VRS: where success portends trouble at ground level

By C. R. L. Narasimhan

CHENNAI, JAN. 31. The third quarter results of State Bank of India announced on Tuesday show a drop in its net profit by over 45 per cent at Rs. 220 crores from Rs. 400 crores in the same quarter last year. However, the net profit in the first nine months has gone up by 14 per cent to Rs. 1,262 crores compared to the same period last year.

Two factors are primarily responsible for the lower profit in the third quarter. A higher provisioning for non-performing assets during the quarter (Rs. 1,050 crores against Rs. 850 crores last year at the same time) became necessary following the changes in the Reserve Bank of India reclassification norms. The second is due to a one time provisioning of Rs. 462 crores, representing the issue expenses of the controversial India Millennium Bond issue. (Among its other short-comings a complete lack of transparency as to its deployment, a trait it shares with its predecessor, the Resurgent India Bonds). For the fourth quarter and hence for the whole year the bank has to reckon with another extraordinary item of expenditure on account of the voluntary retirement scheme (VRS).

SBI was among the last of the major public sector banks to introduce VRS. (Its associates have not yet embarked on that course). The scheme that closed today has been highly successful, say observers. While there has been no official confirmation on the final tally as yet - opting employees have been given a week's time to reconsider - reliable sources speak of more than 32,000 opting for the sceheme. This number includes all categories - officers, clerical and subordinate staff. SBI like other banks says it intends ``to control the outflow according to its requirements.'' Therefore, it will have the discretion to limit the number of employees who will be allowed to retire in each category. Among other contingency plans: drawing up of a category-wise list in descending order of age (preference for older employees) and forbidding specialist officers from exiting.

All these plans will be necessary in the face of the runaway success. But whatever numbers eventually leave, the bank will have to reckon with a large bill for VRS payments. The last quarter results will have the VRS's imprint and that is something that cannot be wished away or jargonised through expressions such as``superlative manpower planning''. A ball park estimate places SBI's outgo alone at close to Rs. 2,500 crores.

Other PSBs also are facing the pressures of an unexpectedly positive VRS response from their staff. Only the other day Mr. B. Vasantham, CMD of Andhra Bank, who was in Chennai for his bank's IPO roadshow indicated that everything was under control. Bigger banks such as Bank of India have seen their top management leave in droves and yet their CEOs are publicly unperturbed. It is an entirely different story at other levels. Those who stay behind will require a tremendous motivation to carry on. Plus training. Plus maybe financial incentives and a swifter career progression. Or is it ``back to the good old days of meaningless HRD slogans,'' asks a sceptical banker who is not leaving.

At the ground level the banking industry, as everyone will admit, is a not a place where the management's writ runs always. So post VRS, shuffling the available staff to the deficit areas is a thankless task more so because of the strident trade union opposition. The bank managements might have ``successfully'' implemented the scheme but there is nothing to suggest that they have the necessary skills, tact or power to cope with the new ground realities. After all VRS was by the standards of the day a sudden development. Neither its financial implications nor the organisational constraints connected with it could have been anticipated or budgeted.

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