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Reserve Bank clarifies norms on job cut expenses by banks

India's central bank has clarified the norms for banks to provide for expenses on their employee separation schemes, according to a circular issued by the Reserve Bank of India.

Banks which are unable to complete the separation scheme by March 31 do not have to make the provisions in the current year, it said.

The RBI had earlier instructed state-run banks to provide for the expenses over a period of five years starting from the current financial year 2000-01 (April-March).

Almost all of the country's 27 state-run banks, which employ about 850,000 people and account for more than 75 percent of the banking industry's deposits and advances, have offered lucrative deals to reduce flab.

Payments have ranged from Rs 1 million to Rs 500,000, relatively large sums in India, as these are equivalent to several years' wages for most workers.

Nearly 10 per cent of the total workforce opted for it, but some banks which started the scheme late in January and February are unable to complete the process by March 31 due to administrative hassles.

"It is clarified that in such cases provisions need not be made in the accounts this year," said the RBI circular dated March 22 and made available on Friday.

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