The severe competition, economic dependency and scarcity of financial resources force the domestic banking industries, companies and the governments to opt for the policy of downsizing. Many famous and big multinationals like AT&T, The Bank of America, Kimberly-Clark, RJR Nabisco, Xerox, IBM, US Air, Ford Motors, Procter & Gamble, Colgate-Palmolive and PIA, WAPDA, Pakistan Railways, Banks and DFIs of the country are ready to initiate a new round of downsizing. The ultimate results of downsizing, rightsizing, restructuring or reengineering differ from country to country and from organisation to organisation. Some developing countries like Pakistan are adopting this policy of downsizing because of the pressure of the international monetary agencies.

According to some economists, downsizing is a positive and purposive strategy. It is a set of organisational activities undertaken on the part of the management of an organisation, and is designed to improve organisational efficiency, productivity, and/or competitiveness. It is evident that in Pakistan, downsizing is part of the overall economic programme that embraces deregulation and liberalisation of the economy, with a view to achieving higher growth rates through improved efficiency and better services. It is also true that in Pakistan, downsizing is integrated to the overall policy of privatisation. The banking system of Pakistan consists of a central bank, 4 nationalised banks, 2 denationalised banks and 15 newly established private banks. They have been playing an important role in the economic growth of Pakistan. The expected policy of downsizing will damage the high standards of efficacy, professional expertise, rapidity of execution and overall credibility of the government. There has been a ban on jobs in the federal and provincial government departments from the early 1990s. This irrational policy may spoil the social fabric, economic prosperity and financial stability of the general intelligentsia and banks alike.

In our country, the downsizing exercise was instigated in the public banks and DFIs in 1997. The golden handshake scheme was offered to all the permanent employees' at all hierarchical levels. The main philosophy behind downsizing was to save Rs20 to 30 million annually. The IMF, the World Bank and the State Bank offered to bear part of the downsizing expenses. As of June 1998, a total of 22,642 banks/DFIs employees availed of the golden handshake, and the payment that was made to them was Rs29.1 billion.

Every country of the world is adopting policy of downsizing according to its socio-economic needs and compulsions. Hasty and imported policy of downsizing programmes can leave countries/companies with an atmosphere of mistrust and insecurity.

Downsizing is not the only solution for any radical change in the banking sector of the country. In spite of downsizing of local banks and DFIs, the recovery of stuck-up advances in full, strict enforcement of credit, financial and administrative discipline, reduction of cost of financial intermediation, payment of positive average real rates of returns to depositors, removal of corrupt bankers and computerisation to be taken. According to ILO (1998), nearly 68 per cent of all downsizing, restructuring, and reengineering efforts are not very successful all over the world. In many cases, companies that downsized and restructured to become more profitable and efficient have not achieved either. Instead they have experienced tremendous fallout, especially in the areas of decreasing employee productivity and morale, and increasing levels of absenteeism, cynicism, and turnover.

The people of Pakistan are very emotional about their jobs and organisations. They work hard for the betterment of their departments. Therefore, the sudden downsizing would be a bolt for them. The major economic conditions of Pakistan are not stable. There are huge internal and external debts, regional disparity, massive unemployment, low mark-up structure, and deteriorating law and order situation, which is negating all the efforts of the government for the quick economic revival and poverty alleviation. Unemployment is increasing, price hiking is a bitter reality, inflation is on the move and industrial productivity is decreasing day by day. In this bleak situation, the policy of downsizing in the domestic banking industry may add fuel to the miseries of general masses and employees.

Every country of the world is pursuing the policy of downsizing according to its own economic realities, social needs, political commitments, financial obligations and administrative needs. Pakistan should not follow the imported ideas of the west, and what had been applicable in the case of IBM, Ford Motors and The Bank of America cannot be replicated in Pakistan completely. It is imperative for the policy makers to first draw clear objectives of the downsizing mechanism and decide carefully as to how these objectives have to be achieved.