HR Issues andChallenges in PSUBanks of IndiaAn analysis by:Ragavendra.B(09MBI050)
INTRODUCTION• Over the last three decades, there has been a remarkable reforms in the Indian Banking sector.• The business profile of banks has transformed.• The major challenge faced by banks.• Integration drive has provided common platform for banks.• However, the challenges faced in the HR front are numerous.
Evolution of Banking Sector inIndia• The banking sector was one of the most protected sector for five decades• Since 1991 reforms there has been radical and perceptible transformation in the operational environment of the banking sector• It aimed at increasing the profitability and efficiency of the 27 public- sector banks that controlled about 90% of all deposits• The IT revolution is changing the way banking is carried out• Banks are setting up alternative delivery channels to contain operating costs like off-site ATMs, internet banking, telebanking, outsourcing.
Market ConcentrationICRA provides the following statistics(2011) • The PSU’s hold nearly 75% of the market. • Private bank holdings are 18% • Foreign banks’ holdings are 7%
PSU Banks-Definition• Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by a government.• The remaining shares of these banks are listed on stock exchanges.• There are a total of 26 PSBs in India
Emergence of PSU Banks• The Central Government entered the banking business with the nationalization of the Imperial Bank Of India in 1955• A 60% stake was taken by the Reserve Bank of India and the new bank was named as the State Bank of India• The next major nationalisation of banks took place in 1969 when the government of India, under prime minister Indira Gandhi, nationalised an additional 14 major banks• This move increased the presence of nationalised banks in India, to 84%• The next round of nationalisation took place in April 1980 when the government nationalised six more banks.
Challenges Faced by PSU’s inIndia• Technology up gradation• Customer centric• Response to competition• Transparency• Skilled workforce(HR Issues)
SWOT Analysis of PSU’s in HRcontextSTRENGTHS WEAKNESS 1) High skilled personnel in middle and low levels in the 1) Poor technology banks infrastructure 2) Aggression towards the 2) Presence of more number development of the existing of smaller banks. standings 3) Presence of intellectual 3) Poor compensation system capital to face the change in 4) Poor talent management implementation with good quality
SWOT Analysis of PSU’s in HRcontextOPPURTUNITIES THREATS 1)Availability of fresh talent 1) Inability to meet additional to strengthen bank capital requirements. operations. 2) Huge investments in 2) Increasing risk technologies. management expertise. 3) Entrance of foreign banks 3) Need significant to capture talent HR. connection among businesses, credit & risk 4) Increasing cost of human management and IT. capital.
Why human resourcemanagement is important forBanks?• Human Resource Management is important for banks because banking is a service industry• Banking has been and will always be a "People Business". Though pricing is important, there may be other valid reasons why people select and stay with a particular bank• Values such as "sound", "reliable", "innovative", "international", "close", "socially responsible", "Indian"• Those who do not meet the customer expectations will find survival difficult in transparent situations with a high level of competitiveness
HR Issues/Challenges in Banking• According to the Hudson report (2008)• The critical HR challenges are hiring right staff, retaining talent, staff, staff development, salary inflation, external threats, etc• Other challenges are Changing working conditions, re-skilling, compensation etc.• Massive technology adoption programme
Major HR Issues in PSU BankPositioning a HR policy• The quality of human asset present is the prevailing problem• Little initiatives have been taken in the last few years• The demands on the banking system are increasing and it priorities are refocused to create sustainability and profitability• It is time to restructure and position the HR policies in place• HR goals and aligning these goals with the banks goals and vision
HR planning• Human Resource planning is a process by which the management of an organization determines its future human resources requirements and how the existing human resource can be effectively utilize to fulfil these requirements.• Banks have to suitably realign their existing human resources• About 70% staff in each bank constitutes clerical and subordinates staff• Job redesigning and role restructuring is recommended at this level in the banking system.
Talent Management• Human Resource undoubtedly plays the most important part in the functioning of an organization.• The potentials, abilities, capacities, and skills, can be developed through continuous interaction in an organization• Activities performed all contribute in some way or other to the development of human potential• Hence, it is essential for an organizational to take steps for effective utilization of these resources.
Training and Development• Training is a continuous learning process in human resource managerial and interpersonal skills• In which increase motivation, and improve the effectiveness of people employed in an organization• It also helps to achieve between corporate and personal goals• The strength of any organization lies in the strength of its people• Training is undoubtedly the most important part of organizational renewal as an on going process
Performance Assessment• The new generation banks are depending upon competency assessment, performance evaluation and skills rating.TRANSFORMING THE MINDSET• These changes are creating challenges, as employees are made to adapt to changing conditions.• Acceptance of technology is slow but the utilization is not maximized.
Increasing efficiency• Deregulation has made the banking sector more competitive• Decontrolled interest rate and liberalized norms for foreign exchange.• Increased competitiveness has made it necessary to look for efficiencies in the businessCUSTOMER LOYALITY• Customers are reacting to favourably to the value added ofference.• Customers have also become more demanding and their loyalties are diffused.• Employees need to operate with a more customer centric in their operations.
Comparison of Staff Expenses• The above table suggests that PSBs are no longer the major employment providers in the financial market• Their per employee expenses have gone above that of Private Sector Banks• The staff strength of PSBs have gone down between 1998-99 and 2010-2011• The competitive advantage in terms of staff costs that was thought the PSBs had is no longer there• The absence of the cost advantage coupled with the problem of lower productivity makes HR reforms critical
Two-day strike from 24th August• Bank employees in India began a two-day strike on Wednesday.• To protest against proposed reforms that would ease mergers and allow more private capital, including foreign investment• Engaged by one million employees and affect 70,000 bank branches• India, Asias third-largest economy, has struggled to reform and liberalise important sectors like banking, retail and insurance, partly because of political opposition and fears of the exploitation of domestic interests by foreign investors.