For the first time, public sector banks have spent a larger part of their income on wages compared to their counterparts in the private sector.
A study by consulting firm Boston Consultancy Group (BCG) has found that per employee salary costs for public sector banks at Rs 5.6 lakh per employee has for the first time exceeded that of private sector banks, which stands at Rs 5.4 lakh per employee in 2010.
BCG’s Saurabh Tripathi attributed this to higher average employee age in public sector banks, which entailed a higher wage outgo, underscoring the need to induct new talent in large numbers to maintain growth. He added that human relations would be one of the major challenges ahead for public sector banks in the coming decade.
However, MV Nair, chairman of Union Bank of India, said there was an anomaly in comparison as state-owned banks include sub-staff and other low-end labour such as guards among employees. Most private banks outsource some of the low-end functions and these expenses are not reflected in wages.
The BCG study was unveiled at a Ficci-IBA seminar. The study has highlighted among other things that massive reskilling was required at each level for the banks to move from predominantly back office roles to predominantly sales and service roles.
The study titled Indian Banking 2020 has outlined a series of new trends that the Indian banking sector would be witnessing. Among other things, it has noted that retail banking would benefit immensely from the Indian demographic dividend and that mortgages would cross Rs 400,000 crore by 2020 while wealth management business would grow 10 times. The bottom of the pyramid or the ‘next billion’ segment would emerge as the largest numbers and will accentuate the demand for low-cost banking solutions. Banks would be moving on from core banking solutions and the next wave in technology would be in customer-relation management and data warehousing.
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