VRS so popular that banks now bolt gates

Bank of Baroda, according to its Chairman and Managing Director, P.S. Shenoy, has decided not to relieve most of its employees who avail of VRS before the end of April or middle of May. “By that time we will be able to plug the gaps by putting in place the next rung of officers,” says Shenoy. BoB expects around 5,500 staffers to avail the VRS, at a cost of Rs 550 crore to it.

And Punjab National Bank, the first bank to complete its VRS in November, says it had anticipated the tremendous response. So, it went for a two-fold strategy — it gave promotions in advance to people it wanted to retain and also began persuading them to stay. PNB, it appears, is not as badly placed as some other banks.

Though around 12 per cent of the total bank staff of over 7 lakh across the country has availed of the golden handshake option (at a cost of around Rs 5,000 crore), the situation in Gujarat is truly ludicrous. More than 9,000 employees (30 per cent of the total) have opted for the VRS.

In Union Bank of India’s Navsari branch, all employees, including the manager, have opted for the VRS! In Bank of India’s Navrangpura, Paldi and V S Hospital branches in Ahmedabad, 85 per cent of the staff sought VRS. It’s a similar story in the main branch at Bhadra where VRS found favour among 50 per cent of the staff. More than 90 per cent staff in it’s city branches in Junagadh and Jamnagar have taken VRS, leaving less then a dozen people to man the branch. In fact, the Indian Overseas Bank closed its VRS file a fortnight ahead of the last date after 90 per cent of its officers applied for it.

Even the State Bank of India, which expects around 24,000 of its 2,30,000 employees to take the advance retirement plunge, is getting badly hit in certain pockets — in Kerala, close to 40 per cent of the staff has applied for VRS.

The runaway success of the VRS, top bankers admit, has caught them a bit by surprise. The Union Bank of India, for instance, has had to shell out Rs 430 crore for its VRS package for 4,300 staffers but its original estimate for the VRS outgo was a mere Rs 150 crore! As a result of the significantly higher outgo, the bank has decided to pay half the settlement through a five-year bond which has an interest of 10 per cent.

Ironically, the eight bank employee unions, which had opposed the VRS so far, have suddenly changed their tune. “INTUC only opposed the VRS on pension grounds. Otherwise we support it,” says general secretary Gautam Thakker. The AIBEA, NCBE, AIBEAOU and BEFI also changed their stand. The General Secretary of National Confederation of Bank Employees, S A Quadri, says, “No one expected it to be such a success. We opposed it initially but it was of no use.”

Naturally, the huge package is the reason for the scheme’s success — for, apart from the VRS, these employees will also be getting their provident fund and other retirement benefits. Says Syndicate Bank official M R Kamath, “I will get nearly Rs 23 lakh in the package, including PF and other benefits. After paying a tax of Rs 3 lakh, I will have Rs 20 lakh in my hand. I plan to float a consultancy firm and purchase a new house with the money.” HRD managers in Gujarat add that the entrepreneurial skills of the Gujaratis are the main reason why more Gujaratis have opted for this.

But it’s not just the employees who’re on a roll. The banks, anxious to cut flab, also stand to gain — many of them, in fact, plan to write off the amount this year itself. And some investment firms, such as Credit Suisse First Boston, have already raised their rating of the Indian banking sector to `overweight’ from `buy’ following the restructuring plans. It’s a win-win situation for everyone.

(With inputs from George Mathew in Mumbai)