RETIREMENTS AT PUBLIC SECTOR BANKS WORRY GOVT

The spate of retirements that public sector banks will be faced with in the next couple of years has the government worried.

This is apparent from the fact that after it set up a committee on human resource (HR) issues in public sector banks last year, the government has set up another committee to consider the feasibility of these banks drawing up integrated long-term HR intervention plans to maintain business continuity and ensure growth.

Panel's mandate

The advantages of going in for lateral recruitments, working out incentive schemes, and compensation package flexibility (not exceeding a pre-defined employee cost to revenue threshold) are the other items that will engage the attention of the committee.

The committee will also examine if banks should get autonomy in deciding employee compensation, a touchy issue with trade unions in the banking sector.

For almost four decades, the collective bargaining model, under the aegis of the Indian Banks' Association (IBA), has been followed by PSBs for fixing employee remuneration.

Set up a couple of months ago, the new committee is headed by Mr Alok Nigam, Joint Secretary, Department of Financial Services, Government of India. The prominent members of the committee are Mr M.V. Nair, Chairman and Managing Director, Union Bank of India, and Mr K.L. Jagdish Pai, Executive Director, Canara Bank.

Though PSBs, 26 in all, have been recruiting by the thousands in the last couple of years, the Government, as the majority shareholder in these banks, seems to be concerned about the quality of the new recruits.

BCG recommendations

The recommendations on HR made by management consulting firm BCG will be considered by the committee. The firm has raised the red flag on HR issues that PSBs will face in the next few years. It is of the view that crucial competencies and knowhow will be lost as almost 80 per cent of the middle management and 50 per cent of the junior-most officers will move out of the system due to retirement in the next 10 years.

PSBs collectively have an employee strength of about seven lakh. Accounting for 72 per cent of total assets and 77 per cent of the total liabilities of the banking system, they play a crucial role in the development of the economy.

Initiatives

Eight initiatives — four each ‘To institute discipline' and ‘To enhance motivation' — are likely to form the basis for meeting the people challenge in PSBs.

The ‘To institute discipline' initiative, according to BCG, will entail steady talent induction (to attract and retain talent to spur growth), sensitive performance management system (sensitive to the social context), systemic succession planning and career management (moving people on career tracks suiting their aptitude and organisation's needs) and structural adjustment in cost (new HR practices should be utilised to reduce employee share of total costs).

Under the ‘To enhance motivation' head, the consulting firm has recommended empowerment of senior and middle managers (enrich their roles, enable people with leadership training and engage all cadres to take up change), massive re-skilling (moving from predominantly back-office roles to predominantly sales and service roles), stimulate non-officers (energise them with suitable engagement interventions and incentive programmes), and structured change management (HR departments need new technology and skills).

At the last annual general meeting of the Indian Banks' Association held a few months ago in Mumbai, the Finance Minister, Mr Pranab Mukherjee, highlighted the fact that PSBs will need large recruitments of right quality in the next few years to bridge the gap that is likely to be caused by a large number of retirements.

The Minister said that banks would have to resort to technology/business process re-engineering to reduce the gap created by the shortage of staff and improve the overall manpower efficiency.

Source: http://www.thehindubusinessline.com/2010/10/01/stories/2010100152980600.htm