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BUSINESS
Profitable
Loss
The retirement
scheme for PSU bank staff has got good response, but will it make them
competitive?
By
Malini Goyal
Bogged
down BY non-performing assets, bleak profits and mounting competition
for years, public-sector banks finally have something to be cheerful about.
If the number of applicants is any indication, the voluntary retirement
scheme (VRS) of PSU banks is a success. One out of every 10 employees
has applied for the golden handshake, willingly and happily. It translates
to about 90,000 of the nine lakh employees from 17 public-sector banks.
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"Government's
quick approval to our VRS package was a big help."
S.S. Kohli,
Chairman,
IBA & PNB
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''It is a
good offer, no doubt about it,'' says a deputy manager of the State Bank
of India (SBI), who after 31 years of service will get Rs 18 lakh as VRS
package, not to mention the monthly pension of Rs 6,200.
At the macro
level, it sets a precedent of successful downsizing in PSUs. ''If an organisation
wants to rightsize the manpower, VRS is the only option,'' says N.S. Nayak,
general manager, Bank of India. This is the first time that the industry-in
this case the Indian Banks Association (IBA)-was allowed to work out a
VRS package and then refer it to the Government. As a result the package
was more practical. Already, M.A. Hakeem, secretary-general, scope (Standing
Conference of Public Enterprises), has requested the Government to allow
other PSUs to chalk out customised VRS packages based on their financial
strength.
| THE
PACKAGE AND ITS IMPACT |
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90,000
PSU bank employees apply for VRS.
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60
days'
salary to be paid for every year of service.
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Rs
7,500 crore
is the approximate bill of VRS.
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50
per cent
of payment will be made in cash immediately.
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4-5
years will be needed to recover cost of VRS.
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| (Figures
are estimates as many banks are yet to finalise applications.) |
The employees
willing to retire have been offered 60 days' salary for every year of
service (as compared to the usual 45 days' pay) or current salary for
the remaining months of service, whichever is less. While 50 per cent
of the payment will be immediate, the rest will be paid in cash or bonds
in six months. Says IBA Chairman S.S. Kohli, who prepared the draft: ''We
realised that unless the package was good, nobody would take it.'' Kohli
is also the chairman of Punjab National Bank (PNB) which received 6,000
applications. The biggest nationalised bank, SBI, had 33,000 employees
lining up for VRS.
The scheme
is more attractive for employees who opted for pension rather than provident
fund (PF). Barring SBI-which offered all three retirement benefits of
gratuity, pf and pension-the banks in 1995 had given their employees the
option of choosing between pension and pf. Most opted for pf. ''Only 20
per cent of PNB employees chose the pension scheme. The exodus would have
been much bigger if all of them were on the pension scheme,'' says a PNB
branch chief general manager, who did not opt for VRS because he was on
the pf scheme.
''Those
who did not opt for pension will take home less,'' informs B.D. Narang,
chairman, Oriental Bank of Commerce. The difference is substantial. Take
the case of Ajay Gupta. With 25 years of service and a salary of Rs 15,000,
he would get Rs 15.5 lakh besides Rs 4,500 every month if he had been
in the pension scheme, but only Rs 14 lakh under the PF scheme.
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