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State Bank of India to trim its workforce - Views on News from Equitymaster
 
 
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  • Jan 20, 2000

    State Bank of India to trim its workforce

    The State Bank of India (SBI) is in the process of drafting a voluntary retirement scheme (VRS) to trim its 237,000 strong workforce. This scheme however will not be extended to the seven associate banks of SBI.

    SBI (FY99 total income: Rs 19.11 bn) is India's largest bank. It runs the world's largest network of 8,900 branches and controls about 22% of India's loans and deposits.

    SBI has got approval from the finance ministry and plans to fix the cut-off age at 45 for the VRS. SBI's workforce accounts for one-fourth of the total industry strength. Of the 237,000 employees, there are 60,000 class officers, 1,20,000 class III staffers and another 60,000 class IV staffers. The bank plans to reduce its workforce by adopting the strategy of restructuring and re-engineering. By 2006 the banks' work force is expected to shrink by 38,000 to 199,000 due to retirements. SBI does not plan to refill these posts.

    Though the clearer details of the VRS have not been worked out yet, this will happen once the bank's technology plan is in place. The bank's foray into insurance is likely to absorb around 20,000 employees. Also SBI has plans of training its employees to improve their communication skills and improve morale levels. It plans to appoint consultants in these areas to do so.

    This move by SBI seems a start in the right direction. Though the clear details of the VRS have yet to be worked out, the fact remains that SBI is overstaffed like other public sector banks and needs to take some concrete decisions on how to increase its productivity levels. Public sector banks efficiency in terms of business per employee and profit per employee are much lower than foreign and private banks. Hence to increase its profitability and efficiency ratios this step of introducing a VRS seems to be a positive. However as the public sector bank unions are very strong in India, the VRS will have to get their approval before it actually takes off.

    Market View:
    The improving economic scenario and the steps taken by SBI to counter its inefficiencies has made many analysts turn positive on the stock.

     

     

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