RBI now Questions HR Policies of Public Sector Banks

RBI for overhaul of banks' HR practices

K C Chakrabarty questions wisdom in hiring from top B-schools

BS Reporter / Mumbai Jun 06, 2012, 00:52 IST The Reserve Bank of India (RBI) has called for a complete overhaul of human resource practices at banks, especially public sector ones where several staffers are due to retire in seven to eight years. K C Chakrabarty, one of the central bank’s deputy governors, says this sort of increasing intervention in the affairs of public sector banks was needed due to lack of management capacities at the latter.  Earlier, PSBs had expressed discomfort at increasing interference from above in day-to-day operations on credit sanctioning, loan pricing, and human resource (HR) issues. The Union finance ministry had recently asked all banks to follow a uniform practice on promotion and recruitment. At a HR summit of PSBs, Chakrabarty said: “Why are the promoters and owners being made to take a keen interest in your routine affairs? Efficient and effective HR systems are the key here. In my opinion, this may be due to something lacking in the management capacity of the banks.” The deputy governor made these comments at an event on Saturday. A copy of the speech was put up on the RBI website on Tuesday. Saying this would be a “retirement decade” for PSBs, as tens of thousands were set to retire by 2020, he said this would be the best time to transform HR processes and implement some new-age concepts. Emphasising on acquiring the right people, the deputy governor questioned banks’ enthusiasm to recruit from major management institutes. “Is the mad rush to top campuses justified? Will the people recruited from top management institutes understand financial inclusion drives? Will these people have empathy towards the poorest of the poor?” Chakrabarty asked the bankers. Lenders often talk about the challenge of finding people keen to work in rural areas, he said. “Does it not indicate that there is something amiss in the way we recruit people? Is it not better to recruit people from smaller cities?” Indicating there was no proper mechanism of performance management in PSBs, Chakrabarty said the results of not having one could be disastrous. “We are all having to deal with the problem of people who are ‘promotable’ but not ‘postable’ and people who are ‘postable’ but not getting promoted. This is because we have failed to discriminate between performers and non-performers,” Chakrabarty said. http://www.business-standard.com/india/news/rbi-for-overhaulbanks-hr-practices/476424/ He called on the senior management of banks and the board to spend more time on performance management. There is a need for complete job description and clear delineation of job roles of chairman and managing directors, and executive directors, he added. PSU banks convene HR pow-wow to halt attrition Published on Tue, Jun 05, 2012 at 22:16 |  Source : CNBC-TV18 Updated at Tue, Jun 05, 2012 at 22:52   http://www.moneycontrol.com/news/cnbc-tv18-comments/psu-banks-convene-hr-pow-wow-to-halt-attrition_713891.html In a rare show of forward planning, the government met public sector bankers to grapple with a challenge that will hit the banking system a few years from now, that is how to replace the 75,000 employees who are set to retire by 2015, and ensure a leadership vacuum does not suffocate growth, reports Gopika Gopakumar of CNBC-TV18. It was a busy weekend for senior public sector bankers, who met at a first-ever HR conference held under an initiative of the finance ministry with the agenda: How to replace 75,000 employees who are set to retire by 2015? RBI deputy governor KC Chakrabarty says it's time for lateral hiring of skilled employees. KC Chakrabarty, deputy governor, RBI, says that why should you recruit from PSU banks? Globally people move to banking professions from other professions. How many from MC Kinsey joined bank? How many from accounting have joined bank? There is a need to go for lateral recruitment.  Senior bankers called for better compensation package to retain young employees. In response to this, Chakrabarty argued that cost per employee of PSU banks is higher than that of private sector banks. And as per IBA data, profit per employee in PSU banks is much lower. So, he says the absence of cost advantage, and the problem of lower productivity calls for an urgent HR transformation in PSU banks. However, bankers feel variable pay structure should still be introduced. Alok Mishra, CMD, Bank of India, said a report will be submitted on profit shared with good workers as it will be motivating. The profit should be shared in the form of amount, monetary, non-monetary and ESoPs. In the meeting, the mandatory rural service rule also came under review. Currently, bankers have to complete two years of rural posting to be eligible for a promotion but the finance ministry wants this mandatory for bankers at the time of joining. Prabhakar, CMD, Andhra Bank, says that we should give first posting to rural areas so that they will work for two-three years because that is where business is going to be in coming years. Priorities of government, priorities of nation require people to work in rural areas. In this context suggestion are welcome. But there was a more immediate problem that banks need to work on. The finance ministry is pushing PSU banks to fast-track all promotions and transfers, and have them complete by the June 30 and you may call this micro-management, but the ministry feels that an important solution to stopping attrition in PSU banks is a streamlining of the process, so transfers and promotions must happen regularly and on time. First posting in rural area may become mandatory at public sector banks Abhijit Lele / Mumbai Jun 05, 2012, 00:57 Staff costs higher at public sector banks Staff costs higher at public sector banks    MUMBAI, JUNE 6:  The average public sector bank employee is better off than his private sector counterpart. Staff cost per employee in a public sector bank is 150 per cent higher than similar costs in private banks.  According to the data provided by the RBI, costs per employee in a public sector bank in 2010-11 were at Rs 7.15 lakh wheras it was Rs 5.63 lakh for a private sector. In a speech delivered recently at a conference of public sector HR managers, the RBI Deputy Governor Dr K.C.Chakraborty, said, "One thing is, thus, loud and clear – the competitive advantage in terms of staff costs that we always thought the Public Sector Banks had is no longer there. The absence of the cost advantage coupled with the problem of lower productivity, underscore the critical need for urgent HR transformation in Public Sector Banks." He also mentioned that per employee expenses in a public sector bank were higher despite their pension expenses not being full reflected. Calling for immediate attention to the problem, he said, HR transformation would determine their ability to compete.  MY VIEWS:     This refers to a comparatively study published in newspaper and comments made by Dy Governor RBI Mr. K C Chakravorty who said that average pay of bank employee in public sector banks is 150% of that in private sector banks. Public sector banks are required to perform all types of non productive work such as payment of pension, old age pension, MANREGA payment, teacher salary payment, tax collection etc which private sector banks are not doing. It is PS banks which have to shoulder the responsibility of target for Financial Inclusion fixed by the government. They have to open branches in remote villages where possibility of earning profit is very rare. Number of branches as such in public sector is far more than that in private sector. And the bitter truth is that majority of branches opened in rural areas are loss making and they spend their time mostly in unproductive work imposed by state or central government. It is PS banks which have to oblige various politicians on sanction of loans and then on write off of loans. Banks have to lend under priority sector, under PMEGP programme, under SHG etc which private sector banks are not required disbursing loans. Similarly PS banks have to lend for agriculture development, distribute UGC and taken part on all KVC projects recommended by District Industry centers. Such types of loan more often than not become bad in a year or two and then banks has to sacrifice huge money to keep their Balance sheet attractive. Private Banks do not perform and do not undertake such work which are economically not beneficial. Political loaning and political write off of loan takes place only in public sector banks, not in private banks. As such there is no comparison between private and public sector banks. Hence effort of Dy governor Mr. Chakravorty to demoralize the employees of public sector banks and deprive them of wage hike is not justified. Private Banks are employing 80% of their workforce at pay less than Rs10000.00 per months and only 20% of workforce get higher pay package. These banks cannot retain the employee for longer period and therefore attrition rate is much in private banks. Public sector banks have to follow uniform wage structure as prevalent in government departments and other public sector undertakings. To add fuel to fire public sector banks did not make any employment or made negligible recruitment since 1991 due to which average age of bank employee in PS banks is more than 45 whereas the average age in private banks is less than 30, Why RBI Dy Governor does not compare the wage structure of pay package of central government employee with that of government banks? Why he does not compare the pay package and productivity of PSUs with that of private corporate houses? Why RBI Dy Governor does not compare the pay package of Indian railways, Indian airlines, BSNL where productivity and profitability is negligible with their counterpart in private sector (excl railways)? Why BSNL, Railways, Airlines run in loss despite the fact that enjoy all privileges. Changing our Habits Germany is a highly industrialized country. It produces top brands like Benz, BMW, Siemens etc. The nuclear reactor pump is made in a small town in this country. In such a country, many will think its people lead a luxurious life. At least that was my impression before I read this article by a traveller. -- QUOTE— When I arrived at Hamburg, my colleagues who work in Hamburg arranged a welcome party for me in a restaurant. As we walked into the restaurant, we noticed that a lot of tables were empty. There was a table where a young couple was having their meal. There were only two dishes and two cans of beer on the table. I wondered if such simple meal could be romantic, and whether the girl will leave this stingy guy. There were a few old ladies on another table. When a dish is served, the waiter would distribute the food for them, and they would finish every bit of the food on their plates. We did not pay much attention to them, as we were looking forward to the dishes we ordered. As we were hungry, our local colleague ordered more food for us. As the restaurant was quiet, the food came quite fast. Since there were other activities arranged for us, we did not spend much time dining. When we left, there was still about one third of unconsumed food on the table. When we were leaving the restaurant, we heard someone calling us. We noticed the old ladies in the restaurant were talking about us to the restaurant owner. When they spoke to us in English, we understood that they were unhappy about us wasting so much food. We immediately felt that they were really being too busybody. " We paid for our food, it is none of your business how much food we left behind," my colleague told the old ladies. The old ladies were furious. One of them immediately took her hand phone out and made a call to someone. After a while, a man in uniform claimed to be an officer from the Social Security organization arrived. Upon knowing what the dispute was, he issued us a 50 Mark fine. We all kept quiet. The local colleague took out a 50 Mark note and repeatedly apologized to the officer. The officer told us in a stern voice, " ORDER WHAT YOU CAN CONSUME, MONEY IS YOURS BUT RESOURCES BELONG TO THE SOCIETY. THERE ARE MANY OTHERS IN THE WORLD WHO ARE FACING SHORTAGE OF RESOURCES. YOU HAVE NO REASON TO WASTE RESOURCES." -- UNQUOTE— The mind set of people of this rich country put all of us to shame. WE REALLY NEED TO REFLECT ON THIS. We are from country which is not very rich in resources. To save face, we order large quantity and also waste food when we give others a treat. THIS TEACHES US A LESSON TO THINK SERIOUSLY ABOUT CHANGING OUR BAD HABITS.