Printer Friendly

The impact of a voluntary retirement scheme on Indian public sector banks and its existing employees: an empirical analysis.

The objectives of the banking reforms in India suggested by Narasimham Committee II were to keep banks financially sound while encouraging more competition and reducing government ownership of state banks. Among many management and structural issues, it also suggested that a voluntary retirement scheme (VRS) may be introduced in the banks to reduce over manning, wherever necessary. As a result, all public sector banks (PSBs) in India except Corporation Bank introduced VRS on a non-discriminatory basis. More than one hundred thousand bank employees in different cadres accepted it and were allowed to retire under the scheme.

This article, based on a primary survey conducted in a few selected Indian States, attempts to find out the impact of VRS on public sector banks and its exiting employees. The results point out that although customer service and efficiency in the banks has become better, VRS has adversely affected the existing employees because of increased workload and work responsibility. However, business per employee and profit per employee in public sector banks has increased and now they have low non-performing assets (NPAs).

The Probit analysis concludes that the differences in the household characteristics are some of the plausible reasons why some employees opted for VRS, while the others though eligible, did not find it attractive.

INTRODUCTION

The Indian banking system is going through a period of far-reaching changes. The banking system has been aimed to provide a diverse financial infrastructure so as to help the process of resource mobilisation and to meet the expanding and emerging needs of a developing economy. It is well recognised that the structure and size of the financial sector play a critical role in achieving sustained economic growth in any economic system. The financial sector acts as a conduit for the transfer of financial resources from savers to borrowers. Rangarajan (1998, pp.130) describes these economic functions of financial sector in terms of liability asset transformation; size transformation; maturity transformation and risk transformation. The financial intermediation supports increasing capital accumulation and helps in economic growth. Financial structure has to be designed so that financial intermediaries and capital markets can play their role effectively. A strong financial system is central to the objective of strengthening the real economy and for its healthy and orderly growth. But it is empirically found (Demirguc-Kunt and Levine; 2001, pp.233) that along with a higher level of overall financial-sector development, the legal system, which protects the rights of outside investors more efficiently, helps economies, industries and firms to grow faster. It was also found (ibid, pp. 257) that greater bank development brings about tougher competition, higher efficiency and lower profits. Thus, greater financial development would improve the efficiency of the banking sector, potentially leading to higher growth, both at the firm level and the macro level.

The financial sector reforms were initiated in India, as a component of stabilisation and structural adjustment programmes in mid--1991. The banking reforms were believed to be essential not only for economic integration but also for financial integration with the outside world. The recent banking sector reforms could be construed as policy response sought to eliminate the phenomenon of financial repression (1), which had crept into the system over the years. The objectives of the reforms were to keep banks financially sound while encouraging more competition and reducing government ownership of state banks. The reforms are so designed as to enhance the productivity and the efficiency of the economy through enhancing operational efficiency and allocative efficiency and also increasing international competitiveness. The reforms are comprehensive in scope covering wide inter-related aspects. These are: (i) monetary policy changes with respect to reserve requirements (SLR-statutory liquidity ratio and CRR--cash reserve ratio, both of which were quite high till reforms); interest rate (level and structure) and exchange rate mechanism; (ii) adoption of internationally accepted practices and norms relating to income recognition provisioning and capital adequacy; (iii) changes aimed at bringing greater autonomy, competition, efficiency and profitability in the banking industry; and (iv) strengthening supervision and surveillance over banking operations in a deregulated environment.

Policy reforms that have been implemented since 1992-93 were recommended by Mr. M. Narasimham Committee I and II. Narasimham Committee II, also known as Committee on Banking sector reforms, proposed reforms which focused on improving the systems, productivity, efficiency and profitability as also on providing greater operational flexibility and functional autonomy in decision-making. The committee has added that action on strengthening the foundations of the system by improving asset quality; enhancing capital and improving profitability need to go along with structural changes in the system. Among many management and structural issues, it also suggested that a voluntary retirement scheme (VRS) may be introduced in the banks to reduce over manning, wherever necessary.

The consolidation process also started in the Indian Banking along with these changes. With the opening to the private sector by the Indian central bank, Reserve Bank of India (RBI), the competition in the banking industry grew intense and some large banks started the merging process. ICICI Bank has acquired ITC Classic, Anagram Finance and Bank of Madura. HDFC Bank has merged Time Bank with itself. Punjab National Bank merged The New Bank of India in its fold. All these instances show that strong banks would continue to get tempted to takeover weak and inefficient banks to increase their size and possibly their profits. The experience of HDFC Bank's merger with Times Bank showed an increase in earning per share and market capitalisation in the post-merger period (Stock Exchange Official Directory, different years). Recently the wave of mergers has gathered speed. The Bank of Punjab and Centurian Bank have merged to form Centurian Bank of Punjab. Similarly Lord Krishna Bank tried to merge with The Federal Bank but after the failure of their final negotiations it explored other options. It has now finally decided to merge with Centurian Bank of Punjab. The Bank of Rajasthan is also on a look out for a South India based bank for merger so as to expand its operations. The finance minister Mr. Chidambaram (2) is also pushing hard for consolidation in the banking industry and wants that Indian banks should also rank as one of the largest in Asia and the world. He even mentioned that the banks and trade unions within the banks are ready for the change, as the mergers would not lead to any job losses and it is only the Central unions (3) who have to clear the proposals.

However, Ram Mohan (2005) does not find any substantial evidence in support of mergers of banks in India. He finds that banks in India have performed quite remarkably after the reforms even without any significant mergers. The performance of public sector banks (PSBs) in terms of profitability, by appreciation in stock values, by cutting of costs and by diversification of portfolios has been impressive. According to him, there is no empirical economic support for future mergers of Indian banks.

Beside these set of measures, technological up-gradation measures and manpower restructuring was also implemented by banks. New technology--computerisation, automatic telling machines (ATMs), cash counting machines, tele banking and internet banking was introduced in many banks--both in public sector banks and in private banks.

Year 2000-01 in a way happens to be a landmark year in the history of Indian Banking. Indian banking industry entered the New Millennium with vastly changed outlook and strategies. The industry and Indian Banks understood the necessity and were keen to change the way they were carrying out banking business. Although, the VRS scheme came into force in the New Millennium, background work had started long back. Thinking in that direction was prompted by low profitability of banks, particularly that of public sector banks. A serious argument in favour of improving bank profitability was made in the report submitted by Tarapore Committee on Capital Account Convertibility (CAC). Improved profitability among others was identified as a precondition for adopting CAC.

Surplus employees (estimated at 25 percent by various committees and experts) were identified as one of the main reasons for low profitability of public sector banks (PSBs). Relatively high establishment costs and low business per employee were serious pointers in support of the opinion. These also lent weight to the argument in favour of rightsizing PSBs. It was also felt that rightsizing would pave the way for recruitment in the specialised cadre covering technology, forex, venture capital, e-commerce, money and securities managements, etc.

VRS or 'golden handshake' was earlier used by many organisations to cut down staff costs and improve its productivity and profitability. Faced with cutthroat competition from the new private sector banks, state-owned banks had to take the task of cutting costs very seriously. Despite a clear lead in terms of time, clients and network, public sector banks have lagged far behind the new private sector banks in financial performance. The public sector banks have been suffering from growing levels of Non Performing Assets (NPAs), inadequate incomes, inefficient capital adequacy, over staffing, increased staff costs, loss making branches and banks, rising deposits costs, and low return on advances, etc. Overstaffing and increased staff costs were one of the main reasons of lower profits per employee and overall lower profitability. Plagued by a high establishment cost (4) of 20.13 percent in nationalised banks in the year 1997-98, as compared to 7.66 percent in foreign banks and 3.04 percent in private banks, the government showed its keenness to reduce staff strength. A study conducted by Federation of Indian Chamber of Commerce and Industry (FICCI), using the benchmark of Rs.125 lakh (5) business per employee, pointed out that nearly 22 percent of the bank employees (numbering approximately 1.75 lakh) in 16 public sector banks (PSBs) are redundant in 1998-99. As a result, the Union finance ministry asked, all chief executives of nationalised banks in September 2000, to quickly prepare a VRS, which may be offered to the employees.

As a remedial measure to this situation PSBs came out with a VRS with the following purposes:

* To optimise human resources

* To achieve a balanced age and skill profile

* To reduce costs and improve profitability

Under the VRS, the public sectors Banks did not compel any specific employee to leave service, but in the reverse process the employees willingly came forward attracted by the liberal provisions of the scheme and opted to retire from service voluntarily without any pressure being exercised on them by the management. It was achieved through a very attractive package of terminal benefits and compensation, which motivated employees favourably in large numbers for voluntarily early retirement. This helped the banks in realising the objective of shedding 10 percent of the staff strength so as to become leaner. Between November 15, 2000 and March 31, 2001 all public sector banks, except Corporation Bank introduced VRS on a non-discriminatory basis. More than one hundred thousand bank employees in different cadres accepted it and were allowed to retire under the scheme. State Bank of India has now introduced a second VRS for its officer staff with new conditions.

The first scheme followed guidelines issued by the Indian Banking Association (IBA). The scheme was open to all permanent employees with 15 years of service or 40 years of age. However, certain categories were excluded from the scheme. Some of the banks made suitable changes in the criteria as per their own circumstances; i.e. their own financial position and staff requirement. The amount of ex-gratia offered (6) was 60 days salary (pay plus stagnation increments plus special allowance plus dearness relief) for each completed year of service or the salary for the number of months service is left, whichever is less. Other benefits like gratuity, pensions, and leave encashment as per rules were also extended. The scheme was generally kept open till 31-3-2001. It was suggested that depending on the financial position of each individual bank, it may decide to pay partly in cash and partly in bonds or in instalments, but minimum 50 percent be paid in cash instantly and the remaining 50 percent after a stipulated period. However, some financially strong banks like State Bank of India (SBI), Bank of Baroda, Canara Bank did pay the entire compensation in cash. The funding of the scheme was to be made by the banks themselves either from their own funds or by taking loans from other banks/financial institutions or any other source. However, the banks had the prerogative either to accept a request for VRS or reject the same depending upon the requirement of the bank. Sufficient precautions were to be taken to ensure that highly skilled and qualified workers and staff were not given the option.

It was believed that with the introduction of VRS, many banks and branches would be primed of surplus staff and the banks would have to manage their operations with the remaining staff. It was thus conceived that no new staff would be provided to replace the retired staff, since the philosophy was to restructure banks and cut down the size of the staff. There were, however apprehensions that not only inefficient but many capable and efficient staff members may also opt for the scheme; thus affecting the operations and profitability of the banks.

In the light of these apprehensions and other issues that were raised, a survey was planned with a view to find out any adverse effect on the existing employees after the implementation of VRS had pruned the staff strength. The objective of the study is four fold. Firstly, an attempt is made to find out why those employees who were eligible to accept VRS did not opt for it. Secondly, we try to find out how VRS has affected the existing employees of the public sector banks (PSBs). Thirdly, we also investigate how the work atmosphere and customer service in the banks have changed. Finally, the financial performance of the PSBs, after VRS has been implemented is also analysed. In the following section we outline our main database. Section III highlights the profile of the existing employees who were covered under the survey. In section IV, we present the findings on the reasons of not opting for the VRS by the eligible employees. Section V provides the details about the impact of VRS on the existing employees. Section VI contains some more analysis of the impact of VRS and the Probit analysis. Section VII provides the impact of VRS on the working of the banks and their financial performance. The conclusion is presented finally in section VIII.

Database

A survey of the existing employees in public sector banks (7) was conducted, with the financial support from University Grants Commission, New Delhi to find out the impact of voluntary retirement scheme, which was introduced in 2000-2001.

The survey of existing employees was conducted between April 2004 to March 2005 in the Indian cities of Delhi, Chandigarh, Jaipur, Lucknow, Agra and Bhopal with an eye to cover the important North Indian States (8). Efforts have been made to cover the maximum number of banks in these cities to broaden the coverage of the survey. Before using the primary data collected through the questionnaire, the questionnaire is tested for internal consistency and reliability. The consistency of the questionnaire is tested by Cronbach's Alpha method and the results give high values of 'alpha' for different sections--from 0.53 to 0.88, supporting the consistency of the questionnaire. The reliability of the questionnaire is tested by test and retest method. A pilot survey was done for existing employees in Delhi and outside Delhi-almost six months after the first survey for test-retest reliability. We calculate the correlation of the responses between the original survey and the pilot survey. The correlation is found to be 0.9943 (p-value =0.8867), which shows that the responses of the respondents were reliable.

Our sample consists of 636 persons, with 443 (69.65 percent) from Delhi, 49 (7.70 percent) from Chandigarh, 37 (5.81 percent) from Jaipur, 47 (7.39 percent) from Lucknow, 24 (3.77 percent) from Agra and 36 (5.66 percent) from Bhopal. The sample covers 24 (almost all) nationalised banks including State Bank of India (SBI) subsidiaries. It consists of employees from State Bank of India-13.68 percent; Punjab National Bank (PNB)-13.68 percent; Canara Bank-10.06 percent, Bank of Baroda-7.39 percent; Central Bank of India-6.13 percent; etc.

Profile of the Existing Employees

The sample of existing employees includes supporting staff (13.54 percent) along with clerical staff (39.69 percent) and officers (46.77 percent) -18.43 percent Scale I officers, 21.42 percent Scale III officers, and the remaining 6.92 percent Scale II officers (9). Some variations in the composition across cities are observed but each category is quite representative in character.

In the survey, efforts have been made to select mainly those existing employees who were eligible for VRS when it was introduced. However, views of few other employees are also incorporated to broad base the study. We have 435 such existing employees in our survey who were eligible to opt for VRS and the remaining 201 were not eligible for it. The mean age of existing employees in the sample is 48.50 years, much above the eligibility age of 40 years. Around 80 percent of the sample employees are above 45 years of age. The mean age among different cities is quite same with lowest being in Jaipur 47.62 years and highest in Bhopal--50.31 years and the sample across cities do not differ much in mean age (t-value being only 0.6678 and p-value=0.504 for Delhi in comparison to outside Delhi).

The mean experience of existing employees included in the sample is 24.75 years--i.e. they were eligible for opting the VRS. The mean experience does not vary much across cities--with the minimum being in Chandigarh--23.84 years and maximum in Bhopal--26.31 years. The test of equality of experience confirms that there is no significant difference in the mean experience between Delhi and outside Delhi the t-value being only 0.4138 with probability equal to 0.679. The analysis also points out that 82.7 percent of the sample employees are males and only 17.30 percent are females. The proportion of female employees in banks is quite low--especially among senior employees (10).

It is also found that mean number of children of the existing employees is only 2.21--maximum 2.49 in Jaipur and minimum 1.87 in Lucknow. There are very few employees with large numbers i.e. 4 or more than 4 children--only 8.65 percent. The sample across cities again does not differ much in mean number of children (t-value being only 0.8689 and p-value=0.3852 for Delhi in comparison to outside Delhi).

The mean size of the family is also quite reasonable at only 4.36--it being again lowest for Lucknow (3.89) and highest for Jaipur (4.95) as could be expected because of a similar pattern for the number of children. No statistically significant difference has been found across cities in this regard (t-value being only -0.4007 and p-value=0.6888 for Delhi in comparison to outside Delhi). It is also clear that not many employees have a significant number of dependents--other than wife and children. The mean age of children also indicates that they have grown up children. Both these facts together point out that the employees do not have to bear many family responsibilities.

The details about the status of the spouse of the existing employees are also analysed. It shows that in 67 percent households, the spouse is unemployed and in only 29 percent cases, the spouse is employed-either in business or elsewhere. Obviously one may expect that those with an unemployed spouse will have lower economic status than the others; but given a choice whether such employees would opt for VRS or not, would depend on many considerations. However, it is observed that the sample across cities does not differ much in the status of spouse (t-value being only 0.6724 and p-value=0.5016 for Delhi as compared to outside Delhi).

Though the social profile of existing employees in Delhi and outside Delhi is almost similar but all the cities covered in the study are different in their economic status. It is thus hypothesised that behaviour of respondents in each geographical region is different. Hence, the subsequent analysis has been carried out for each of these cities to capture the same and chi2 test has been carried out and reported to find out the independence of responses (11) across cities.

Reasons for not opting for VRS

The survey asked the employees to express their views on VRS-whether they considered it good or bad, and why they did not opt for it. The results of the survey are presented in Tables I and II. Table I indicates that though the opinion about VRS as an option is divided; yet, more than half (53.8 percent) considered it to be a good option. It is only in Bhopal that 'bad' out numbered 'good'. Chi2 for independence of responses across cities is = 22.7113 (p-value=0.012) suggesting that they are not independent but vary across cities. It must be remembered that most of these employees did not exercise their option for VRS when they were offered it. So the obvious curiosity was to know the reasons why they did not take Voluntary Retirement (VR) despite perceiving it to be 'good'. The reasons for not opting for VRS were put in three groups--financial, job related and personal and each group consisted of different alternatives.

Since the respondents from outside Delhi were relatively small, they were all asked to treat each group separately and rank the alternatives within a group in order of importance for them as the reason (s) for not opting for VRS. Delhi was divided into 2 groups--while a small group (64) was treated like respondents in other cities, the remaining (477) were asked to rank the entire groups as one. So we got two sets of responses--while the first set is summarised in Table II (a) the other set --mainly for Delhi (379 respondents) is presented in Table II (b).

It is evident from Table II (a) that in all the cities where the survey was conducted, the majority (75.7 percent) has not taken VRS because they do not have any alternative employment or business opportunity. The remaining 24.3 percent do not find the scheme to be financially attractive. A further probe has been considered necessary as to why so many employees do not find it attractive. After a long discussion with those who opted for VRS (12), it emerged that the first reason for not opting for VRS could be that many of the eligible employees do not have the option of pension. In the absence of it they would be deprived of a regular source of income in future. The second reason could be that most of such employees may not be highly qualified, as to get alternative employment. A pilot survey was again done in Delhi and outside Delhi focusing mainly on these two aspects. The results of pension plan option are contained in Table III and those of educational qualification in Table IV. Table III highlights the majority--around 52.6 percent of the employees have the benefit of pension plan. The proportion is low for Delhi (41.86 percent) and high for outside Delhi (65.71 percent). A comparison of this with that of retirees (13) confirms the apprehensions. While 83 percent of the retirees in Delhi had pension scheme, only half of this proportion, 41.86 percent of the existing employees have this option. This could partially explain why the proportion of respondents saying VRS is not financially attractive is higher in Delhi as compared to other cities. In other cities the proportion of retirees and existing employees with pension scheme is almost equal--60 to 65 percent.

However, a cursory look at the results in Table IV indicate that outside Delhi employees are relatively more qualified--more than 52 percent are post-graduates and above as compared to only 28 percent in Delhi. The results are only indicative and not suggestive, as we do not have similar details about the retirees. But, it is difficult to conclude that lack of alternative employment or business could be just because of their educational status. It is possible that due to the general high level of unemployment especially among educated, one finds it difficult to take an alternative job at the age of 50. It may be mentioned that alternative employment/ business is not a very important reason for taking VRS by retirees and many of them did not take any such alternative employment even after they have actually accepted VRS and reported to be doing 'nothing'.

Among the job related reasons for not taking VRS, a vast majority 66 percent [Table II (a)] have reported that they are happy with their current job and few of the employees--11.15 percent expects to have another VRS, may be a better one with pension scheme. 75 percent of the respondents have also cited family responsibilities as the important personal reason for not opting the VRS. We find no alternative employment as the most important financial reason; happy with the job as the most important job related reason and family responsibilities as the most important personal reason for the existing employees for not opting for the VRS.

The responses of the second set of Delhi respondents have been presented in Table II (b). It ranks all the reasons together. On the basis of the Pt rank, it is clear that 'happy with the present job' is the most important reason for not accepting VRS, followed by no alternative employment/ business opportunities; scheme not attractive financially; expecting another VRS and family responsibilities. Even when we consider the first three ranks, we find the reasons are primarily the same--family responsibilities, happy with the present job and no alternative employment/ business opportunity available.

It thus comes out clearly from the survey that along with financial reasons, job related and personal reasons also influenced the decision of the existing bank employees for not opting for the VRS. It may also be mentioned that many respondents have pointed out that the VRS is good for those who are left with only few years of service. For relatively young with 10 or more years left of their service (14), the VRS is not a very attractive option to fall back upon especially in the absence of a viable and sound alternative plan.

Probit Analysis

To find out the differences in the household characteristics between retirees and existing employees, probit analysis (15) has been attempted. The question that baffled us was why is it that some employees with the same age and experience accepted the VRS, while others did not volunteer for the same scheme. What could be the possible reasons for this divergent behaviour of the employees? From the two sets of responses--one for retirees (16) and other for existing staff, only those existing employees have been selected who have completed at least 20 years of service; i.e. they are eligible to opt for VRS and are also at least above 45 years of age. We have 435 such existing employees in our survey. The household characteristics namely age, experience (length of service), position in the bank, number of family members, number of children and number of dependents of the existing employees is compared with the retirees and the mean values along with t-values for equality of means are presented in Table V.

It shows clearly that except for the number of family members and children, there are significant differences in other characteristics. The mean values are also higher only for these characteristics for existing employees and are lower for others, which are also significant.

The results of the Probit analysis are presented in Table VI. It contains the coefficients; their slope i.e. dF/dx which gives a relative change in the decision due to the variable; and the corresponding standard errors. All the Z values in the model point out that all the variables included in the Probit estimation are significant in explaining the decision of the employees. The chi2 of likelihood ratio along with its probability indicates that the model is a good fit. Though pseudo--RZ is 0.2192 the low value need not mean that the model is not good [Maddala (1983), p.38].

It thus seems that the differences in the household characteristics are some of the plausible reasons why the employees with at least the same length of experience and age decided differently from each other. The econometric analysis thus gives some rational explanation to the behaviour of retirees and existing employees of nationalised banks in India.

Impact of VRS on the Existing Employees

The survey investigates the impact of VRS on existing employees through its affect on their workload; the changes in workload because of new technology; the changes in work responsibility; their chances of an earlier promotion and their overall life in the bank after VRS. Table VII contains the results of the employees opinion on their workload and reveals that while in Delhi, Lucknow and Agra 80 to 90 percent of the employees say that it has increased substantially (more than 20 percent); in Chandigarh, Jaipur and Bhopal 44--47 percent express the same opinion. But almost everyone in these cities, except Bhopal agrees that workload has increased--whether marginally (0-10 percent), moderately (10-20 percent) or substantially (above 20 percent). In Bhopal around 30 percent feels that it has remained the same. A test of independence of responses across cities shows chi2 to be equal to 190.012 (p-value=0.000) suggesting that they are not independent but vary across cities.

The impact of the introduction of new technology on the workload is summarised in Table VIII. Among the different types of new technology introduced in the banks the survey considered only the computerisation; introduction of Note Counting Machines; and Automatic Teller Machines (ATMs). It must be mentioned that not all branches have introduced these technologies but efforts are being made to gradually computerise all the branches. Similar efforts are also being made to spread ATMs by banks but note counting machines have been introduced only by selected branches based on business; as it involves lots of investment.

Table VIII shows that all employees across cities are unanimous in their view on computerisation--that it has reduced their workload. It seems that though the trade unions initially opposed the introduction of computers in the banks for fear of losing jobs, but the staff has now accepted it and perceives it to be good--as it has reduced their workload. However, the opinion seems to have been divided on the other two major changes--ATM and note counting machines. While employees in Delhi and Lucknow seem to disagree that these have reduced the workload; in other cities--Jaipur; Agra and Bhopal they felt that workload has reduced. As already mentioned, since these changes are not very widespread, therefore we have these divided opinions.

The impact of cutting down of staff on work responsibility of the existing employees is presented in Table IX. It discloses that 82 percent of the employees perceives that their work responsibility has increased after the introduction of VRS. While another 12.5 percent thinks it has remained the same; only 5.4 percent believes it to have reduced. Chandigarh's responses, where 28.57 percent says that it has reduced are consistent with their earlier responses. Chi2 for independence of responses for change in work responsibility across cities is 103.0571 (p-value=0.000) suggesting that they are not independent but different across cities.

Whether VRS has improved the chances of an earlier promotion of the existing employees or not is displayed by Table X, where it is clear, that only about one-third employees (37.66 percent) perceives it to be true that VRS has increased their promotion chances. More than half (58.70 percent) think it otherwise--i.e. VRS has not changed their promotion chances. This perception of the employees, however, may affect their morale and motivation at the workplace and could even affect the working and service of the banks. The result of test of independence of responses across cities is similar to the earlier attributes and chi2 = 82.3447 (p-value=0.000) suggesting that they are not independent but vary across cities.

Another perception factor evaluated is the 'life' of existing employees in banks after VRS was introduced. It is clear from Table XI that while more than half--53 percent perceive that their life has become better or much better; 21.6 percent perceive it to be the same as before. However, one may notice that many employees--160 (25 percent) conceive that their life has become less enjoyable or bad; i.e. they have negative perception about the impact of VRS on their life. It could imply that a group of existing employees feel that VRS has neither improved their promotional chances, nor improved their 'life' in the bank. These negative perceptions could be a drag for them as well as the branches/ banks--and needs immediate attention of the management. Chi2 for independence of responses across cities is = 157.9701 (p-value=0.000) suggesting that they are not independent but vary across cities.

The existing employees of the bank were also asked about their opinion on the reasons, which were behind the introduction of VRS in the banks. Computerisation and surplus staffs are deemed to be the main reasons. Their opinion was also sought on any future VRS would they opt for it, if it is introduced either with the same benefits or with better package. The majority replied in the affirmative for the better scheme. It is thus clear that future VRS must include more attractive benefits for the employees to make it successful.

The relationship (17) of working conditions with important household characteristics (sex, experience and position in the bank) is also explored and the independence of the attributes is tested through chi2 test. It is found that sex of the respondents do not have any affect on the response behaviour. However, the difference is statistically significant for respondents with different position in the bank. The chi2 for position with responsibility; chances of promotion and life after VRS are 17.78 (p-value=0.059), 40.19 (p-value=0.004), and 41.18 (p-value=0.003) respectively. The behaviour is also different of persons with different experience towards their response to life after VRS. Respondents with more experience enjoy better life than their counterparts with less experience [d-d2 =33.18 (p-value=0.032)]. The response towards workload, work atmosphere, efficiency in the bank and customer service is independent across household characteristics.

The results thus point out that a majority of total existing employees expresses the opinion that workload and work responsibility in the bank has increased without improving their promotion chances. The results therefore support the hypothesis that VRS has adversely affected the existing employees.

Impact of VRS on the working of the Branch / Bank

The effect of introduction of VRS on the working of the bank is being captured by its impact on the work atmosphere/ culture (18) in the bank, the service to the customer and the efficiency of the branch. One of the main reasons, which the management forwarded to bring in VRS, was to make the banks/ branches more efficient and customer friendly so as to face the similar challenges from its private counterparts. The purpose of the survey here is to evaluate how far these objectives have been met after VRS has been implemented. The results are summarised in the next table and charts.

Table XII gives the distribution by work atmosphere in the banks after VRS-across cities. In almost all the banks and cities, the existing employees feel that now there is more work pressure. The pruning of staff because of VRS and the fear of competition with other branches have put in pressure on the employees to perform and do their duties more seriously. 76 percent of the total existing employees are of the opinion that work pressure has increased. The response is very different in Chandigarh where the pressure is felt by a fewer proportion (around 50 percent). Another 18 percent of the employees feel the work pressure has remained same, while only 2.7 percent feel it has reduced. Chi2 for independence of responses across cities is = 98.4429 (p-value=0.000) suggesting that the responses do vary across cities.

The status of customer service in the banks is depicted in Chart 1. It is evident that an overwhelming majority--81.77 percent of the existing employees feel that customer service in the bank is better now than before and another 12.44 percent feel it to be same. Only 5.79 percent feel that it has deteriorated because of shortage of staff. Chi2 for independence of responses across cities is = 19.119 (p-value=0.014). It suggests that the responses are not independent but vary across cities.

A similar opinion has been expressed about the efficiency in the branch. A vast majority of 83.11 percent again feels it has become better (Chart 2); 11.6 percent feel it as same and only 5 percent think it has become worse. All the cities show the similar pattern. Chi2 for independence of responses across cities is = 9.4883 (p-value=0.303) suggesting that they do not significantly differ across cities.

Thus, the survey points out that though the work pressure on the employees and in the branch might have increased but the customer service and the efficiency in the banks have become better. One may be tempted to conclude that VRS has been a success in bringing about a change in the work culture and in service of the banks. To some extent this reflects in the healthy balance sheets of the banks after 2000-2001 and also in the employees efficiency--shown by business and profit per employee.

Performance of Banks since 1996-97--Pre and Post VRS

There has been considerable improvement in the performance of the banking system since the VRS has been implemented. Table XIII shows the performance of public sector banks (PSBs) in respect of five key performance indicators--interest spread, intermediation cost, net non-performing assets, provisions and contingencies and net profit, all measured as a percentage of total assets, since the beginning of second phase of banking reforms, i.e. 1996-97 till 2005-06. The table reveals that there has been an improvement in these indicators.

Net profit, has shown remarkable improvement in recent years i.e. since 1996-97, when the second phase of reforms was introduced. After 1996-97, all efficiency parameters like interest spread; intermediation cost; and NPAs have experienced a decline, an indicator of improved efficiency. Provisions and contingencies showed a slight increase in recent years because of provisions for NPAs and VRS expenses. But if one is to look at the results for the two sub periods of pre VRS (1996-97 to 2000-01) and post VRS (2001-02 to 2005-06), then it is noticed that net profits as percentage of total assets have increased much faster in post VRS period. The t-test for equality of mean in the two periods also confirms the same and is equal to -3.7751 with p-value of 0.0004. The net NPAs have significantly reduced in this period from 2.40 per cent to less than one-third at 0.70 per cent (the corresponding t-value is 4.6819 with p-value equal to 0.0030). The intermediation cost also shows a similar trend and has significantly reduced in the post VRS period. The t-test gives the value of t as 6.9544 with p-value as 0.0002 and supports the result. However, we find no significant change in interest spread (t-value being only 0.0692 with p-value equal to 0.9465), as there is an increase in interest spread in the initial years of post VRS, because of low rates of interest on deposits. Provisions and contingencies also do not show any significant change in the two periods; as t = -4.4501 with corresponding p=.0021.

The relative performance of PSBs with two other categories of domestic private banks and foreign banks in recent years is summarised in Table XIV. It summarises the changes, which have taken place in employees' productivity during this period.

Table XIV shows that whereas business per employee in PSBs has increased by 125 per cent from 1996-97 to 2000-01, and it went up by 55 per cent after 2000-01 i.e. in post VRS period of three years. The increase in business per employee in the post VRS years is statistically significant as the t-value is -4.6499 with p-value of 0.0035. It also shows that though business per employee in PSBs has increased significantly both in the pre VRS and post VRS period and is quite comparable to the old private banks but it is still the lowest among different groups of banks. The profit per employee of PSBs has also increased significantly from Rs.43,000 in 1996-97 to Rs.76,000 in 1999-2000; an increase of 77 per cent but fell to Rs.54,000 in 2000-01 due to provisions for VRS expenses. However, it soared again in the subsequent years and reached to level of Rs.2.2 lakhs in 2003-04, a fourfold increase over 2000-01. The increase in post VRS is also statistically significant as shown by t-value of -4.2179 with p-value of 0.0056.

The important reason for the 'poor' performance of PSBs in India lies in the objectives and the nature of PSBs. PSBs were established and spread throughout the length and breadth of the country for easy accessibility to people for their banking needs. As a result of these objectives, the PSBs are handling large number of accounts, from small account holders including pensioners and are also lending to small borrowers as part of Priority Sector Lending policy. The PSBs, thus, need not only large number of bank branches but also large number of employees to man them and meet the 'social' objectives of banking. To a great extent these obligations of opening rural branches and lending to small borrowers, are missing from the operations of new private banks and foreign banks, which have generally entered the scene post 1991. They generally cater to big depositors and borrowers and have to handle fewer accounts. Also the PSBs are committed to employment security and have a full time workforce, whereas in the private sector (and foreign banks) the staffing policy is part-time workforce and on contractual basis, which is not counted while calculating per employee ratios. One may be tempted to say that comparing the performance of PSBs employees with new private banks and foreign banks is thus unwarranted and misleading.

CONCLUSION

The banking reforms in India were comprehensive in scope covering wide inter-related aspects. VRS was introduced in Indian public sector banks as a manpower restructuring exercise aimed at keeping banks financially sound while encouraging more competition and reducing government ownership of state banks. It was felt that overstaffing and increased staff costs were one of the main reasons for lower profits per employee and overall lower profitability. The survey results point out that though the efficiency in the banks has become better and customer service has improved the majority of total existing employees expressed the opinion that work responsibility and workload in the bank has increased without improving their promotion chances. The results therefore support the hypothesis that VRS has adversely affected the existing employees. However, as a result of the introduction of VRS and other reforms, business per employee and profit per employee in PSBs has increased. An overview of scheduled commercial banks thus reveals that they have become more profitable and efficient and now have low NPAs.

The Probit analysis concluded that the differences in the domestic characteristics are some of the plausible reasons why the employees with at least the same length of experience and age decided differently from each other. While some employees opted for VRS, the others did not find it attractive.

On the basis of the results it is thus recommended that the agenda for future restructuring of manpower be carefully prepared and followed as this sector has to play a pivotal role in the domestic economic growth process and also as a player in global financial world.

Appendix 1

Probit Analysis

The term "probit' was coined in the 1930's by Chester Bliss and stands for probability unit. A probit model is an econometric model in which the dependent variable y can be only one or zero and the residuals of the model follow a probability distribution. Here a simple linear regression of y on x is not appropriate, since among other things, the implied model of the conditional mean places inappropriate restrictions on the residuals of the model. Furthermore, the fitted value of y from a simple linear regression is not restricted to lie between zero and one. Probit regression is an alternative log-linear approach to handling categorical dependent variables. Its assumptions are consistent with having a categorical dependent variable assumed to be a proxy for a true underlying continuous normal distribution. Where logistic regression is based on the assumption that the categorical dependent reflects an underlying qualitative variable and uses the binomial distribution, probit regression assumes the categorical dependent reflects an underlying quantitative variable and it uses the cumulative normal distribution. Both the cumulative standard normal curve used by probit as a transform and the logistic (log odds) curve used in logistic regression display an S-shaped curve. The probit model (1) is defined as Pr (y=1 | x) = ([PHI] (xb)

where [PHI] is the standard cumulative normal probability distribution and xb is called the probit score or index.

The log-likelihood function for probit is

In L = [summation] [w.sub.j]ln[PHI]([x.sub.j]b) + [summation] [w.sub.j]ln(1-[PHI]([x.sub.j]b))

where [w.sub.j] denotes optional weights.

Probit analysis has been preferred because of its underlying assumption of standard normal distribution. The dependent variable used is the decision to take retirement or not with former taking value 0 and the latter as 1. The X variables included in the analysis are age, experience (length of service), position in the bank, number of family members, number of children and number of dependents of the employees.

The model can be estimated by using different statistical packages, i.e. E views, Stata, etc. When we use Stata, it provides several likelihood-based statistics:

* Log likelihood is the maximised value of the log likelihood function l.

* The LR statistic tests the joint null hypothesis that all slope coefficients except the constant are zero. This is the analog of the F-statistic in linear regression models and tests the overall significance of the model. The number in parentheses is the degrees of freedom, which is the number of restrictions under test.

* Probability (LR stat) is the p-value of the LR test statistic. Under the null hypothesis, the LR test statistic is asymptotically distributed as a chi square variable, with degrees of freedom equal to the number of restrictions under test.

* pseudo- [R.sup.2] is the likelihood ratio index. It has the property that it always lies between zero and one.

* dF/dx which gives a relative change in the decision due to the variable x.

(1) For more details about the model, one may refer to any standard textbook on Econometrics including Maddala (1983).

* The author acknowledges the financial assistance received from University Grant Commission, New Delhi, India for the study.

REFERENCES

Demirguc-Kunt, A and R. Levine (2001): Financial Structure and Economic Growth: Cross Country Comparisons, Cambridge, MA: MIT Press.

Government of India, (1991): Report of the Committee on the Finance System (Chairman: M. Narasimham), November 1991, New Delhi.

Government of India, (1998): Report of the Committee on Banking Sector Reforms, (Chairman: M. Narasimham), April 1998, Published by The Associated Chamber of Commerce and Industry of India, New Delhi.

Maddala, G.S. (1983): Limited dependent and qualitative variables in econometrics, Cambridge University Press, London.

McKinnon, Ronald I. (1973): Money and Capital in Economic Development, Brookings Institution, Washington DC.

Ram Mohan, T.T. (2005): "Bank Consolidation: Issues and Evidence" Economic and Political Weekly, Vol. XL, March 19-25, pp. 1151-61.

Rangarajan, C (1998): Indian Economy: Essays in Money and Finance, UBS Publishers Distributors Ltd, New Delhi.

Reserve Bank of India: Report on Currency and Finance, different issues, Mumbai. Reserve Bank of India: Report on Trends and Progress of Banking in India, different issues, Mumbai.

Reserve Bank of India: Statistical Tables Relating to Banks in India, different issues, Mumbai.

Stock Exchange Official Directory, different years, Mumbai.

Suresh Chand Aggarwal

University of Delhi

NOTES

(1.) McKinnon (1973) defines financial repression, as a situation in which investment opportunities are lost and economic development could not take place as a result of a weak and inefficient financial sector.

(2.) Business Standard: 15th November 2005.

(3.) Central unions in India are the unions, which represent the Indian industry and are generally affiliated to some of the national political parties. They are quite powerful and voice the concerns of labour on important issues related to them. The banks have their individual bank wise unions as well as a confederation of all bank employees.

(4.) Establishment cost is defined as ratio of staff costs to total income.

(5.) Ten lakh is equal to one million.

(6.) Ex gratis payment is similar to a severance pay.

(7.) In India, there are 27 public sector banks -19 nationalised banks and 8 State Bank of India and its subsidiaries.

(8.) While Delhi is a State with the same capital, Chandigarh is the capital of both Haryana and Punjab; Jaipur of Rajasthan; Lucknow of Uttar Pradesh (UP) and Bhopal of Madhya Pradesh. Agra, a city of UP is included because of the large size of UP. All these states are in the north of India.

(9.) The categories are formed by including the following staff:

* Supporting Staff includes Guard, Head Messenger, Messenger, Head Peon, Peon, Record Keeper, and Security Guard.

* Clerical Staff includes Assistant, Cashier, Clerk, Computer Operator, Head Assistant, Head Cashier, Senior Assistant, Senior Clerk, Special Assistant, and Supervisor.

* Officers-Scale-1 includes Assistant Branch Manager, Assistant Manager, Assistant of Chairman, Branch Assistant, Officer, Officer--I, Staff Officer.

* Officers-Scale-2 includes Deputy Manager, Deputy Branch Manager, Deputy Chief Officer, Deputy Officer, Scale--II Manager, In charge HOD, Legal Manager, Official In charge, Senior Assistant Manager, Senior Officer, Vice Manager,

* Officers-Scale-3 includes Branch Manager, Chief Officer, Deputy Chief Manager, Manager, Senior Branch Manager, and Senior Manager.

* Officers-Scale-4 includes Assistant General Manager, CEO, Chief Manager, Regional Manager, and Senior Regional Manager.

(10.) The proportion of total female employees in total employees was 14.15 percent in all public sector banks in India during 2003 and it was only 6.43 percent among officers.

(11.) The author is thankful to the anonymous referee for initiating this exercise. Chi2 has been obtained for all the tables giving the distribution of a characteristic across cities and independence of the responses is tested.

(12.) A similar survey was also conducted by the author for the retirees to find out the impact of VRS on their life. It covered the same cities and the total sample size was quite comparable at 643 for retirees against 636 for existing employees. The retirees were also asked the reasons for why some employees who were otherwise eligible for VRS did not opt for it.

(13.) See note 12.

(14.) In most of PSBs, the retirement age is 60 years.

(15.) See Appendix 1.

(16.) See note 12.

(17.) The author is thankful to the anonymous referee for suggesting this exercise. All the attributes of working conditions have been cross tabulated with each of the three household characteristics and independence of attributes was tested by chi2 test. Only the significant results of chi2 are reported here.

(18.) By work atmosphere/ culture means the pervading mood in the bank about work. So, while the work pressure tries to capture the mood, workload has tried to find the actual volume of work.
Table I: Distribution of Existing Employees by their views on VRS as
an Option

VRS Option      Delhi      Chandigarh     Jaipur       Lucknow

Good         241 (54.90)   24 (48.98)   18 (48.65)    26 (55.32)
Bad          177 (40.32)   24 (48.98)   15 (40.54)    16 (34.04)
Both           21 (4.78)     1 (2.04)    4 (10.81)     5 (10.64)
Total          439 (100)     49 (100)     37 (100)      47 (100)

VRS Option      Agra         Bhopal        Total

Good         16 (66.67)    15 (41.67)   340 (53.80)
Bad           4 (16.67)    21 (58.33)   257 (40.66)
Both          4 (16.67)            --     35 (5.54)
Total          24 (100)      36 (100)     632 (100)

Note: Figures in the parentheses are column percentage.

Table II (a): Primary Reasons for not opting for VRS
(Only rank 1 has been considered here)

Financial
Reasons                Delhi    Chandigarh       Jaipur       Lucknow

Scheme was
not attractive
financially        24 (39.34)    8 (34.78)    2 (18.18)      4 (9.09)

No alternative
Employment/
Business
opportunities      37 (60.66)   15 (65.22)    9 (81.82)    40 (90.91)

Total                61 (100)     23 (100)     11 (100)      44 (100)

Not eligible        7 (10.94)    7 (17.07)    9 (27.27)    11 (23.40)

Happy with
the present job    41 (64.06)   29 (70.73)   22 (66.67)    30 (63.83)

Expecting
another
opportunity of
VRS                11 (17.19)     2 (4.88)     1 (3.03)     6 (12.77)

Better
promotional
prospects after
VRS                  4 (6.25)     3 (7.32)     1 (3.03)            --

Better working
conditions           1 (1.56)           --           --            --
after VRS

Total                64 (100)     41 (100)     33 (100)      47 (100)

Family
responsibilities   40 (74.07)   17 (60.71)   14 (46.67)      43 (100)

Other reasons      14 (25.93)   11 (39.29)   16 (53.33)            --
Total                54 (100)     28 (100)     30 (100)      43 (100)

Financial
Reasons                  Agra       Bhopal         Total

Scheme was
not attractive
financially          2 (9.09)    4 (20.00)     44 (24.3)

No alternative
Employment/
Business
opportunities      20 (90.91)   16 (80.00)    137 (75.7)

Total                22 (100)     20 (100)     181 (100)

Not eligible        4 (16.67)    6 (18.18)    44 (18.18)

Happy with
the present job    16 (66.67)   22 (66.67)    160 (66.1)

Expecting
another
opportunity of
VRS                 4 (16.67)     3 (9.09)     27(11.15)

Better
promotional
prospects after
VRS                        --     2 (6.06)      10(4.13)

Better working
conditions                 --           --       1(0.41)
after VRS

Total                24 (100)     33 (100)      242(100)

Family
responsibilities     20 (100)    18 (64.29)   152(74.88)

Other reasons              --    10 (35.71)    51(25.12)
Total                20 (100)     28 (100)      203(100)

Note: Figures in the parentheses are column percentage.

Table II(b): Reasons for not taking VRS (Delhi-379)

Rank                                   1             2

Financial Reasons

Scheme was not attractive
financially                         27 (7.16)      25 (7.12)

No alternative Employment/
Business opportunities             90 (23.87)    165 (47.01)

Not eligible                       81 (21.49)       4 (1.14)

Job Related Reasons

Happy with the present job        133 (35.28)    115 (32.76)

Expecting another opportunity
of VRS                              20 (5.31)      11 (3.13)

Better promotional prospectus
after VRS                            4 (1.06)       1 (0.28)

Better working conditions after
VRS                                  1 (0.27)             --

Personal Reasons

Family responsibilities             19 (5.04)      29 (8.26)

Other reasons                        2 (0.53)       1 (0.28)

Total                               377 (100)      351 (100)

Rank                                   3           Total

Financial Reasons

Scheme was not attractive
financially                          2 (0.62)      54 (5.13)

No alternative Employment/
Business opportunities             37 (11.38)    292 (27.73)

Not eligible                               --      85 (8.07)

Job Related Reasons

Happy with the present job           6 (1.85)    254 (24.12)

Expecting another opportunity
of VRS                               3 (0.92)      34 (3.23)

Better promotional prospectus
after VRS                                  --       5 (0.47)

Better working conditions after
VRS                                        --       1 (0.09)

Personal Reasons

Family responsibilities           273 (84.00)    321 (30.48)

Other reasons                        4 (1.23)       7 (0.66)

Total                               325 (100)     1053 (100)

Note: Figures in the parentheses are column percentage.

Table III: Distribution of Existing Employees by their Retirement
Plan, which they had opted during their service in the Bank--Pilot
Survey

Retirement Plan     Outside Delhi         Delhi        Total

Pension Scheme         23 (65.71)    18 (41.86)   41 (52.60)

Lump-sum Payment       12 (34.29)    22 (51.16)   34 (43.60)

Both                           --      3 (6.98)     3 (3.80)

Total                    35 (100)      43 (100)     78 (100)

Note: Figures in the parentheses are column percentage.

Table IV: Distribution of Existing Employees by their Educational
Status Pilot--Survey

Educational Status      Outside Delhi       Delhi        Total

Below Under Graduate       4 (11.11)    9 (21.43)    13 (16.67)

Under-graduate            10 (27.78)    18 (42.86)   28 (35.90)

Under-graduate with         3 (8.33)      3 (7.14)     6 (7.69)
other qualifications

Post- graduate            10 (27.78)    10 (23.81)   20 (25.64)

Post-graduate with         9 (25.00)      2 (4.76)   11 (14.10)
other qualifications

Total                       36 (100)      42 (100)     78 (100)

Note: Figures in the parentheses are column percentage.
Other Qualification includes CAIIB, MBA, etc.

Table V: Summary Statistics: Mean

                                   Position in   Number of
              Age     Experience    the bank      Family
Employees   (Years)    (Years)     (code) (1)      Members

Existing     50.89      27.14         3.06         4.46
Retirees     53.71      30.17         3.78         4.42
Total        52.53      28.90         3.48         4.44
t- value    -12.75      -12.23        -8.38        0.46

                      Number of     Number of
Employees              Children    Dependents

Existing                 2.29         0.21
Retirees                 2.22         0.78
Total                    2.25         0.54
t- value                 1.17        -11.57

(1) = code refers to the codes 1 to 6 which were given to different
category of staff explained in the profile of employees.

Table VI: Probit Estimates

                              Number of observations      1020
                              LR chi 2(7)                305.17
Log likelihood       -543.35  Prob> chi2                   0
                              Pseudo [R.sup.2]           0.2192

Employee dummy     Coefficient      dF/dx   Std. Err.       Z     P>z

Age                   0.066142   0.025269   0.006361     3.97       0
Experience            0.037082   0.014167   0.005682     2.49   0.013
Position in bank      0.148903   0.056887   0.012047     4.72       0
Family Members       -0.576820   -0.22037   0.037379    -5.82       0
Children              0.501961    0.19177   0.042074     4.51       0
Dependents            0.855906   0.326992   0.035278     8.98       0
Observed P            0.573529
Predicted P           0.615711 (at x- bar)

Note: Employment dummy is 1 for retirees and 0 for existing employees

Table VII: Distribution of Existing Employees by Workload in the
Bank after VRS

Workload             Delhi     Chandigarh        Jaipur      Lucknow

Increased
Substantially   239 (80.20)    22 (44.90)    17 (47.22)   22 (78.57)

Increased
Moderately       33 (11.07)    13 (26.53)     8 (22.22)     2 (7.14)

Increased
Marginally        26 (8.72)    14 (28.57)    11 (30.56)    4 (14.29)

Same                     --            --            --           --
                                                                  --
Reduced                  --            --            --           --

Total             298 (100)      49 (100)      36 (100)     28 (100)

Workload              Agra         Bhopal         Total

Increased
Substantially    9 (90.00)     17 (47.22)   326 (71.33)

Increased
Moderately       1 (10.00)      4 (11.11)    61 (13.35)

Increased
Marginally              --       3 (8.33)    58 (12.69)

Same                    --     10 (27.78)     10 (2.19)
                        --
Reduced                 --       2 (5.56)      2 (0.44)

Total             10 (100)       36 (100)     457 (100)

Note: Figures in the parentheses are column percentage.

Table VIII: Impact of New Technology in reducing the workload
after VRS

                          Computer-     Note Counting
Delhi-New Technology       isation         Machine

Yes, Reduced                    92.79           20.00
Not Reduced                      7.21           80.00
Total                     100.00 (430)   100.00 (385)

Jaipur-New Technology
Yes, Reduced                    72.97           63.89
Not Reduced                     27.03           36.11
Total                     100.00 (37)     100.00 (36)

Lucknow-New Technology
Yes, Reduced                   100.00           12.77
Not Reduced                        --           87.23
Total                     100.00 (47)     100.00 (47)

Agra-New Technology
Yes, Reduced                   100.00          100.00
Not Reduced                        --              --
Total                     100.00 (24)      100.00 (2)

Bhopal-New Technology
Yes, Reduced                    80.56           80.00
Not Reduced                     19.44           20.00
Total                     100.00 (36)     100.00 (35)

Delhi-New Technology         ATM           Others

Yes, Reduced                    19.84           88.24
Not Reduced                     80.16           11.76
Total                    100.00 (383)     100.00 (17)

Jaipur-New Technology
Yes, Reduced                    72.22          100.00
Not Reduced                     27.78              --
Total                     100.00 (36)      100.00 (7)

Lucknow-New Technology
Yes, Reduced                    10.64              --
Not Reduced                     89.36              --
Total                     100.00 (47)              --

Agra-New Technology
Yes, Reduced                   100.00              --
Not Reduced                        --              --
Total                      100.00 (2)              --

Bhopal-New Technology
Yes, Reduced                    80.56              --
Not Reduced                     19.44              --
Total                     100.00 (36)              --

Note: Figures in the parentheses are total responses in the particular
category.

Table IX: Distribution of Existing Employees by Change in Work
Responsibility in the Bank after VRS

Work
Respons-       Delhi      Chandigarh      Jaipur        Lucknow
ibility

Increased   366 (87.77)   32 (65.31)    21 (56.76)    38 (82.61)
Same          38 (9.11)     3 (6.12)    15 (40.54)     6 (13.04)
Reduced       13 (3.12)   14 (28.57)      1 (2.70)      2 (4.35)
Total         417 (100)     49 (100)      37 (100)      46 (100)

Work
Respons-       Agra         Bhopal         Total
ibility

Increased   21 (87.50)    22 (61.11)    500 (82.10)
Same          2 (8.33)    12 (33.33)     76 (12.48)
Reduced       1 (4.17)      2 (5.56)      33 (5.42)
Total         24 (100)      36 (100)      609 (100)

Note: Figures in the parentheses are column percentage.

Table X: Distribution of Existing Employees by Chances
of an Earlier Promotion in the Bank after VRS

Promo-      Delhi      Chandigarh      Jaipur      Lucknow
tion

Yes      137 (31.00)    27 (55.10)   19 (51.35)   21 (45.65)
No       300 (67.87)    17 (34.69)   11 (29.73)   22 (47.83)
Do not
Know        5 (1.13)     5 (10.20)    7 (18.92)     3 (6.52)
Total      442 (100)      49 (100)     37 (100)     46 (100)

Promo-      Agra        Bhopal        Total
tion

Yes      10 (45.45)   24 (66.67)   238 (37.66)
No       11 (50.00)   10 (27.78)   371 (58.70)
Do not
Know       1 (4.55)     2 (5.56)     23 (3.64)
Total      22 (100)     36 (100)     632 (100)

Note: Figures in the parentheses are column percentage.

Table XI: Distribution of Existing Employees by Life
in the Bank after VRS

Life in Bank     Delhi      Chandigarh     Jaipur      Lucknow

Much Better     15 (3.40)     2 (4.08)        --           --
Better                267
                  (60.54)     4 (8.16)    6 (16.22)   28 (60.87)
Same           64 (14.51)   23 (46.94)   23 (62.16)    6 (13.04)
Less
Enjoyable      66 (14.97)   17 (34.69)    6 (16.22)     2 (4.35)
Bad             29 (6.58)     3 (6.12)     2 (5.41)   10 (21.74)
Total           441 (100)     49 (100)     37 (100)     46 (100)

Life in Bank      Agra        Bhopal        Total

Much Better        --           --         17 (2.69)
Better         11 (45.83)    4 (11.11)   320 (50.55)
Same            5 (20.83)   16 (44.44)   137 (21.64)
Less
Enjoyable       7 (29.17)   15 (41.67)   113 (17.85)
Bad              1 (4.17)     1 (2.78)     46 (7.27)
Total            24 (100)     36 (100)     633 (100)

Note: Figures in the parentheses are column percentage.

Table XII: Distribution of Existing Employees by
Work Atmosphere in the Bank after VRS

Work
Atmosphere        Delhi      Chandigarh     Jaipur      Lucknow

Work pressure
Increased       342(77.90)   24 (48.98)   31 (83.78)   39 (82.98)
Work pressure
Same            79 (18.00)   16 (32.65)    5 (13.51)    8 (17.02)
Work pressure
Reduced           5 (1.14)    9 (18.37)           --           --
Others           13 (2.96)           --     1 (2.70)           --
Total            439 (100)     49 (100)     37 (100)     47 (100)

Work
Atmosphere         Agra       Bhopal         Total

Work pressure
Increased       23 (95.83)   24 (66.67)   483 (76.42)
Work pressure
Same              1 (4.17)     3 (8.33)   112 (17.72)
Work pressure
Reduced                 --     3 (8.33)     17 (2.69)
Others                  --    6 (16.67)     20 (3.16)
Total             24 (100)     36 (100)     632 (100)

Notes: Others include i) atmosphere has changed, ii)
customer service has changed because of rush, iii)
Manpower shortage has affected the working, v) problems
in customer dealing, vi) salary should be according to work.

Table XIII: Key Performance Indicators for Public Sector
Banks (1996-97 to 2005-06) (As percent of total assets)

Indicators          1996-   1997-   1998-   1999-   2000-
                    1997    1898    1999    2000    2001

Interest Spread *   3.16    2.91    2.80    2.70    2.86
Intermediation
Cost **             2.88    2.66    2.66    2.53    2.72
Net Non -
performing
assets *** (NPAs)   3.65    3.27    3.14    2.94    2.70
Provisions and
Contingencies       1.03    0.81    0.95    0.89    0.92
Net Profit          0.57    0.77    0.42    0.57    0.42

Indicators          2001-   2002-   2003-   2004-   2005-
                    2002    2003    2004    2005    2006

Interest Spread *   2.73    2.91    2.97    2.92    2.85
Intermediation                      2.20    2.09    2.06
Cost **             2.29    2.25
Net Non -
performing
assets *** (NPAs)   2.40    1.90    1.28    0.94    0.70
Provisions and                      1.56    1.33    1.12
Contingencies       1.16    1.36
Net Profit          0.72    0.96    1.12    0.89    0.82

Source: RBI: Report on Trends and Progress of Banking
in India, various years.

* Interest Spread is defined as the difference
between interest income and interest expended.

** Intermediation cost is operating cost and also
includes wage bill.

*** Net non- performing assets are gross non-performing
assets minus provisions, whereas gross non-performing
assets are the total outstanding of all the borrowers
classified as NPAs (viz. substandard, doubtful and
loss asset).

Table XIV: Business and Profit per Employee

          Business Per Employee (Rs. in Lakh)

Year        PSBs    Private Banks   Foreign
                    Old     New     Banks

1996-97     70.9    87.7    611.5   447.5
1997-98     85.5    120.9   785.9   529.4
1998-99     100.1   144.9   759.8   553.0
1999-00     120.5   178.9   996.6   599.2
2000-01     159.8   202.3   749.2   817.6
2001-02     191.4   227.4   906.2   959.9
2002-03     214.9   253.8   740.2   862.0
2003-04     247.1   285.9   740.1   877.9

          Profit Per Employee (Rs. in Lakh)

Year       PSBs   Private Banks   Foreign
                  Old    New      Banks

1996-97    0.43   0.81   10.34    9.92
1997-98    0.70   1.14   11.35    4.49
1998-99    0.61   0.81   7.35     5.61
1999-00    0.76   1.36   9.49     1.77
2000-01    0.54   2.76   5.15     6.60
2001-02    1.10   4.22   3.88     5.90
2002-03    1.62   1.64   4.42     12.38
2003-04    2.20   3.20   5.02     18.08

Source: RBI: Report on Trends and Progress of Banking
in India, various years. One lakh is equal to one
hundred thousand.

Chart 1. Distribution of Existing Employees by Customer Service in
the Bank after VRS

Percentage Distribution

            Better   Same   Worse

Delhi       4.29     11.06   84.65
Jaipur     13.51     21.62   64.86
Lucknow    10.64     10.64   78.72
Agra        8.33      8.33   83.33
Bhopal      8.33       25    66.67
Total       5.79     12.44   81.77

Note: The question was not asked in Chandigarh.

Note: Table made from a bar graph.

Chart 2. Distribution of Existing Employees by Efficiency in the
Bank after VRS

Percentage Distribution

            Better   Same   Worse

Delhi       3.84     11.74   84.42
Jaipur     13.51     10.81   75.68
Lucknow      8.7     10.87   80.43
Agra        8.33      8.33   83.33
Bhopal      8.33     13.89   77.78
Total       5.79      11.6   83.11

Note: The question was not asked in Chandigarh.

Note: Table made from a bar graph.
COPYRIGHT 2007 International Employment Relations Association
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2007 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Aggarwal, Suresh Chand
Publication:International Journal of Employment Studies
Article Type:Report
Geographic Code:9INDI
Date:Oct 1, 2007
Words:11248
Previous Article:Older male workers and job mobility in Australia.
Next Article:Temporary agency work and the blurring of the traditional employment relationship in multi-party arrangements--the case of Germany and the United...
Topics:

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters