Voluntary Retirement Scheme (VRS) is an innovative concept evolved in India in the post economic reform environment. It is an attempt to synthesize an operation aimed towards downsizing the workforce of overstaffed Public Sector Banks (PSBs), with employees' willing acceptance and participation. The high cost wage component and low productivity had been making PSBs less competitive in the market. This article evaluates VRS as a strategy for restructuring the PSBs, focusing upon its rationale and merit as manpower planning strategy and also to review its financial implication as a cost reduction measure.

Since the inception of financial sector reforms, a major transformation has taken place in the functioning of the banking industry, especially in the PSBs. The major challenge faced by banks was the narrowing spread, coupled with the need to maintain book profits to show improvement in performance. They had to induct competitive technology against the private sector. Consequently, they had to motivate their rank and file employees to attune themselves to this new dispensation. They had to make an extensive exercise to reengineer their processes, restructure their administration and reorient their strategies to meet the challenges that were emerging fast.

Typically, the exercise of restructuring plan covers (i) operational aspects, such as, business parameters, human resource development, rationalization of staff, technology upgradation, drastic reduction in cost of operation, etc., (ii) Organization of administrative tiers, corporate governance, (iii) Capital restructuring to meet the capital adequacy requirements, and (iv) Systematic restructuring covering legal reforms to facilitate quicker disposal of issues.

The Accounting World Magazine, Voluntary Retirement Scheme, VRS, Public Sector Banks, PSBs, Financial Sector Reforms, Strategic Planning, Organizational Performance, Indian Banking Industry, Indian Banks Association, IBA, Indian Economy, Bank Management, Information Technology, Non-performing Assets, NPAs, Human Resource Management.