The Telegraph
Since 1st March, 1999
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Pay pangs lurk in IDBI merger plan

Mumbai, July 30: The top brass of IDBI Bank and Industrial Development Bank of India (IDBI) will have to review widely divergent salary structures while merging the two entities.

The management is likely to find a solution that will bring parity to the way employees are paid, given the fact that differences in wages and perks are much too stark.

IDBI Bank staff take home fatter cheques than their counterparts at the financial institution, which is known to be more generous with perks. “If we take into account other facilities, such as concessions related to housing, IDBI employees are better off. On the other hand, those at IDBI Bank enjoy wages higher than ours,” said an employee from the financial institution.

Sources at IDBI Officers’ Association who welcomed the merger, said they intend to meet senior managers of the institution soon to discuss wage revision.

“It has been our demand that the existing pay structure of IDBI employees be retained. In any case, a revision has been due since November 2002. Our association will meet soon on the issue. That will be followed by talks with the management,” sources added.

The boards of IDBI and IDBI Bank on Thursday cleared the merger, which will spawn an entity with Rs 80,000 crore in assets and a place on the list of top 10 banks. IDBI Bank had deposits of over Rs 11,000 crore and assets of Rs 8,732 crore. Of this, Rs 3,891 crore is in the retail segment. It has 92 branches spread across 69 cities and plans to set up another 28 in the near future.

IDBI will first convert itself into a bank, following which IDBI Bank would be folded into it. The valuation, determination of swap ratio and approval of shareholders will take time, but the process is expected to be completed in the current financial year itself.

IDBI decided to transform itself from a development financial institution to a universal bank. One of the reasons was to garner cheap retail deposits so that the merged entity can lend at more competitive rates.

Fitch thumbs up

International rating agency Fitch said merging IDBI Bank with itself will improve the financial health of IDBI. While the union could pose a challenge, Fitch said these developments are “positive” for the credit quality of the financial institution in the medium term.

“Together with the government’s proposal of transferring a part of IDBI’s problem assets to a special purpose vehicle (stressed asset stabilisation fund), the merger will help the institution diversify its lending activities and improve its balance sheet in future.”

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