Government clarifies regarding premature retirement of Inefficient Staff in Banks

Recently, the government had asked the Public Sector Banks to review performance of employees and retire inefficient staff prematurely. The bank employees and associations highly criticised this direction of the government and said the review process was not transparent and this could lead to harassment of employees. Now the government has clarified questions about a directive asking nationalised banks to review employee performance, which could lead to early retirement for underperforming staff.

In the Lok Sabha, MPs Subbarayan K and Selvaraj V asked whether the government had officially instructed banks to evaluate their employees and remove those not meeting performance standards. They also requested details about the criteria used for these evaluations and whether current measures in employee agreements were enough to address underperformance.

Responding to the queries, Minister of State Pankaj Chaudhary explained that public sector banks (PSBs) are managed by their boards and follow their own rules and employee agreements. He confirmed that systems for performance reviews are already in place.

The reviews consider several factors, such as an employee’s job history, health, responsibilities, performance reports, disciplinary records, and leave history. The Department of Financial Services has asked banks to conduct regular reviews under existing guidelines to improve efficiency.

“The Department of Financial Services, in a letter dated September 26, 2024, instructed PSBs to carry out regular performance reviews based on existing rules and schedules outlined by the Department of Personnel & Training (DoP&T). This aims to improve efficiency and speed up government work,” Chaudhary said.

“The Department of Financial Services, via letter No. 4/1/22/2015-IR dated 26.09.2024, instructed PSBs to periodically review employee performance as per existing provisions and the schedule specified in the Department of Personnel & Training (DoP&T) O.M. No. 25013/03/2017-Estt.A-IV dated 28.08.2020. This aims to strengthen administrative efficiency and expedite government functions,” Chaudhary stated.

Government’s Directive

The Ministry of Finance, through the Department of Financial Services (DFS), has instructed top management at the State Bank of India (SBI) and other nationalized banks to conduct regular performance reviews of senior employees. This review aims to identify employees not meeting performance standards, who may then face early retirement. Specific guidelines for these reviews include:

• For SBI Officers: Review starts at age 50 or after 25 years of service.
• For Officers at Nationalized Banks: Review begins at age 55 or after 30 years of service.
• For SBI Clerical and Substaff: Review at age 58 and above.
• For Clerical and Substaff at Nationalized Banks: Review at age 57 and above.

If employees do not meet performance standards, the bank can issue a notice for retirement. Officers are eligible for a three-month notice or equivalent pay, while clerks and substaff may receive a two-month notice period.