Mumbai: State-run banks, which are struggling to find talent in the face of a large number of retirements in the sector, may get a boost with the government allowing the appointment of 11 additional executive directors (EDs) for human resources (HR) and technology.
The ministry has already issued directives to public sector banks (PSBs) to this effect, according to two persons familiar with the development. One of them is an official of the finance ministry and the other a banking industry official.
This follows recommendations submitted by an expert committee headed by former Bank of Baroda chairman Anil K. Khandelwal, which had made critical recommendations to improve manpower management at PSBs. The posts are of the rank of director (HR) in oil and gas public sector units (PSUs) such as Oil and Natural Gas Corp. Ltd and Indian Oil Corp. Ltd.
Among the recommendations of Khandelwal committee were the induction of HR specialists, the appointment of an executive director for HR, 50% direct recruitment of officers against 25% now and compulsory three-year rural service for new recruits.
The committee had also said that senior officers in PSBs should be appraised on the basis of feedback from colleagues, subordinates and customers.
According to the ministry official, the government has sanctioned the appointment of six additional EDs in the large state-run banks and five in small-sized banks. Presently, large PSBs can have two EDs and smaller banks generally have one ED.
These banks are Bank of Baroda, Bank of India, Union Bank of India, Punjab National Bank, Canara Bank, Central Bank of India, Dena Bank, Vijaya Bank, Bank of Maharashtra, United Bank of India and Punjab and Sind Bank.
The move assumes significance as PSBs are in urgent need of HR reforms in the face of a severe shortage of skilled executives and increasing attrition.
India currently has 27 public sector banks, accounting for more than 70% of the country’s Rs 65 trillion banking sector. These banks together employ around 700,000 people. Out of this, more than 100,000 are scheduled to retire over the next five years.
“Appointment of a dedicated ED for HR is essential for PSBs as, in the absence of focused efforts, the industry will not be able to cope with the large number of retirements,” said a senior public sector bank official, who is set to be promoted as an ED. He did not want to be named.
Attrition has been rising in recent years as younger executives are keen to take up more-rewarding jobs in private and foreign banks. Many PSBs are at a disadvantage as they lack standardized staff appraisal norms.
“The intent of this recommendation is to professionalize HR in PSBs and seek board-level engagement in many crucial HR reforms,” Khandelwal said.
The Khandelwal committee had recommended that only professionally qualified and experienced persons should be considered for the ED position and that lateral recruitments should be made if necessary.
The role of the ED will include developing HR policy, talent management, employee engagement, HR audits, reviewing the learning infrastructure and initiating measures to develop a leadership pipeline, it said.
As part of HR reforms at PSBs, the finance ministry had asked banks to effect a smooth transition whenever top executives take charge. For instance, when Nupur Mitra replaced D.L. Rawal as chairman and managing director of Dena Bank in September, there was a 15-day transition period.