Banks face HR asset-liability mismatch

Written by Pranav Nambiar | Mumbai | Updated: Dec 31 2012, 07:07am hrs
Around 1.8 lakh of the 8 lakh public sector bank employees will need to be replaced over the next five years. According a 2010 report by the government-constituted Khandelwal committee on human resource (HR) policies in public sector banks, over 22,000 employees will retire in 2012-13. This number is expected to go up to around 30,000 in 2014-15. With experienced bank professionals leaving and new hires not fully prepared to take over, a serious vacuum in middle and top management is on cards. The Khandelwal committee report said that up to 2015, around 80% of general managers, 65% of deputy general managers, 58% assistant general managers and 44% of chief managers would be retiring.

Many of these officials who will need to be replaced have been with banks for over 30 years and their exit will leave a gap difficult to fill. A report by management consultancy Boston Consulting Group (BCG) notes that retirements in public sector banks will add to the already-burgeoning manpower needs of the sector. BCG estimates that the banking industry will need to hire 9-11 lakh employees over the next five years, with the largest number of vacancies in public sector banks.

The reason for the mismatch, bankers say, is that public sector banks failed to assess their own growth potential. Shortages in manpower have arisen mainly because the post-nationalisation recruitment spree of the seventies and eighties was followed by a hiring lull from 1990s, ostensibly to reduce excess flab. Voluntary retirement schemes and adoption of information technology have worsened the situation.

Bankers say they have increased hiring over the last couple of years, but this is still not enough to match the industrys rate of growth. BCG says the banking industry has been witnessing rapid growth over the last decade and is expected to grow at 20% over the next decade. Taking cognisance of the challenges, the government has permitted the appointment of a third executive director (ED) at large public sector banks like Bank of Baroda (BoB) and Punjab National Bank (PNB) to look into HR issues.

With more than half a dozen chairman and managing directors (CMDs) of public sector banks expected to retire in the next financial year, the government has eased the eligibility norms for EDs to be promoted as CMDs. They now require only six months of experience as ED to become eligible for promotion to CMD, compared with the earlier 24 months.

The generation gap between the new hires and their bosses is also becoming stark, often affecting day-to-day functioning at the banks. A Bank of Baroda official said: There are now two large groups of employees. One group includes people under 30 and the other above 50. So, our efforts are focused on increasing the cultural interaction between these two groups.

According to SBI chief general manager Sunil Pant, public sector lenders are finding it hard to attract talent, given the wide choice of employment options in private banks and other industries. We cannot match the wages offered by many industries, he said. Over the next year, SBI is planning to hire 20,000 across officer and clerical cadres, adding to its 2-lakh plus manpower. The Khandelwal committee recommended performance-linked pay on the lines of the private sector to attract talent to state-owned banks, but this has not been taken up so far.

Public sector banks will have to rely on new recruits and internal promotions to fill in the vacant benches, as they do not hire laterally. All public sector banks pay the same wages for various grades. Hence, except on rare occasions, lateral hiring is difficult to undertake and negligible in numbers, said Ram Sangapure, general manager, Central Bank of India.

Punjab National Bank has tied up with Manipal University to train and recruit entry-level candidates. Manipal University offers students a one-year PG programme in banking and finance, at the end of which candidates are absorbed into PNB. BoB has appointed BCG to develop a comprehensive HR programme called project SPARSH for recruitment, training and succession planning.

Mid-level employees at most public sector banks are now undertaking internal training programmes and executive training sessions to build their expertise to fill in the role of the retiring personnel. We are identifying and training the middle level to take up higher responsibilities as part of our succession planning. In the 1980s the move from scale one scale to another would take 7-10 years. Nowadays, it is happening in 3-5 years, a Bank of Baroda official said.

Over one in five public sector bank employees set to retire by 2017

* 22,000 employees to retire in 2012-13. Number expected to rise to around 30,000 in 2014-15

* BCG estimates that the banking industry will need to hire 9-11 lakh employees over the next five years

* Govt has permitted appointment of a third executive director at large public sector banks

* PSBs find it tough to attract talent, given the wide choice of employment options