and banks' capacity to pay.

The 8 per cent wage hike will put an annual burden of Rs 930 crore on the banking industry. In 1996-97, the annual wage burden on the industry was Rs 11,600 crore which went up to Rs 12,800 crore in fiscal 1998. "The Rs 930 crore outgo on account of 8 per cent wage hike is being calculated taking March 1997 as the base year," Dandekar said.