The human resources crisis at public sector banks


C.V.R. Rajendran, chairman and managing director (CMD) of Andhra Bank, retired on 30 April. V.R. Iyer, CMD of Bank of India, will retire by the end of this month and M.S. Raghavan, IDBI Bank Ltd’s CMD, will retire at the end of June. If the government, the majority owner of the public sector banks (PSBs), is not able to identify the chiefs of those banks where the top positions have been lying vacant for months, by end-June, corner offices of seven PSBs will turn vacant. Four other banks that do not have occupants in their corner offices for months now are Bank of Baroda, Canara Bank, Punjab National Bank and Syndicate Bank.

A few months back, the government split the top position in the PSBs. It was decided that there would be a non-executive chairman to guide the board of such banks while the day-to-day management would be looked after by a managing director (MD) and chief executive officer (CEO). In sync with this, the new heads of PSBs who have been appointed in past few months (at United Bank of India, Oriental Bank of Commerce, Indian Overseas Bank and Vijaya Bank) are called MD and CEO. When Indian Bank CMD T.M. Bhasin’s term ended last month, he got an extension (as he is not 60 as yet) but his designation has changed.

Top positions at three large banks (Punjab National Bank, Bank of Baroda and Canara Bank) have remained vacant and two more will fall vacant in the next two months (Bank of India and IDBI Bank) simply because the government has not been able to find suitable candidates to fill the vacancies. In other words, there are no serious takers for such posts—not a very happy omen for the PSBs, which have a roughly 70% market share in the Indian banking industry’s assets.

Making a deviation from the normal appointment process, where executive directors are promoted to head banks, being picked up by an appointment committee of the finance ministry, the government is scouting for talent from the open market for the chiefs of the so-called category 1 banks, which have a balance sheet size of at least Rs.3 trillion each.

However, the search is not yielding the desired results. Initially, the government looked for candidates not more than 55 years old and with at least three years of board-level experience, but since the response was muted, the government has relaxed the eligibility criteria. While the age limit has been increased to 57 years, the mandatory board-level experience for the applicants has been reduced to one year. I am told that many junior executives of PSBs who have board-level experience by virtue of heading regional rural banks applied for the top posts in the first round and the government had no choice but to relax the criteria in search of the right candidates. An external head-hunting agency—Hay Group—is believed to be involved in the recruitment process.

The vacuum at the top is the proverbial tip of the iceberg. The talent crunch is evident across the spectrum and, to make matters worse, there will be a large-scale retirement of senior employees over the next few years. Junior finance minister Jayant Sinha, in a written reply in the Rajya Sabha, the upper house of Parliament, recently said that about 25% of the staff would retire by 2020. Going by a 2013 McKinsey and Co. report on the Indian banking structure, 87% of general managers of PSBs will superannuate by 2016-17 and between 60% and 90% of deputy general managers will hang up their boots by that time. General managers, who are placed two levels below the level of the managing director, are a very critical cog in the wheel of the decision-making process in PSBs. The Reserve Bank of India (RBI) has termed 2010-20 as the “decade of retirement” for public sector banks.

These banks went on a recruitment overdrive in the 1980s after they were nationalized but once the massive balance sheet clean-up drive was launched in the mid-1990s following the introduction of income-recognition norms, there was a blanket ban on new recruitments. And, on top of that, early this century, about 125,000 bank employees were shown the door through a voluntary retirement scheme after these banks embraced computerization, albeit reluctantly. New recruitments have started, but they have not been able to keep pace with the growth in business and retirement of old colleagues.

How are the banks filling in the vacancies at senior level? Most have fast-tracked the promotion process and senior executives are now being produced on a conveyor belt. In the absence of proper grooming, many among the over-promoted executives are just not equipped to meet the business exigencies.

Meanwhile, the government has constituted a panel, headed by RBI governor Raghuram Rajan, to select non-executive chairmen in PSBs. Other members of the panel are Usha Thorat, a former RBI deputy governor; Hasmukh Adhia, secretary of financial services in the ministry of finance; and N. Vaghul, former chairman of Industrial Credit and Investment Corp. of India Ltd, the erstwhile financial institution. The panel will prepare the eligibility norms, such as maximum age, qualification and tenure, as well as identify the candidates. Let’s hope and pray that retired bureaucrats do not end up hijacking the posts.

In the second half of the last fiscal year, the entire public sector banking industry threw its weight behind the Pradhan Mantri Jan-Dhan Yojana (PMJDY), the flagship financial inclusion programme of the National Democratic Alliance government, which saw a record 140 million bank accounts being opened. The bankers are once again busy linking health insurance and pension schemes to PMJDY to ensure flow of money into such accounts. When will they have time to recruit staff and groom them? I am also curious to know whether appointment of bank bosses features on the government’s priority list.

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