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INTERNAL ASSIGNMENT Name of the candidate : Rajesh Kumar Enrollment no. : 07315903911 Course : MBA-II Section : A Batch : 2011-2013 Subject : Human Resource Management Subject code : MS-112 Topic of assignment : VRS Policy and Its Effects Subject Teacher’s name : Ms Meenakshi Singh


Signature of Guide Ms. Its original work carried out by Rajesh Kumar under the guidance of Ms. Meenakshi Singh (Guide) Student name : Rajesh Kumar Enrollment no-07315903911 MBA-II Sec-A (RDIAS) 2 . Meenakshi Singh.CERTIFICATE OF MERIT This is to certify that HRM Project Assignment entitled VRS policy and its effects submitted to Rukmini Devi Institute of Advanced Studies.

No. 4 5 6 7 8 9 11 13 15 16 17 18 3 .TABLE OF CONTENTS S. Contents 1 2 3 4 5 6 7 8 9 10 11 12 Article Name Introduction Abstract VRS in SBI VRS Features Scope Impact Analysis & Interpretation Findings Conclusion Bibliography Plagiarism Report Page No.

Introduction 4 .

Basically it happened in the situation of overstaffed company. It also happens when company has suffered a heavy loss either through financial crisis. On that situation company is unable to pay the employees salaries. Why a VRS ? The chief goal of a VRS is to downsize the number of employees on a given payroll. Abstract 5 .What is VRS ? A voluntary retirement scheme (VRS) is a package offered to certain employees as an incentive to retire. This severance may be so expensive that it causes companies to reconsider the value of a VRS. Economic slowdown or any other reasons. renumeration or full compensation..g. ten years). Bankruptcy. Such benefits often include tax-free severance. It usually contains generous benefits and is typically targeted at employees in middle age and/ or those who have been with a company for a considerable amount of time (e.

(ii) To have optimum utilization of human resources at various levels in keeping with the business strategies. restructuring. Objectives of VRS in Banking Sector (i) To transform the banking organizations for increased efficiency and for controlling operational costs. skill profile and requirements of the banks. 6 . Voluntary Retirement Scheme (VRS) in Public Sector Banks was formally taken up by the Government of India in November 1999. re-sizing. VRS being an exit policy taken upon by banks uniformly to become competitive as regards the human resource management. Beginning in the late 1980s. Downsizing is a deliberate organizational decision to reduce the workforce that is intended to improve organizational performance. This rapid growth had an excessive focus on quantitative achievements which made many banks inefficient. the target of organizational activity was cutting expenses through headcount reductions and redesigning the organization's structure in order to increase profits. it has posed certain challenges. then right sizing. re-engineering were substituted. unprofitable and undercapitalized.After the nationalization of banks in India in 1969 and then in 1980. with a view to rightsize the over staffed banks. Regardless of what term was used. Over staffing was one of the ills recognized by the second Narsimham committee report (April 1990). a large number of regulatory measures were adopted by Reserve Bank of India to improve the banking network and operations of public sector banks.

The scheme remained open till March 31. The SBI was the largest bank in India in terms of network of branches. and insurance & for corporate banking. The scheme envisaged to assists banks in their efforts to optimize the use of human resources and achieve a balanced age and skills profile in tune with their business strategies. housing loans. 2001. VRS’ features 7 . SBI promoted the VRS as a ‘Golden Handshake’. cash management and loan syndication. VRS was approved by SBI board in December 2000. SBI offered infrastructure finance. which was approved by the Finance ministry. revenues and workforce.VRS IN SBI The SBI was formed through an Act of Parliament in 1955 by taking over the Imperial Bank. It offered a wide range of services for both personal and corporate banking. The personal banking services included credit cards. It became operational after adoption by the respective bank's Board of Directors. consumer loans. Indian Banks Association (IBA) to circulate the voluntary. Indian Banks Association (IBA) formulated a VRS package for PSBs. retirement scheme to Public Sector Banks as per their individual manpower planning.

 Employees eligible for VRS but who did not want to avail themselves of the scheme were provided with the option of choosing to go on a sabbatical leave for 5 years  Right of refusal to give retirement to the volunteers have been granted to bank management.The following guidelines under scheme was issued by Indian Bank's Association-  The scheme allowed the banks to give the payment of VRS package in two installments  Minimum of fifty per cent of the amount to be paid in cash immediately  Remaining payment can be made within six month either in cash or in form of bonds. recruiting against vacancies arising through the VRS route had been disallowed. 8 . 2000.  All the permanent employees with 15 years of service or 40 years of age were eligible to avail of it with ex-gratia amounting to 60 days salary as of March 31.  Banks had been asked to undertake a complete manpower planning exercise before offering VRS.

Gain assistance while learning Those who need higher or professional studies makes living on a future fixed income easily to groom career. The bank's profits growth was however. Enhance career opportunities Those whom had not been promoted can change their job or avail that opportunity by any other means. Growth visible In year (2001-2002) State Bank of India posted impressive first quarter performance with 21% jump in interest income and 26% rise in earnings. Open scope for technology It leads the computing world by reducing workload by reducing staffs and open doors of efficiency and more skillful works. Better opportunity for job change High skilled persons or higher post persons can change their job and ripe the fruits of better opportunities. 9 .Scope of VRS Positive Impact: Better Retirement Planning A VRS can be an attractive option for those nearing retirement age and those who do not have dependent children. trimmed by over 100% increase in tax provision Cost cutting factor Due to VRS scope of cost cutting generates by reducing redundant and extra employees. Cost cutting enhance the revenue of banks and other sectors.

10 . Willful Option It is thoroughly based upon will of employees that when they will take retirement and plan future also. who will opt VRS will get the termination dues. There is no any pressure. VRS is the best way to solve this problem. Better HRM Planning It gives benefit to plan our human resources in efficient and effective manner by better work distribution on behalf of their potentials and skills. Monetary benefits to employees The employees. IBA has approved VRS which is justified which create social respect among employees. Permission to work in SBI subsidiary banks They will be allowed to work in any of SBI’s subsidiaries Banks and affiliates. Strikes and Lockouts are avoided. half their salary for a maximum period of three years and all pay and perks.Reduce over-staffing problems by Downsizing We found that 35% employees are overstaffed which create extra pressure upon SBI & Other banks which unbalance the growth and development. Social Justification Retrenchment and firing the employees are not better options by which Labour unions offended.

but these were tackled by SBI by rotating the administrative staff to various branches wherever there was a need to do so. Fear of losing brand image Due to delayed services.000 employees. Higher level persons were more willing for VRS Lower level employees are unwilling for VRS due to less job opportunities. It creates manpower shortage. By June 2001. loyal customers as well as new customers made up mind to change the bank for better services which were the signs of losing brand image. SBI’s manpower problems were shared by all public sector banks. But implication of VRS was to reduce lower order workforce. Customer Inconvenience & Dissatisfaction Due to shortage of manpower which led delay in customer services like cheque clearance which increase Customer Inconvenience & Dissatisfaction. Retrenchment is the best option than VRS in this aspect. Workforce Burden VRS move would significantly increase workforce burden and the government has now disallowed new staff recruitment.000 applications for the VRS. Heavy financial burden The cost of VRS to the bank was Rs 2. forcing banks to retrain the remaining staff to handle new duties at the shortest possible notice. Minor Regional Imbalances Minor regional imbalances.000 crore-plus. Higher level employees are more willing for VRS due to better job opportunities in market. Delays in Transaction Delays in remittance and money transfer due to scarcity of employees from various branches for interest lost.Negative impacts of VRS Manpower Shortage SBI received around 35. SBI had relieved over 21. SBI’s manpower problems were shared by all public sector banks. 11 .

It seems helpless in market competition. it had lost its experts to its competitors. Daily Concurrent Audit got affected Single officer had to take charge of 3 or 4 branches as the daily concurrent audit got affected.90% 58.280 31-0300 59.474 % change 11. VRS would not be feasible in rural and semi-urban areas Due to acute shortage of officers where the branches were not yet computerized the threat of bringing down the retirement age from 60 years to 58 years was putting a lot of pressure on senior bank officials to opt for the scheme. So many persons felt helpless due to lack of training. but due to weak HR policies.21% 233. Competition inability SBI had many strong organizational strengths and an excellent training system. They were keen to take VRS mostly in rural and semi-urban areas.729 210. CHANGE IN SBI’s STAFF STRENGTH 31-0301 52.Problem of recruitment Due to shortage of experienced persons in Banking Service Recruitment Board (BSRB).63% 115. Computerization led VRS Large portion of the back-office staff had become redundant after the computerization of banks.535 8.92% Officers Clerical Subordinate Total 12 . Hiring & Recruitment become tuff task.558 103.424 9.993 53.433 9.

VRS illegal structure SBI chose not to abide by government guidelines and offered VRS only to employees above the age of 55. MBA’s. They were also assured help in getting jobs elsewhere. The group filed cases before High Courts in various parts of the country. VRS conflicts The officers who were denied the VRS formed an action group in March 2001. postgraduates in computer applications. They claimed that SBI had violated the guidelines of the Government and the Indian Banks Association. any employee who was above 40 and had completed 15 years of service was eligible for VRS. VRS inequality Also. on occasion. This created a furore among employees below 55 years who also wanted to opt for VRS. A delegation of VRS-denied officers even met the Finance Minister and also submitted a memorandum to the SBI management.Analysis & Interpretation VRS Sabbatical Scheme The employees were allowed to go long leave without pay with an aim to cut costs. 13 . But this scheme raised issues about the promotion procedure for those who would return. Chartered Accountants. VRS was not for all VRS was also not open to employees who were doctorates. Cost & Works accountants. Many “returnees” expected promotions to be on par with other colleagues. According to government guidelines. challenging SBI’s decisions. But SBI marked its own cut-off age: it offered VRS to only those employees who were over 55. management would relieve only those officer cadre applicants who had crossed the age of 55 years. executives or management have not been bound by the same VRS practices as employees with lower positions or pay.

* After these restrictions were introduced.4% of the officers were left eligible for VRS instead of the earlier 33%. If an employee wished to continue a housing loan after accepting VRS. 14 . Labor unions said.Inappropriate Loan consideration Bank also restricted the loan facilities to the personnel who had opted for the VRS. “They are propagating the VRS in such a manner that the employees are being compelled to opt for the scheme. he was asked to pay interest at the market rate. and that the real problem.” VRS was completely unnecessary. which plagued the bank were NPA. only 13.

Analysts felt that SBI was not able to realize the critical importance of recognizing inherent merit and rewarding the performers. discriminatory and belying the voluntary character of the scheme. In order to trim the workforce and reduce staff cost.Findings FICCI report stated that the Indian banking industry was overstaffed by 35%. like all the other public sector banks. 15 . It left all branches short on staff and managers and the remaining staff frustrated. had little choice in the matter Banks would have collapsed if the VRS was not implemented. the Government announced that it would be reducing its manpower. There’s no doubt that the VRS was mismanaged. That would lead to a tremendous increase in the workload on the existing workforce.” SBI’s decision was taken in haste with no proper manpower planning undertaken. SBI. Media reports also called SBI’s decision to restrict the VRS as arbitrary. The arbitrariness and insensitivity at the corporate level had dealt a severe blow to the employees of the SBI and PSBs.

based on age and competency profile of the employees.Reducing employee strength before technology arrived only led to chaos. “Usually in public sector banks.” Conclusion Post-VRS was just money-making machines. SBI HR executive says that the decision was taken too swiftly to enable proper communication to employees. VRS was unwise move. since a huge number of employees were in the process of exit. it is necessary to analyze the results of short term. There were fundamental fallacies in the way banks carried out the VRS. should have a clear-cut manpower plan and should be driven by keeping in mind future strategies of the business. 16 . the management has an interface with the employees. But in this case. A good VRS should be demographically aligned. this procedure was skipped. offering them a counselling-cum-discussion session. These were missing in the VRS implementation among public sector banks.VRS gives opportunity to avail the facility of future planning and career planning. Phased implementation over five or six years will induce an ordered reduction in staff would give a better picture of effects of VRS. For wider perspective decision. Best-planned VRSs have an impact on employee morale which enhances employees’ skills and knowledge according to changing circumstances. 17 .Bibliography www.

How does Viper work? (Click here for full explanation) Report for 'HRM ass 073. Actual content match minus quotes: 32% Cover Page : INTERNAL Name Enrollment of the no. candidate : : ASSIGNMENT Rajesh Kumar 07315903911 18 .doc' Overall content match: 32% Direct quotes: 0% of which 0% found online.

Course Section Batch Subject Subject Topic Subject of : Human code assignment Teacher's name : : : : A MBA-II 2011-2013 Resource : Management MS-112 and Meenakshi Its Effects Singh VRS : Ms Policy 19 .

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