Feb 18, 2017 01:04 PM IST | Source:

Ahead of merger, SBI arms to offer voluntary retirement to staff

State Bank of India‘s (SBI) five associate banks will offer voluntary retirement schemes (VRS) for their employees before the date from which the merger will be effective. The date for the merger is yet to be notified.

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Beena Parmar
Moneycontrol Bureau

State Bank of India’s (SBI) five associate banks will offer voluntary retirement schemes (VRS) for their employees before the merger comes into effect. The date for the merger is yet to be notified.

State Bank of Hyderabad (SBH) board has already approved the VRS while other associate banks have placed the scheme before their boards for approval, two officials aware of the development told Moneycontrol.

This move is in line with the decision taken to merge SBI with its five associate banks — State Bank of Bikaner and Jaipur ( SBBJ ), State Bank of Hyderabad (SBH), State Bank of Mysore ( SBM ), State Bank of Patiala (SBP) and State Bank of Travancore ( SBT ). Union Cabinet had cleared the merger on Wednesday.

“The VRS scheme will be open to all permanent award staff and officers in the Bank, except those specifically mentioned as ‘ineligible’, who have put in 20 years of service or have completed 55 years of age as on November 30, 2016,” said the VRS offer document sent to the Board of one of the associate banks for approval.

The VRS scheme will apply to approximately over 50,000 employees of all associate banks.

This would help SBI reduce their staff costs as they take over the liabilities from the associate banks after the merger. One of the above officials said, "This would also lead to more expenditure from the associates thereby reducing their profits, which will lower their valuations during the takover."  

SBI’s staff expense in the December quarter was Rs 7,137 crore, rising 16.5 percent year-on-year. SBI’s pension obligation is estimated to be around Rs 3,500 crore. This would increase once associate bank employees come under the SBI fold.

Currently, SBI has just over 2 lakh employees while its associate banks have a cumulative headcount of about 71,000.

Under the VRS scheme, the staff members whose request for voluntary retirement is accepted will be paid an ex-gratia amounting to 50 percent of the salary for the residual period of service (up to the date of superannuation), subject to a maximum of 30 months’ salary. This includes basic pay, stagnation increment, Professional Qualification Pay (PQA), special pay and dearness allowance.

This will be paid in cash within five weeks of the date of retirement.

A senior bank official with an associate bank said, “The HR issues are yet to be clear. VRS is generally not an attractive package. We need to see what will be offered to us from SBI and if we will be allowed to stick to the existing package or move to SBI. The younger lot is happy but some seniors are concerned as there is a lot of uncertainty, the regional flavour will be gone, and some who have been performing well at present may lose their identity.”

“It is not a straight-jacket wage structure,” said an SBI official. “Everyone may not get everything. But there are positives in both. The wage structure for SBI and the associates is slightly different."

In associate banks, all employees draw 50 percent of their last drawn salaries as pension. They also have service gratuity linked to the number of years they have serviced. They do not get provident fund i.e. their bank does not contribute for the PF of the employees. Up to Scale 3 or so, pension is 50 percent, while above it is 40 percent of the last drawn salary. "We at SBI have a cap on gratuity and we have a contribution to provident fund,” the official added.

Under the VRS, other benefits such as the gratuity, provident fund, pension, encashment of balance privilege leave will be applicable as per the ‘relevant date’ or the date when the service ends.

Additionally, apart from the housing loan, those who opt for VRS will also have to repay all the outstanding loans before the date of retirement under VRS, failing which the amount of ex-gratia and other terminal benefits payable will be paid towards the loan and only the balance amount will be payable to the employees.

The retiring employees will not be able to negotiate the conditions of the scheme and also will not be entitled to dispute the payment benefits received under the scheme.

The scheme will remain open for 15 days (inclusive of the date of launching and last date of receipt of application) with an option to the Bank to close early/extend the scheme without any reasons. The launch date will be soon finalised by the Managing Director of the respective bank.

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