The Hindu Business Line : ICICI Bank lures insurance VRS optees for deposits

ICICI Bank has begun chasing employees of the public sector insurance companies who have opted for the voluntary retirement scheme (VRS) to mop up bulk deposits.

Banking sources said that ICICI Bank has targeted all the 8,500 employees. Separation of the employees began last week.

In fact, the bank has directly approached all the VRS optees individually for depositing their compensation package with it. The bank has prepared a separate deposit product and branded it as the `ICICI Bank Retiral Plan.'

The bank's interest in the VRS optees was in view of the large size of the compensation package. The average separation package for the VRS optees from the four insurance companies is in the region of about Rs 20 lakh per person. In the case of the officers, the package is upwards of Rs 25 lakh per person. All the four companies have opted for a one-time settlement of the separation package.

The funding for the VRS expenditure by the four companies — New India Assurance Company Ltd, National Insurance Company Ltd, United India Insurance Company Ltd and the Oriental Insurance Company Ltd — was done out of the internal accruals for which reserves had already been created.

The sources said that ICICI Bank under its `retiral' plan had offered a term deposit package of up to 10 years at current interest rates. At present, the term deposit rate of the bank for tenors upwards of three years is at 5.5 per cent and for senior citizens it is 6 per cent. But in the case of the VRS optees, there are no senior citizens. The sources said that the move by the bank was initiated to garner bulk deposits. The total separation package amounts to a little over Rs 1,500 crore.

ICICI Bank's move is aimed at mobilising the entire amount or at least the bulk of it to augment its long-term deposit base, the sources said.

Not to be outdone by ICICI Bank, India Post has also jumped into the fray. India Post has begun enticing the VRS optees to deposit their funds into the postal savings schemes.

The Postal department's savings schemes offer the depositor a monthly income plan with a yield of up to 8 per cent. At present, postal savings offer the highest yields for retail savers in the country.

However, the drawback in the India Post savings plan is that the deposits are limited up to Rs 6 lakh, with a lock-in period of six years.

Consequently, ICICI Bank was leveraging on the liquidity of its package, without any penal rates in the event of premature redemption beyond three years. India Post, the sources said, was leveraging on its USP of an implicit sovereign guarantee and the substantially higher rate of returns.

In addition, depositors in the ICICI Bank, also have the option of availing some of the loan products on the strength of their deposits. India Post, on the other hand, is not allowed to lend. Besides, few banks are prepared to lend on the strength of the Postal Deposit certificates as collateral.

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