Staff management still a big challenge- Rural Development Bank's Merger

AS the Nepal Rasta Bank (NRB) gears up for the merger of five rural development banks, readjusting their staff has remained as a big challenge. The central bank has already given its nod for the merger of these banks — Purbanchal Gramin Bikas Bank, Madhyamchal Gramin Bikas Bank, Paschimachal Gramin Bikas Bank, Madhya Pashchimanchal Gramin Bikas Bank and Sudur Paschimanchal Gramin Bikas Bank. These five banks have a total of 913 staffers. Both central bank and government officials admit that the number of employees in the merged entity would be greater than what would actually be required. But the central bank, which has the largest stake in these banks, dœs not have a specific plan for the management of employees after the merger. “We do not plan to cut the staff size before the merger,” said NRB Spokesperson Bhaskarmani Gnawali. “We will take a call on this matter after the merger.” Gnawali said it may not be necessary to cut the staff size after merger. A central bank study has suggested that voluntary retirement scheme (VRS) could be an option for rightsizing the employees’ number. “As launching VRS would be costly, the central bank is looking for expanding the working area of these banks,” said another NRB official. These rural banks currently cover 60 districts, which the official said can be expanded to all 75 districts. Past experience in Purbanchal Grammen Bikas Bank suggests that on an average Rs 1 million is required per retiring employee if VRS scheme is launched. Purbanchal Grameen Bikas Bank CEO Rajesh Sharma said those retiring under VRS were given a package of Rs 900,000 to Rs 1.4 million as per their position and their service period. A total of 35 employees had retired under the VRS launched in 2008-09 and 2009-10. Another NRB official said there are questions whether retaining all the staffers would be sustainable at a time when these banks were not performing well. He said being costly, VRS would be an appropriate measure to cut down the staff size provided that the resources are arranged from sources like the government. A Finance Ministry official said the compulsory retirement scheme (CRS) or targeted retirement scheme (TRS) could be needed for reducing the staff size after the merger. But he said the government is less likely to provide funds for VRS scheme as it has very low stake in these banks. However, central bank officials said it has sought Rs 500 million from the government as capital investment to strengthen the financial status of the merged entity. After the merger, the paid-up capital of the merged entity will be Rs 392 million. Baikuntha Aryal, joint secretary at the Finance Ministry, said there has not been any decision on capital injection by the government in the merged entity. “Only after the capital structure of the merged entity is finalised, the government would decide whether and how much capital it would inject,” he added. The central bank pushed for merger of these rural banks as most of them have poor performance. Only two of the five rural development banks made profits in the last fiscal year. According to the NRB, Purbanchal, Madhya Paschimachal and Sudur Paschimanchal incurred losses of Rs 14 million, Rs 20 million and Rs 37 million, respectively, in the last fiscal year. Paschimanchal and Madhyamchal earned profits of Rs 8.9 million and Rs 6.2 million, respectively. NRB’s Gnawali said the merger of these banks could be completed in initial months of the next fiscal year. Due Diligence Audit and Human Resources Study have been completed, while a study on the merged entity’s business plan is underway, according to the NRB official.