The employees of Bank of Rajasthan on Wednesday launched an agitation to protest against its proposed merger with ICICI Bank, the country's largest private sector bank.
On Tuesday, ICICI Bank announced it had entered into an agreement with "certain" shareholders of BoR to merge the Jaipur-based lender with itself.
Unlike the new private sector lenders, BoR employees' wages are still governed by the industry wage package negotiated by the Indian Banks Association with bank staff unions.
The protection of pension and service conditions are crucial concerns and employees staged a protest through the country, said Vishwas Utagi, secretary, All India Bank Employees Association.
BoR employees are expected to benefit on pay, since the new private sector lenders are known to be better paymasters than the public sector and old private sector lenders. But, this comes with expectation of higher productivity.
The average productivity of BoR employees is less than half of those of ICICI Bank, which generates the highest business per employee among its private sector peers.
According to an analysis by Business Standard, ICICI Bank generated Rs 11.54 crore (Rs 115 million) of business per employee for the financial year ended March 31, 2009. BoR's comparative figure was Rs 5.32 crore (Rs 53.2 million). BoR had a profit per employee of Rs 289,000 for the financial year up to March 31, 2009, compared to Rs 11 lakh (Rs 1.1 million) for ICICI Bank.
ICICI refused to comment on the issue. G Padmanabhan, the Reserve Bank of India-appointed managing director and CEO of BoR, brought in last year to improve corporate governance in the bank, told Business Standard that increasing employee productivity was one of the major challenges he faced.
"We have monthly performance reviews and we told the employees that unless they deliver, it would be difficult for the bank to move forward. That was the clear message given," he said.
ICICI Bank might see a fall if the merger goes through. The country's second largest private sector lender, HDFC Bank, saw its business per employee fall from Rs 6.07 crore (Rs 60.7 million) in 2006-07 to Rs 5.06 crore (Rs 50.6 million) after it merged Centurion Bank of Punjab with itself.
BOR currently has an employee strength of about 4,300. Almost 51 per cent of its 443 branches are in Rajasthan.
Another source of friction in the merger could be the difference between the average ages of employees of the two banks. BoR employees, on an average, are in the late 40s, compared to a much younger age profile at ICICI Bank.
Meanwhile, the shares of ICICI Bank today plunged 7.24 per cent on concerns of an overvalued takeover deal. The stock fell by eight per cent to touch an-intra day low of Rs 818.35. On the other hand, BoR's shares have surged 53 per cent in just two days. In the past four trading sessions, the shares today surged 20 per cent to Rs 119.40, its best in a year.
"The stock of ICICI Bank got a beating from investors on concerns that the deal would be a costly affair for the bank in the short run. The news is coupled with the bearish market overall," said Rajesh Jain, vice-president of SME Capital.
