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BUSINESS
Prosperous
States Take the Lead
Interestingly,
more officers have opted for VRS than lower grade workers. In SBI, 32.4
per cent of the officers applied for VRS compared to only 11.2 per cent
of the clerical staff. The reason is obvious. ''Bank staff do not have
generic skills which are easily transferable to other positions. Many
will not be computer literate,'' explains Greg Watson, principal, AT Kearney,
a consultancy firm. While the clerical staff has limited employment opportunities,
there is a demand for officers in the private sector. The opening up of
the insurance and financial sector has helped. ''I have an attractive
offer from a private bank. My salary will also go up more than 200 per
cent,'' says a 48-year-old manager of the Bank of India.
Despite the
officers' exodus, most banks have decided to stick to VRS. Some like Syndicate
Bank are planning to promote about 1,000 clerical staff to officer level.
But SBI has increased the VRS age to 55 to prevent officers from leaving.
This means only 13.4 per cent of the officers are eligible for VRS instead
of the earlier 32.4 per cent.
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"This
will help banks achieve a balanced age and skills profile."
R.J. Kamath,
Chairman,
Canara Bank
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Prosperous
states take the lead in the VRS race. The SBI got good response in Maharashtra
and Gujarat, but not much in Bihar and Orissa. In West Bengal also, where
workers' union have a strong hold, the response was poor. ''This has a
direct correlation to economic advancement and alternate employment opportunities,''
says Nayak.
The good
news comes with some bad news as well. The huge cost of VRS is worrying
bank managements. At an average cost of Rs 8 lakh for each employee, letting
90,000 people leave would mean an expenditure of Rs 7,200 crore. Kohli
of PNB says that banks will take 4-5 years to recover the VRS expense
through savings on salaries. But analysts caution that the banks are discounting
the cost of relocating staff.
Succour
has come in the form of concessions being provided by the Government.
All psu banks have been allowed to break up the VRS expenses over five
accounting years, but can claim income tax deduction in the current fiscal
year. The three weak banks-UBI, UCO and Indian Bank-are being provided
financial assistance to meet the VRS payments.
What will
weigh heavy, say analysts, is the loss of competent staff. The private
sector has already wooed the best of bankers. VRS will help those sitting
on the fence. ''It's not the numbers but the loss of competency that may
cause a problem,'' says Atul Pradhan, executive director, KPMG Consultancy.
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THE
FINE PRINT
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Employees
with pension plan to get more than those under PF.
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Second
instalment could be paid in cash or bonds.
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Banks
to adjust VRS expense over five years.
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VRS comes
at a time when nationalised banks are under tremendous pressure. Competition
from private players is just one of the factors. Technological tools like
ATMs and the Internet have changed banking dynamics. A large chunk of
the back-office staff-80 per cent-has become redundant. Not just the oversized,
overstaffed PSU banks, even foreign players like Stanchart, ANZ Grindlays
and Bank of America have had to downsize to keep pace with the changing
times. A PSU bank spends close to 18 per cent of its income on staff expenses
(against a global average of 7-9 per cent) and has no option but to downsize
and opt for automation.
Moreover,
the average employee age in PSU banks is high. There was a blanket ban
on recruitment for 10-15 years which has affected the age profile of bank
staff. ''With private banks like ICICI Bank hiring MBAs, how can we compete?''
asks Narang. VRS will help infuse fresh blood. ''It will help us achieve
a balanced age and skills profile,'' says R.J. Kamath, chairman, Canara
Bank. In PNB, the average age of 47 will decrease by 3-4 years after the
exodus. ''VRS is expected to result in higher profitability per employee
and lower percentage of establishment cost to total expenditure,'' says
V.S. David, deputy general manager, SBI. The downsizing will help bring
down staff cost (PNB staff cost will reduce to 17 per cent from 19 per
cent) and improve productivity.
But its
benefits could taper off if banks fail to follow it up with restructuring
and ''de-layering'' of the organisation. Says Pradhan: ''VRS will be successful
if it is not treated as an isolated move but an activity in the process
of making banks competitive.''
Being lean
is after all only one step to being fit.
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