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Our Banking bureau
Mumbai, Apr 7: Finance secretary Vijay Kelkar hinted at a voluntary retirement scheme for bank employees at his meeting with the IBA brass. He also made it clear that the Government will continue to support the banking sector, particularly the weak banks, in the form of recapitalisation funds.
Dispelling the fears of some bankers concerning the stoppage of Government funds to shore up bank bottomlines, the finance secretary said that recapitalisation will be considered, albeit very selectively.
Banking sources, however, said that unlike the earlier years, the flow of government largesse will reduce to a trickle, with the Government insisting on improved operational efficiency and corporate governence of the banking sector. "The recapitalisation funds for the banking sector have already registered a significant decline from the 1993-94 levels of Rs 5,700 crore to only Rs 400 in 1998-99," sources said.
In 1993-94, the government started pumping in funds in the form of Rs 5,700 crore worth of recap fundsand followed it up by doling out Rs 4,813.79 crore (1994-95), Rs 850 crore (1995-96), Rs 1,513 crore (1996-97), Rs 2,700 crore (1997-98) and Rs 400 crore (1998-99).
IBA chairman AT Pannir Selvam said that the finance secretary hinted at a voluntary retirement scheme (VRS) for bank employees but declined to give details or the timeframe for the same. "A viable VRS scheme has been a long standing demand of the banking sector, but we have yet to work out the funding sources of any such schemes," Selvam said.
According to sources, the finance ministry has been closely looking into the possibility of introducing VRS in the banking sector. However, the stumbling block is the funds involved in such a scheme. The Calcutta-based Uco Bank has already moved the ministry with a formal proposal of introducing VRS to retrench about 7,000 employees.
Most of the public sector banks have been suffering from low productivity and high overheads on account of huge surplus staff. The annual wage burden of the industry hasgone up by over Rs 1,000 crore following the agreement on the seventh bipartite wage settlement. The VRS also assumes significance in the backdrop of various banks looking at the mergers and amalgamation route to build up on their synergies and realign forces towards forming a formidable national presence, banking sources pointed out.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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