But as far as the health of the banking system is concerned, the minister of state for finance, (banking. insurance and expenditure) Balasaheb Vikhe Patil is confident that real benefits will show, but may take some time to reflect on the sector as a whole. He spoke to U N Kapur on VRS and its impact on the banking sector.

A mismatch has occurred with a higher percentage of officers opting for the VRS compared to clerical and subordinate staff in banks. Will this not create problems for the sector?
The necessity of having a VRS has been amply demonstrated by the good response to the scheme. However, banks do have the freedom to refuse applications and have started studying the staff pattern before taking a final decision.

Though more officers as a percentage have opted for VRS, it gives increased opportunity to those remaining with the banks to show their merit and derive better work satisfaction. Those opting to stay back also have long experience behind them and are competent enough to fill the gaps. The number of regional offices, however, may go down once the exercise is complete.

All in all, we have to retain the confidence of those who have opted to stay on. Since the average age profile of the remaining staff is likely to be younger, the work environment will become better. In the private sector too, VRS has proved successful, as seen in the case of Bajaj Auto.

Has the transfer policy pertaining to officers contributed to their leaving banks in larger numbers?
I do not think the transfer policy has anything to do with this. It is like this, some people take the risk of opting for VRS, whereas others do not. It also depends on the kind of opportunities available for them after retiring from banks.

Those remaining in the banks will, however, have better access to the senior management for decision making as fewer layers would remain. It also gives an opportunity to bank managements to make their business more composite.There was some resistance from some banks to offer VRS in the form approved by the government and the Indian Banks Association (IBA). Subsequently, some bank managements were reportedly having second thoughts about the scheme's feasibility.

I have not come across any perceptible reluctance. The boards of all banks have passed a resolution approving the VRS. However, initial fears by employees may have been expressed but once the facts became clear, there has been overwhelming support, as you can see from the large number of applications received. However, it will take some time for the benefits of VRS to reflect in the improved financial health of banks.

Implementing the VRS has substantial cost implications. What benefits will accrue to banks over a period?
The IBA had represented to the Reserve Bank that the total cost incurred on account of VRS should be spread over a period of five years. It is a calculated decision taken by banks. More than one lakh applications have been received by them. Once the scheme is implemented in a well-planned manner, the cost would be absorbed well. Moreover, it is a one-time expenditure though initially the cost does appear a heavy burden. The benefits would be many, amongst them, reducing over-staffing, increasing efficiency. Decision-making would become faster as one layer in the administrative setup will be abolished in some banks.

Why are employees, who have a few years left for retirement, being allowed to opt for the scheme at a substantial cost to banks?
We cannot discriminate against anyone. The level of commitment of those who decide to stay back will be high as far as the banks are concerned. The relationship between the employer and employee is more important to us than acceptance or rejection of applications. Generally, making people work against their will is counter-productive. Over-staffing had led to a glut in opportunities for employees. However, certain banks will be refusing some applications for VRS to meet their requirements.

How have bank unions reacted to the scheme?
Nobody has complained to me, since the response to the scheme has been very good. I think the unions, too, are beginning to see the merits of VRS. In any case it is a `voluntary' scheme. It does not in any way unsettle the unions.

How do you see the post-VRS scenario in public sector banks?
Certainly the situation will improve, but slowly and steadily. With leaner structures, banks will be able to cope better with the new opportunities as decision-making will improve and will become faster. Managements will also be under pressure to perform as the issue of lower profits because of over-staffing will cease to exist.

Are you in favour of giving banks more autonomy?
Absolutely. However, managements should also take more responsibility for their actions.

Some weak banks, like Uco, Indian Bank and United Bank have failed to slash staff by 25 per cent in implementing VRS as recommended by the Verma Committee.

What action are you contemplating?
Although these banks may not be able to get applications for VRS to the extent of 25 per cent of their total employees. The average age profile would be higher in these banks and subsequently, larger number of employees would retire in the near future. Moreover, no new recruitments would be made. These banks would, therefore, take more time to stabilise. But the process of recovery has already begun.