Also in the pipeline is a plan to take over another bank, which has stronger presence in the western states of Maharashtra and Gujarat. In an exclusive interview with The Financial Express, bank managing director and chairman RJ Kamath said these moves form part of a strategy to take the bank to the number one slot among the commercial banks in the country with a total market share of 5.7 per cent by the year 2006.

The board of directors meeting held on December 9 and 10 has given the go-ahead for the VRS plan, which is termed as `right sizing' the existing staff by 10 per cent. "Out of a total staff strength of 55,000, we expect to receive about 5,500 applications," Mr Kamath said. The entire cost of VRS would be met from internal accruals. The bank has sought tax exemptions for five years from the income tax department for the package.

Asked about the likely response from the staff unions, Mr Kamath said the employees are well aware of the need for reforms within the bank. As per the VRS package, the lower level staff will get compensation of Rs 4 to Rs 4.5 lakh, the clerical staff Rs 6 lakh, and the officer cadre Rs 9 to Rs 9.5 lakh, in addition to pension benefits. The scheme will be opened for a month.

At present, Canara Bank has the maximum number of branches in the southern States of Karnataka and Tamil Nadu. Mr Kamath pointed out that the restructuring process in the banking industry is going on in a way that only a few banks would be maintaining their present identity five to six years from now. According to him, there was no question of going back on the reform process in the industry.

"Strikes will come and go," was his response to the widespread protest against the move to dilute government equity in state-run banks. The PSUs can no longer expect recapitalisation funds from the government and therefore the only alternative is diluting government equity in them, he added.