"Most of the private and state-run banks have joined the strike. Fifty-three commercial banks are taking part," said R.J. Sridharan, general secretary of the All India Bank Officers' Association.

"We are protesting against government proposals for privatisation and outsourcing of cheque clearing and other operations," he said.

An estimated 500,000 employees joined the strike and more than 50,000 of India's around 65,000 bank branches were affected or closed, officials of the the All India Bank Employees Association said.

But the country's biggest bank, the State Bank of India which has around 200,000 employees, was not affected by the stoppage as its workers do not belong to the union, officials said.

The unions said they called the strike to protest against the government's move to "allow 74 percent foreign direct investment in our private banks (and) against outsourcing of all types of banking services to private outside agencies."

The central bank, the Reserve Bank of India, has said it will allow banks to outsource banking services to a new payments firm owned by public and private sector banks in a bid to create a central payments system.

The move is aimed at streamlining payments methods that currently are a mix of electronic and antiquated paper based systems.

The government has also announced plans to allow foreign banks to set up wholly owned units or to buy stakes in private domestic lenders. Previously, foreign banks were only allowed to set up branches.

Banking unions said the privatisation and outsourcing moves by the government would lead to job losses.

"Instead of handing over to foreign banks, we should be able to consolidate and grow stronger," said Vishwas Udagi, general secretary of the All India Bank Employees Association.

Sridharan said if the government did not back down, the unions would call more strikes.