Voluntary retirement: some serious issues

SOMETHING WHICH I consider serious is happening but most people seem to be wholly unaware of it. That is the recently announced Voluntary Retirement Scheme for the staff of the public sector banks. What is shocking is that the retirement benefits that will be paid out to these men and women will be very large; in my view, these payments amount almost to plundering the country. They will retire voluntarily and we, the people, have to pay compulsorily.

I tried to ascertain the details of the scheme and its effects. I made efforts to get the printed literature, but completely failed; it is very nearly impossible to get such information from almost any governmental agency. What I therefore did was to have informal discussions with some staff of banks and carefully checked it with some others. The details which I am now recording below are therefore mainly accurate but there may be minor errors of facts which will not affect my main argument.

What they get

I was told that the decision to offer such a scheme was taken by a group of people called the Indian Banks Association in Mumbai. Every one asking for voluntary retirement should have put in 20 years of service. If that condition is fulfilled, then on voluntary retirement (which will take place in April or May this year), a retiree will get two months salary for every year of service in the bank. In actual terms, the position will probably be that a person aged about 50 having done about 27 years of service as an officer will get 54 months salary straight - of which 50 per cent immediately and the remaining 50 per cent with an interest rate of 10 per cent over the next five years. This is the most important detail and must be clearly understood. Such a person is likely to take, in all, anywhere between 15 to 20 lakhs of rupees. In addition, of course, if there is any leave to the credit of the person, it will be paid fully in cash calculated on the basis of current salary. India has always followed a simple rule for retirement gratuity - just two weeks salary for every year of service - not two months as in this case. This would mean exactly four times, and creates a new history altogether. In addition to this substantial lumpsum, there will of course be the pension or the provident fund, depending upon the choice made by that person.

When a civil servant retires, there is a stipulation that he cannot take up a job in the private sector or elsewhere without a prior clearance of the government; this is to ensure that a favour done in the past in his official capacity to a particular group should not be misused to get a lucrative job. In India, such insistence is absolutely necessary. In the case of bank retirees there is no such stipulation so far as I could see. The day after retirement, the person can get a good job if he gets one - no permission is needed, no question is asked.

Next, if a person has a very short number of years of service before the actual retirement date, he will be able to claim only the full salary for that period after retirement and up to the date on which he would have normally retired. This creates another history; you retire and claim your full salary, at the end of which again pension or provident fund. The only people for whom the Indian Government had extended such ``full salary till the normal date of retirement'' rule were the members of the Armed Forces who gave up their lives on combat duty. Now it is being given to each public sector bank man.

Argument behind the scheme

The whole argument behind this fantastic scheme seems to be that public sector banks are grossly overstaffed. That is true indeed, and is known to everyone; it never was a secret. Everywhere in the government there is overstaffing. Now, the idea is to make the banks ``less fat and more muscle'' by dropping the surplus staff. One may ask what happens to the new vacancies. The decision seems to be that, if the retirement is up to 10 per cent of the total staff, no further recruitment will be made, but if it is over 10 per cent, that excess could be recruited. Thus, if 12 out of 100 persons were to retire, the bank can recruit two persons. Even here, something is not very clear since the problem would be which category of staff are leaving. Anyway, the net result is expected to be that there will be fewer people in our admittedly overstaffed and money losing banks.

The newspapers now report that perhaps the unified Banking Services Recruitment Board will be abolished and each bank, if required, will be asked to decide its own procedures for future recruitment. This is as yet not certain, but if it happens, it would mean that the unified recruitment with certain norms of fairness and impartiality will hereafter be probably replaced by nepotism and favouritism.

Unstated reason

There seems to be some unstated reason for this sudden decision. Perhaps, before the banks are privatised, the people who will bid to take over them will like to see that the government takes the responsibility for removing a certain number of staff so that, after the takeover, the wage bill for the new employer becomes at least reasonable. Bank staff are very highly paid, a fact which does not seem to be very well known. One would like to have a clarification on this point whether this is the chief reason for the decision.

Let us ask a question about taxation on these large payments. I made a very informal check. It seems that there will probably be no tax on this since it is taken as a terminal benefit, or, at best there will be a negligible amount of income tax on this. Everyone must pay the tax as per law, and artificial special privileges cannot be conferred on certain groups of people. It is precisely this that is probably being done.

The alarm signal is now clear. What has been done will probably be repeated year after year. The very fact that so many people have applied for retirement obviously means that it is very beneficial to them. If the same demand is made by the staff next year, the government will not be able to resist it. After that, will follow similar claims from a large number of public sector undertakings. In India, the clamour for privileges and high salaries in the government sector has been led by the staff of the public sector banks.

As a civil servant I learnt three simple principles of decision- making. These, in brief, are that every decision should be justifiable both in principle and in detail, should stand a close scrutiny, and the decision itself must be in the public interest. A decision will be wrong and faulty if it fails even in one of these three tests. I would like to know whether the policy about voluntary retirement would stand examination on this count.

Such reckless handouts create inflation within the economy. The inflationary pressure in the system is now very alarming, and this and similar inevitable decisions in the future will make matters worse. Everything will cost more - food, clothing, shoes, medicines, gas, etc. It is the common people of this country who will have to bear the burden of this inflation. If the banks pay out of their own funds, I assume, the depositors will have to bear this heavy burden by having to pay higher fees for various banking services. Incidentally, beyond a point, when the government is compelled to pay out money, it becomes necessary to print fresh currency notes, and such printed currency in circulation without more goods in the market tends to be disastrous on the price front.

Possible remedies

Something has to be done about the banks and the retirement gifts. There are various possibilities although there is no guarantee that any of them or even all of them will have any degree of success. First, we must lobby with the leaders of public opinion in this country, and the politicians if at all they would listen, and tell them what we think. Another is a well drafted and thoroughly researched public interest petition before the Supreme Court, demanding simply, that the government, and the banks should publish, without technicalities, a full statement of how much all this will cost, year after year, to get rid of the staff who should not have been there in the first place. If the Supreme Court were to give a decision in our favour, the public will come to know how much all this will cost us. The third possibility with a very thin chance of success is the Gandhian method - start withdrawing money from banks.

In any country, if about 20 per cent of the depositors insisted on closing their accounts fully, the bank will not be able to honour the claims. Why this is so is something which requires the basic understanding of how the banks function. Close your accounts and pay the money in post offices or cooperative banks. The Gandhian element in this method is that you don't cooperate with what you see as evil; it is called non-cooperation. The last possibility is that a few bankmen themselves will see through this game of robbing the country, and will themselves revolt and tell their bosses that ``enough is enough''. This almost never happens, since selfishness blinds everyone, but in India anything can happen!

D. K. OZA

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