Public sector banks together may take a hit of about Rs 2,200 crore (Rs 22 billion) annually if Indian Banking Association succumbs to trade unions' pressure and agrees to hike salaries of staff by 11 per cent this fiscal.

Most of the banks fear there would be pressures on profit margins as they have to provide for additional expenses for wages and salaries retrospectively for the previous two years also, bankers said on Thursday.

"Even at 9 per cent hike in salary, PSU banks will have to shell out about Rs 1,800 crore (Rs 18 billion) annually. If the banks hike the salary by 11 per cent, the outgo would be about Rs 2,200 crore annually," a bank chairman said.

As the banks may have to pay arrears of the last two years, the wage bill might swell by Rs 6,600 crore (Rs 66 billion) this fiscal and will definitely affect profitability of all the banks, another banker said.

IBA is meeting apex bank unions tomorrow in Mumbai for fresh round of talks on wage revision and mobility of staff.

While trade unions had sought a wage hike in the range of 15-20 per cent, IBA was offering 9 per cent raise in pay package till last month.

The unions had earlier threatened to go on a strike on October 5 and 6.

After IBA agreed to consider 11 per cent hike in wages during its last meeting with trade unions in Mumbai early this week, the unions called off the strike.

Under the banner of United Forum of Bank Unions, nine employees unions  -- AIBEA, AIBOC, NCBE, AIBOA, BEFI, INBEA, INBOC, NOBW and NOBO -- are aggressively taking up the matter with IBA and had also approached the finance ministry for intervention.

The finance ministry has declined to intervene as it would have a snow-balling effect on other central and state utilities as well.

But unions are adamant on arriving at a bipartite settlement on wage revision within this year.

"A settlement could be reached shortly if both trade unions and IBA show some relaxation in their stance," a banker said.

While IBA wants a more flexible labour mobility, trade unions are pressing for a higher pay package.

Bank unions, which observed a strike on August 24, threatened to intensify their stir if their meeting with IBA fails.

There are over 1 million employees in the 27 PSU banks.

Even after 100,000 employees opted for VRS four years ago, some of the banks still feel there could be further rationalisation of staff after they upgrade their IT systems and inter-connect all the branches.

Many of the banks are already deploying a portion of their staff for fee-based activities like selling mutual funds, insurance and credit cards.

Bankers are, however, unable to deploy additional staff to the desired areas due to 'unwillingness' shown by staffers.