Mumbai: Employees at India’s state-owned banks are becoming more productive than their private sector counterparts, shows the regulator’s data. Those tracking the sector attributed it to three factors: lack of hiring by public lenders over the years, improvement in their work culture, and a push by the government to make them more productive.
The median profit generated by a public sector bank employee was ₹19.6 lakh in FY25 compared to ₹14.5 lakh for a private bank employee, according to data released by the Reserve Bank of India (RBI) on 29 December. The gap has widened since FY24, when the per-employee profit of government-owned banks stood at ₹15.2 lakh, surpassing ₹14 lakh for their private peers.
Profit per employee is a key metric that tracks staff productivity.
India’s public sector banks had an image of being inefficient, with governments continually injecting fresh capital into them each year. In 2019, the Centre decided to merge 10 public sector banks into four, a move aimed at consolidating the sector into stronger and larger lenders.
“The rate at which employees of PSU banks have been getting superannuated is higher than how fast they are being replaced,” said Ashvin Parekh, managing partner at management consulting firm Ashvin Parekh Advisory Services LLP. “Over the past decade or so, public sector banks have not recruited as many employees as they have superannuated each year.”
This trend is particularly pronounced in larger banks and seems to be strengthening now, as the next four to five years will see a large number of people complete their terms, said Parekh. “With a large number of people retiring, and with few people joining the workforce, the per-employee efficiency and per-employee business numbers have started increasing.”
The headcount at state-owned banks declined for six consecutive years before increasing in 2024-25. In FY25, PSU banks employed 757,641 people compared with 756,015 in the previous year. By comparison, private sector banks—which employ more staff than their state-owned peers—witnessed a decline in employee count to 838,150 as of 31 March 2025, from 845,407 a year earlier.
Of the 12 public sector banks, seven saw a decline in headcount in FY25 over the previous year. State Bank of India (SBI) witnessed the largest addition to the workforce among peer banks, with a net 3,930 employees joining the lender in 2024-25. The steepest decline was at Union Bank of India, where the number of employees fell by 1,935.
Parekh also highlighted how government-run lenders are focusing on productivity. “One of the parameters from the perspective of the government, which is the largest shareholder of public sector banks, is certainly the business per employee metric.”
Others said that the groundwork to improve productivity at PSU banks has started showing results.
“Over the last 3-4 years, the public sector banks have emphasised on sales and revenue generation,” said Upasana Agarwal, partner, professional and financial services, ABC Consultants, a recruitment and talent advisory firm.
They hired senior executives with the required expertise on three-year contracts from private banks and there is a focus on transformation, technology, customer experience and retention, Agarwal said. “This implies an impact on productivity, which is showing in the numbers today.”
Lateral hiring is the process of recruiting an expert for a specific role from another organization. In 2022, SBI hired Nitin Chugh as deputy managing director and head of digital payments. Chugh was previously the chief executive of Ujjivan Small Finance Bank and had spent several years at the largest private lender, HDFC Bank. In 2020, Bank of Baroda appointed Ian De Souza as the chief financial officer. According to his LinkedIn profile, he was previously at Yes Bank. De Souza left Bank of Baroda in 2024 to join the National Stock Exchange.
Some banks have also pushed for stronger human resource (HR) strategies. Business Standard reported on 1 August that State Bank of India (SBI) has decided to engage a management consultant to develop a five- and 10-year HR strategy. The consultant, it said, is expected to advise on aligning the state-backed lender’s HR policies and processes with its overall performance goals, and benchmarking with industry best practices.
“Over the years, there certainly has been a change in the work culture of PSU banks,” said Veinu Nehru, managing partner, Fynehand Consultants, a talent advisory firm. “There is an increased focus on performance-based appraisal, unlike in the past, where employees were not motivated enough.”
At least in some of the top PSU banks, there is a better structure to judge performance, Nehru said. “What has also helped is the intake of lateral recruits. When you are working with employees who come from a different background, at times from the non-PSU space, it pushes the workplace to change its culture.”