Mumbai: How many employees do you have on your payroll? What’s your business per employee and profit per employee? What is the average age of your employees?
Chief executives of India’s public sector banks, which account for around 70% of the industry, need to answer these and several other questions posed by a government-appointed committee that is looking into the human resources, or HR, challenges these lenders face.
India’s public sector banks employ some 700,000 people, many of whom are to retire in the next few years. The business has grown manifold in the past decade, but employee strength has dwindled.
At the start of the last decade, at least 100,000 employees left the industry, responding to the first ever golden handshake scheme in the sector. Since then, there have not been too many recruitment drives. Banks have embraced technology, but that has not been enough.
“Banks have been asked to respond to the questionnaire by the first week of January. Senior human resources officers of select banks, such as Bank of Baroda and Union Bank of India, will analyse these questionnaires and present the findings to the committee,” said a senior executive of the national bankers’ lobby, Indian Banks’ Association, or IBA.
Former Bank of India chairman A.K. Khandelwal heads the panel. Its other members are M.V. Nair, chairman and managing director, Union Bank of India; Deepak B. Phatak, professor and HR specialist, Indian Institute of Technology, Bombay; T.V. Rao of the Indian Institute of Management, Ahmedabad; and H.N. Sinor, former chief executive of IBA.
“We will diagnose the issues with an open mind, keeping in view the future of the banking industry,” Khandelwal told Mint.
A major concern before public sector banks is the large number of employees who are to retire in the next three to five years. Most of the employees had joined the industry in the 1970s, after a group of private banks was nationalized.
The common recruitment board for the industry was dismantled a few years ago and banks were allowed to recruit employees directly—even at senior levels. This has led to cut-throat competition for talent and poaching of each other’s employees.
Public sector banks still adhere to an industry-wide wage settlement, brokered by IBA once every five years.
State Bank of India, the country’s largest commercial lender, employs some 260,000 people, the largest number of employees in any bank. Its per-employee business was Rs5.56 crore and profit per employee, Rs4.74 lakh, lagging behind the industry average of Rs7.5 crore and Rs6.6 lakh, respectively, for fiscal 2009, according to Reserve Bank of India data.
These are two key metrics to gauge employee efficiency.
Corporation Bank, which has 12,465 employees on its payroll, recorded Rs10.49 crore business per employee and Rs7.64 lakh profit per employee in 2009. Dena Bank, which is even smaller than Corporation Bank, has 9,883 employees on its payroll. Its business per employee is Rs7.14 crore and profit per employee is Rs4.28 lakh.
In contrast, ICICI Bank Ltd, India’s largest private sector lender, recorded Rs11.54 crore business per employee and Rs11 lakh profit per employee in 2009.
“The committee has also met senior government officials,” said a member, who did not want to be named. “The government is concerned about the large recruitment programmes that some of the public sector banks have been carrying out. Why do the banks need so much staff despite computerization and implementation of technology?” asked the member.
The chairman and managing director of a public sector bank has an answer. “Every bank has its own requirement. The recruitment is done according to the business strategy and is ratified by the board which has (a) government nominee,” he said. “There is no senseless recruitment being done by banks.”
The committee member quoted earlier also noted that the salary structure of all public sector banks was uniform but “ideally, it should be linked to the profitability, on the lines of private and foreign banks”.
The panel is expected to focus on recruitment planning, career planning and training, performance-linked incentives, succession planning and grooming of leaders for public sector banks. “The terms of reference of this committee is very wide, hence does not limit the operation and scope of the committee,” the panel member said.
“Public sector banks have gained market share in the last decade. We are doing very well in terms of product innovation, marketing and implementation of technology but we still fail to attract the right talent for specialized services such as treasury and risk management,” said the chairman of a Mumbai-based public sector bank. A fast-track promotion policy and incentive-linked performance package may help banks solve the issue.