BackPublic sector banks face acute manpower crisis
It’s a good time for public banks to relook their human resource strategy to address current and looming challenges
Premium(Hemant Mishra/Mint)
The government has relaxed promotion norms to fill up vacancies in public sector banks, according to newspaper reports. With nearly 20% of the staff at these banks expected to retire by 2015, it’s a move that comes not a day too soon. So severe is this issue that it prompted the Reserve Bank of India to call the 10 years to 2020 as the decade of retirement.
In its 2010 report, the Khandewal Committee set up by the government to look into human resources issues in India’s banking industry outlined that over the following 2.5 years the percentage of staff reaching superannuation would reach alarming levels—80% at the general manager level, 65% at the deputy general manager level and 58% at the assistant general manager rank. This reflects a lack of human resource planning at these banks.
The reasons why state-run banks are staring at such a crisis range from the lenders going on a recruitment overdrive after the nationalization of banks in the 1970s and 80s, followed by a lull in the 1990s, to the launch of a voluntary retirement scheme after the introduction of computers. This resulted in a dramatic reduction in the number of employees, particularly at senior levels.
While public sector banks have faced flak in the past for their inability to check deterioration in the asset quality in their books, the fact that these banks haven’t been able to formulate a sound long-term human resource strategy remains under-appreciated. This is already proving costly. Consider this, despite the reduction in staff headcount, their per employee expenses have gone above that of private banks in recent years. Currently, it is more than 150% higher than that of private banks, RBI data show.
With RBI all set to allow new banks in the country, competition in this sector is going to intensify further. These new banks will definitely poach on talent from the public sector banks, worsening the situation. Considering the salary differential, employees of state-run banks may find it more lucrative to work for these emerging private banks. Public sector banks will need to find innovative ways to retain people.
The latest move by the government of relaxing promotional norms only offers a short-term solution. As part of the service industry, human resource is a vital function for the banking industry. The quality of service offered plays a major role in banks winning and retaining customers. It’s a good time for public banks to relook their human resource strategy to address the current and looming challenges.
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