NBL's fourth phase of VRS

Nepal Bank Ltd (NBL) has announced its fourth phase of Voluntary Retirement Scheme (VRS) from tomorrow.
"NBL employees who have worked for 20 years or more can put in their papers voluntarily," said Laxmi Raj Poudel, human resources chief. "They will be given a golden handshake of one-and-a-half months' salary for each year of their total service.
The bank has estimated the VRS will cost around Rs 800 to Rs 900 million. "The estimate stands correct if 1,000 employees will take VRS," he said adding that the number of employees who take VRS might be smaller than 1,000.
"Unlike the earlier three phases of VRS that were supported by the World Bank's Financial Sector Technical Assistance Project (FSTAP), this VRS will be funded by the bank itself," Poudel added.
The VRS idea was floated when the management of NBL and Rastriya Banijya Bank (RBB) was handed over to foreign executives in 2002 under FSTAP to re-engineer the two financial institutions and make them competitive.
One of the reform measures undertaken by the foreign management was introducing VRS to downsize these two overstaffed public sector banks. RBB has also implemented VRS five times and is planning a sixth phase.
At present, NBL has an employee strength of around 3,400. Assuming that 1,000 take VRS -- that may not apply, however -- the bank will in the next five to six years face a human resources crunch. "We have planned to inject around 300 young employees," he said adding that the bank has already planned on how to cope with the situation five years down the line.
Similarly, Agriculture Development Bank Ltd (ADBL) also announed VRS for the fourth time to reduce its workforce. Nepal Rastra Bank, the central bank, has also implemented VRS under the financial sector reform programme.
However, there is a risk of adverse selection as more productive employees could opt for VRS and join lucrative private banks leaving behind less productive employees. Though VRS is means to to give employees the golden handshake, there is always a danger of the productive ones productive.

VRS history
KATHMANDU: Agriculture Development Bank Ltd (ADBL) and Nepal Bank Ltd (NBL) have both announced VRS for the fourth time but Rastriya Banijya Bank (RBB) is planning to announce VRS for a sixth time. Aside from these three banks, NRB too has cut down on its staff size through VRS. To reduced staff cost to a manageable level and to turn the banks around, VRS is seen as a better alternative.

ADBL exercise
First phase (in 1991) -- 226 employees
Second Phase (in 2003) -- 313 employees
Third Phase (in 2007) -- 440 employees
Fourth Phase (in 2009) applied by 162 employees.

Nepal Bank Ltd (NBL) exercise
First Phase (in 2003) -- 1,464 employees
Second Phase (in 2004) -- 196 employees
Third Phase (in 2004) -- 708 employees
Total Employee under VRS -- 2,368
Fourth phase announced