by

L.BALASUBRAMANIAN

Few years ago the Government rolled out handsome cash incentive scheme (Statement of Intent) for CMDs and EDs commensurate with the performance of the Banks. During November 2006 the Government considered social security bonanza of reimbursement of full hospitalization expenses to whole time Directors and their surviving eligible dependents for their entire life period. Close on the heels of these  incentives, on December 5, 2012 there appeared a news in all the leading dailies that the  Government is set to overhaul the process of appointing the top management of two dozen public sector Banks and financial institutions, including an increase in the retirement age to 64 years in a phased manner. It further stated that the finance ministry has moved a proposal to the Appointments Committee of Cabinet, suggesting that Banking being a specialized activity, it needed Chairman and Executive Directors with at least a five-year term instead of the average tenure of one-two years at present. In fact, it pointed out that in technical departments, the retirement age was already increased to 64 years and argued for a similar dispensation for Bank Chairman and Managing Directors, a move which is being seen as a precursor to raise the superannuation age in Government-owned Banks over the next few years.

NUBE makes it pellucid that the unions in the Banking Industry have been demanding increase in retirement age to all employees right from the fifth Bipartite Settlement and are eagerly expecting similar stand of the Government to increase their retirement age. In support of the same we give below the following justifications.

·         A large number of people joined the Banking Sector in 1972-73 following the Nationalisation of Banks. The next wave of recruitment came in 1980-81, and then there was a lull in activity.

·         Due to a legacy of ban of recruitments for two decades, the public sector Banks are witnessing unprecedented loss of skills and competencies in form of massive retirement over the next few years.

·         India’s Public Sector Banks have employed some 700000 people, many of whom are to retire in the next few years. The business has grown manifold in the past decade, but employees strength has dwindled.

·         At the start of the last decade, at least 100,000 employees left the industry, responding to the first ever golden handshake scheme in the sector. Since then, there have not been too many recruitment drives. Banks have embraced technology, but that has not been enough.

·         Thus Banks are going through an unusual manpower crunch. There are reports of experts that in the next 10 years, they will have to hire around one million people to keep their branches running and account for retirement and natural attrition. Finding the right candidate for a leadership position will be even tougher.

·         So many people leaving at the same time has prompted the Reserve Bank of India to call the 10 years from 2010 to 2020 as the 'decade of retirement'. This peculiar situation facing state owned Banks is as much an outcome of the slowdown in recruitment in the 1990s due to lack of retirement planning.

·         A report by Boston Consulting Group endorsed the above fact that PSU Banks will need to employ 9 to 11 lakh employees over the next five years, The report, which includes a survey of about 14,000 customers, 50,000 Bank employees and analysis of data obtained from about 35 Banks in the country, said about half of the employment will be due to attrition.

·         Even The Khandelwal committee, which was set up to address the human resource challenges of state-owned Banks, while acknowledging the manpower shortage Banks are facing, said: "The leadership gaps in public sector Banks are palpable. In the next five years, 80 per cent of general managers, 65 per cent of deputy general managers, 58 per cent of assistant general managers and 44 per cent of chief managers would be retiring.

·         Retirements in public sector Banks will continue to increase and peak by 2017. In total, 1.8 lakh employees will retire and will be replaced. Depending upon the productivity growth, the industry will need 2.5 –  4.5 lakh additional people for growth in business.

·         Today Banking has become increasingly relationship driven in order to get the best value out of the customers. Banks are also not certain whether the prospective candidates are serious in pursuing Banking as a career. It is also the fact that since the salary package is not attractive to attract new talents, there is huge attrition rate of over 30% among the new recruits in all cadres and Banks are unable to retain them with over 100,000 experienced employees of PSBs retiring on superannuation in the next 5 years, Many PSBs are also facing the problem of employee turnover and Public sector Banks will edge out in competitive edge to give the best value out of the customers if the management of the Banks are not quite alive to initiate various measures to contain it.

·         A study states during the period 2004-2011, the number of branches of all Nationalised Banks grew from 34,469 in 2003-04 to 45,850 in 2010-2011.   It registered an annual growth of 3.99 per cent, with an average of 38,387 branches functioning every year.  The number of employees of all Nationalised Banks decreased from 570951 in 2003-2004 to 473041 in 2010-2011.  It registered negative annual growth of -1.59 percent, with an average of 477428 employees working every year. But the deposits of all Nationalised Banks grew from 7, 94,427 crores in 2003-2004 to29, 46,636 crores in 2010-2011.  It registered an annual growth of 20.22 percent, with an average of 15,94,500.25 crores deposits every year. The advances of all Nationalised Banks grew from 412521 crores in 2003-2004 to 2154380 crores in 2010-2011.  It registered an annual growth of 25.89 per cent, with an average of 1114018.63 crores advances every year. The investments of all Nationalised  Banks  grew  from 378873 crores  in 2003-04  to 877326 crores in 2010-2011.  It registered an annual growth of 12.20 per cent, with an average of 5,41,486.63 crores investments every year. The total business of all Nationalised Banks grew from 12, 00,454 crores in 2003-04 to 51, 01,016 crores in 2010-2011. It registered an annual growth of 23.02 per cent, with an average of 2745561.25 crores business every year. At  a  glance  it  is  evidenced  that  the  growth  rate  of  deposits,  advances  and  total business is more than the growth of branch expansion and employee recruitment. It shows that the business performance of Nationalised Banks is improved during the study period.

·         But the co-efficient of variation of branch expansion and employees recruitments are relatively low.  The group which has less co-efficient of variation is said to be more stable.  The co-efficient of variation of other variables such as deposits, advances, investments and total business are high.  A high co-efficient of variation indicates less consistency or less homogeneity.

·         It is found that branch expansion, deposits, advances, investments and business performance are positively correlated to  other  variables,  whereas  employee  recruitments  negatively correlated to all other variables. It shows that even with a decline in number of employees, the business performance of Nationalised Banks is not affected. Public Sector Banks are required to perform all types of non productive work such as payment of pension, old age pension, MANREGA payment, teacher salary payment, tax collection, selling of gold, mutual fund and insurance products etc which Private Sector Banks are not doing. It is Public Sector Banks which have to shoulder the responsibility of target for Financial Inclusion fixed by the Government. Similarly Public Sector Banks have to lend for agriculture development, distribute UGC and take part on all KVC projects recommended by District Industry centers.

·         In other words  it correlates to the additional work pressures and responsibilities which, dedicated, hard working Bank employees  are shouldering and  has reached  a stage of break down  if the vacancies arising out of envisaged  massive retirements in another 5 years stated above are not addressed through visionary manpower planning, pragmatic salary  structures and service condition in the 10^th bipartite. 

·         While we have often heard of people leaving Banks to join finance, legal, accounting firms, etc. seldom have we heard of people leaving these professions to join Banks? This needs to change. The right people will come only if they are paid competitive salaries.

·         In this context NUBE’s pragmatic demand for 45 % increase in wage load in the Charter of Demands submitted to IBA assumes significance than ever before. 

·         The Banking sector is expected to grow at approximately 20 per cent over the next decade and will need major induction of talent, a significant part of which is to replace vacancies arising due to retirements in Public Sector Banks. At the current rate of attrition, the industry will need to employ over four lakh more people. Employment can be announced through news papers by IBPS  but retaining them on account non attractive salary package, long hours of work, no defined working hours, slow career progressions etc. the gap between the actual  need and attritions pointed above is going to be tough task to be bridged.

·         As the economy grows at a steady rate of around 7-8%, incomes rise and demographic dividends start accruing, the Banking industry is expected to take a quantum leap forward. But this growth will need a large number of people and considering that there are retirements in lakhs, a defining moment is being presented before the Nationalized Banks to transform.

·         So in tune with this   defining   moment  increasing  retirement  age is a thoughtful move and  is the only alternative which  will result in better use of retaining the   knowledge and experience of the existing Bank employees to sub serve  targets and goals of the Banks to  face a host of HR challenges, effectively recovering the rising non performing assets (NPA’s), right manpower retaining, training, retaining existing  talent, leadership development, credit appraisals , recovery, risk  management  and  augment succession planning of fresh recruitments Planning,  Acquiring the right people, Retaining/ Developing the people,  Managing people separation / exit.

·         The Central Government has already increased the retirement age of professors in all the Central Universities from 62 to 65 years, two years back. It was not just a matter of filling the ranks of teachers, but imparting quality teaching.

·         On August 18, 2012, The Prime Minister Dr.Manmohan Singh, speaking at the 150th year celebrations of the Bombay High Court, said the Government was in favour of raising the age of retirement of High Court judges. Presently, Supreme Court judges retire at 65 and High Court judges at 62. The Prime Minister was referring to the Constitution (114th Amendment) Bill 2010 to raise the retirement age of only the High Court judges from 62 to 65, which was tabled in Parliament for  the working of the superior judiciary which require far-reaching changes  and to secure the quality of judges is tune with the global trends. In leading Supreme Courts abroad, the retirement age is above 65. In the High Court of Australia (which is the apex court there) it is 70, in the Supreme Court of Canada 75, in the Supreme Court of Ireland 70, in the Supreme Court of Israel 70, in the Supreme Court of New Zealand 68, in the Constitutional Court of South Africa 70 or after 12 years of service, and in the U.K. Supreme Court 75 and no retirements in U S.

·         Describing shortage of doctors as a global problem, many States Governments have tried to solve this by increasing the retirement age of doctors.

·         Whether it is true or not but it is believed that Railway gave its consensus to raise the retirement age of its employees, as it is already re-engaging their retired employee for daily remuneration after their retirement till the age of 62. It was followed from 1998 with the reference of Railway Board Letter No.E(NG) II/97/RC-4/8 dated 03.02.98. In 2009 the rates of Daily Allowances also revised for engagement of retired employees on daily remuneration basis.

·         The National Democratic Alliance Government had raised the retirement age from 58 to 60, in 1998, a move that benefited 90,000 Government servants and 50,000 Defence personnel. At the time, the logic was: the retirement of 140,000 employees would have costed Rs.5200 crore whereas paying salaries cost only Rs.1493 crore. 

·         And there were many reports after introduction of sixth pay commission that the Central Government is keen on extending the retirement age of civil servants to 62, on fiscal grounds, to curb expenditure on pensions as had happened when the retirement age was raised from 58 to 60 in 1998.

·         Over the last three years there were further reports in newspapers that the Board for Reconstruction of Public Sector Enterprises (BRPSE) had recommended to the department for increasing the retirement age of employees of loss-making Central Public Sector Enterprises (CPSEs).

·         For one thing, life expectancy in India has gone up. According to UNICEF, in 2007 it was 64 years, and this is a figure that the average Bank employee would have pulled upwards. Thus, when a civil servant or Bank employee retires at 60, she or he is still at their mental peak, and each acts as an institutional storehouse of Government/Bank’s policy and programme implementation. Retaining them for another two years would possibly enrich functioning of the Government/ Government Banks.

·         The increase in retirement age and year it was introduced given in the parentheses (brackets) for males in many countries are as under:

·         Albania (64.5) (2011), Armenia (63) (2011), Austria (65) (2011), Azerbaijan (62.5) (2011), Belgium (65) (2009), Bosnia and Herzegovina (65) (2011),  Bulgaria (63) (2011), Croatia (65) (2011), Cyprus (65) (2011), Czech Republic (62.5) (2012), Denmark (65-67) (2008), Estonia (63) (2011), Finland (62-68) (2008), France (62) (2011), Georgia (65) (2011), Germany(65) (2008), Greece (67) (2012), Hungary (62) (2011), Iceland (67) (2007), Ireland (65-66) (2008), Israel (67) (2011), Italy (66) (in the 2011-2013 budget), Kazakhstan (63) (2011),  Kosovo (65) (2011), Kyrgyzstan (63) (2011), Latvia (62) (2011), Liechtenstein (64) (2007),  Lithuania (62.5) (2011), Luxembourg (65) (2011), Macedonia (64) (2011), Malta (61) (2008), Moldova (65) (2011), Montenegro (64) (2011) , Netherlands (65) (2011) , Norway (65) (2011) , Poland (65) (2011), Portugal (65), Romania (63) (2008), Serbia (63) (2011), Singapore (62) (2012), Slovakia (62) (2012), Slovenia (63) (2008), Spain (65) (2011), Sweden (61-67) (2011), Switzerland (65) (2007), Tajikistan (63) (2011) Turkmenistan (62) (2011) & United Kingdom (65) (2011).

·         The retirement age in the US is 65; in Japan it is 60 and the Government is gradually raising it to 65 by 2013, but people anyway continue working till 65 on reduced wages. By 2011, Austria’s retirement age will be 65. In Denmark it will be 67 years by 2008. Hungary plans to make it 69 years by 2013. Israel is already raising it to 67 years for men. French Senate house voted and passed the core article of the pension reform bill to prolong the minimum retirement age to 62 on October 9, 2009. Retirement in Germany may rise to age 69.All these countries and many others are increasing the retirement age because of an increasingly alarming problem — their ageing populations. By 2020, a quarter of Japan’s population will be 65 and over. Life expectancy in the US is about 77, and by 2050 is expected to go up to 83. Japan’s is already 82.4 years. Indeed, the life expectancy in some of the advanced countries, according to 2009 OECD data, are: France 80.9 years, Canada 80.4 years, Sweden 80.8 years, Italy 80.9 years and Spain 81.1 years.

·         An UNDP report states in India in 2010, 5.3 percent was aged 65 or older.  This percentage is estimated to increase, and at an increasing rate. By 2025, these numbers will be 7.7 percent in India and by 2035 they will be 10.2 percent and will be termed as country of good, grey haired people. 

·         As India gets wealthier — which it undoubtedly is — our population’s life expectancy will similarly increase. Imagine a person retiring at 60, but living till at least 80 (if not more), perhaps physically weakened as she or he passes 75, but still mentally at the top of his or her game. What do they do with such a long retirement? And besides the fact that the increase in life expectancy leaves retirees with too much time on their hands and their skills unutilized, it also places a great burden on the working population, which has to finance the social security and health benefits that the elderly need.

·         In the West it costs much more to maintain an elderly person than it does to raise a child; and health care costs in the rich world are projected to be those countries’ biggest finance headache (much more than the costs of the stimulus to end the current economic crisis). Thus it is not surprising that there are an increasing number of voices in the West and Japan who are talking of increasing the retirement age to 75.

·         Increasing the retirement age will engage the older citizens, contribute to the state exchequer in terms of taxes from older workers, and reduce the social security burden on the young.

·         In a move that will benefit hundreds of bureaucrats across the country, even the federal Government of Pakistan has announced a two-year increase in the retirement age of all civil servants. The decision came into effect from 1, November 2012. The change has been made through a presidential approval by amending the Civil Services Act 1973, instead of the usual parliamentary amendment.

·         Finally Private sector Eemployees, Public Sector Employees, Government Employees, Bureaucrats, Judges - all have a retirement age.  Individuals running their own businesses hand over the baton to the next generation at some point of time.  But what are our Parliamentarians doing?  Once they get elected to Parliament they find ways not to retire. A Times of India data states The 1st LS had 112 MPs in the age group 25-40 and the 14th LS have just 63 MPs in the same age group.   On the other hand, the 1st LS had just 1MP in the age group 71-90 and the 14th LS have 38 MPs in the same age group. Is this truly representative of the youth of India, given that half of India was born after 1983?   The above table is definitely not encouraging. Interestingly, these are the same MPs who decide the retirement age of an average Indian and a well qualified professional Indian heading a prestigious Institute.  Tony Blair was 43 when he became the Prime Minister of Britain, Barack Obama is 47.  But in India Sexagenarian is now touted as the young face of his party. Even would be our 'young' leaders are old.   

Taking into account that life expectancy in India has increased consistently over the last decades.  Keeping in view of the entire above aspects,  NUBE‘s demand for enhancement of retirement age is  just and  right. News papers are agog with reports that the Centre has not really discarded the move to increase retirement age altogether. But economically speaking, the Government with a large fiscal deficit, could lessen the burden by raising the retirement age as it may save more money by not paying the retirement benefits such as gratuity etc. for two years though the Government's salary budget would immediately be inflated.