Let’s begin with a question.
Who’s the most stressed executive in some of the Indian private banks?
Okay. The treasury head. In a rising interest rate scenario, making profits and avoiding mark-to-market losses is a tough job.
Is that the executive in charge of recovery of bad loans?
The head of credit. Demand for bank loans is rising but making sure that the loans won’t turn bad is not easy.
Then, it must be the head of liabilities. Banks’ credit growth is outpacing deposit mobilisation. The deposit rates are rising. Collection of more deposits to meet the credit demand and yet keeping the cost of money low is a rare balancing act.
Well, here is the answer: The most difficult job is that of the head of HR.
First, let’s take a look at the overall banking industry.
The Reserve Bank of India data shows that the number of clerical employees and subordinates in banks has gone down drastically between 2010 and 2021, while the number of officers has witnessed a sharp spike.
In 2005, clerks and subordinates combined had at least 63 per cent share of employees in scheduled commercial banks. By 2021, this figure has more than halved — 30 per cent. A large part of the shrinkage happened in the past decade. Till 2010, clerks and subordinates formed at least 55 per cent of total banking employees.
Blame it on technology. As digitisation progresses, more and more jobs of the clerical cadre are turning redundant. Typically, they are engaged as tellers and cashiers besides assisting the officers for multiple functions. Barring some pensioners, not too many customers visit branches these days. The senior citizens do drop by not necessarily for transactions (as many of them are tech-savvy) but they use the branches for meeting others — a sort of social activity.
A 2010 report on HR issues of public sector banks, headed by former Bank of Baroda Chairman A K Khandelwal, advised banks to look into the requirement of clerical jobs in an era of core banking solution (CBS). The CBS is an IT infrastructure, which networks all bank branches. As a result of this, customers no longer bank with a branch; they bank with a bank (at any branch across the nation).
Recent media reports say the finance ministry has asked bank bosses to take stock of the employment situation. In fact, the ministry has sought a monthly hiring plan from the banks, a Times of India report says. The number of branches has gone up by more than one-fourth in the past decade but the number of employees has fallen.
Incidentally, in 2015, the ministry had asked the public sector lenders to consider promoting lower rung employees on merit in view of imminent retirement of many senior executives. The ministry asked the banks to promote the competent clerks to scale I and II officers. Then Finance Minister Arun Jaitley, too, had raised the issue of shortage of senior officers at a bankers’ retreat in Pune.
This is the story of the public sector banks.
The HR heads of private banks have been facing a very different kind of challenge. The employee turnover rate at this point is probably the highest ever seen by some of these banks.
Till recently, the turnover was high for the front-end employees — those interact directly with the customers, including the relationship managers. But the scenario has changed dramatically.
Employees across segments, including those involved in specialised jobs such as technology, compliance and risk management, among others, have started leaving the bank fold in hordes.
Where are they going? Anywhere and everywhere. IT companies, fintechs, techfins, fast-moving consumer goods outfits and even delivery service providers have been on the prowl. Of course, many of them are being poached by other banks as well. Like loan accounts, the banks do cannibalise peers for competent employees.
Finally, at least a few of them are leaving to create their own start-ups.
I have spoken to a few private bank CEOs to understand the phenomenon and what they are doing to prevent the exodus.
One of them says his bank could plan a mid-year hike to retain those employees. He has never seen such a huge turnaround. People are leaving en masse.
Another CEO of a larger bank doesn’t consider this something that has never happened before. This has been happening for quite some time. Often an employee leaves her proximate boss and not the organisation. So, the way of retaining them is adoption of an inclusive approach and making them feel wanted.
But the third bank boss throws a different light on what’s happening on this turf.
This embodies new India.
People are not working for roti, kapda aur makaan (food, clothes and a house) any more. The millennials are self-assured and adventurous. They are ambitious and a restless lot. They want to look for different opportunities, including starting their own ventures. They work for a few years, save money, and then wear the robe of an explorer, looking for new avenues.
The way to retain them is not offering more money. They are looking for challenges; routine work doesn’t excite them. They approach their jobs as an entrepreneur. The best way to keep them glued to an organisation is continuously engaging them with tough assignments.
There are other issues. Technology is not only eating away the jobs of the clerical cadre in public sector banks; it is creating a new ecosystem, which makes the bank job less attractive. Backed by deep-pocket investors, many of the fintechs offer higher salaries, flexible working hours and, of course, challenges.
Banks no more are the best bet for talented youth. Once upon a time, many job aspirants preferred a probationary officer’s role in a large public sector bank to civil service, but it’s a different market now. At campus recruitments of reputable institutions, banking jobs are no longer on the priority list of students.
The way banking is done has changed after the collapse of iconic US investment bank Lehman Brothers Holdings Inc in September 2008, leading to the global financial crisis. Globally, there were large-scale layoffs. In India, quite a few foreign banks have either closed shops or shut down certain businesses. Complex derivatives are no more on a banker’s menu.
After the crisis, the salary, perks and glamour that gift-wrapped a banker’s job lost their sheen. Despite that, as the supply outstripped the demand, the task of the HR boss of a bank has been quite easy. It has been a smooth ride for over a decade. But digitisation has changed the dynamics — both in terms of how banking is done and the way it is.
The change cannot be confined to the systems and processes alone; it needs to spill over to the work culture as well. Unless the banks transform themselves, the nightmare for HR division will continue and it will be increasingly difficult to attract and retain talent.