Mumbai: State-owned banks, for long hampered by red tape and government rules that mandate a branch network extending even to unprofitable areas, are battling employee attrition at a time when their private counterparts are rapidly expanding and increasing their share of the market, speakers at a banking conference said.
While the assets of public sector banks grew 17% annually between 2004 and 2007, their employee strength contracted by 1%. On the other hand, private sector bank assets grew at a rate of 38% annually—albeit on a smaller base—and their employees at an explosive 43%.
Public sector banks in India, prodded by nimble and tech-savvy private banks, are aligning themselves to global best practices such as product offerings and customer relationship services, but there is still a wide gap in the way they are managed. Not only is there inadequate compensation at the state-run lenders as compared to their private peers, there is no scientific method employed to measure per employee productivity, said one bank chief.
“There are not enough skilled people to improve the performance of public sector banks as a whole. There has to be a radical improvement in productivity of employees,” said Anil Khandelwal, chairman and managing director at Bank of Baroda, a large Mumbai-based public sector bank, while addressing the Ficci- Indian Bank’s Association Global Banking Summit in Mumbai.
The trend could hurt in the years to come, said Saurabh Tripathi, Partner Boston Consulting Group (India) Pvt. Ltd. “Public sector banks are already running late. If 50% of the employee strength in the public sector banks is not new in the next five years, (they) will pay a price.”
Private and foreign banks are also not insulated from the talent crunch that ails the financial services industry in India with industry insiders pegging attrition at as high as 70%.