HR Issues and Challenges

in PSU Banks of India

An analysis by:
Ragavendra.B(09MBI050)

INTRODUCTION
Over the last three decades, there has been a remarkable
reforms in the Indian Banking sector.
The business profile of banks has transformed.
The major challenge faced by banks.
Integration drive has provided common platform for banks.
However, the challenges faced in the HR front are numerous.

Evolution of Banking Sector in

India
The banking sector was one of the most protected sector for five
decades
Since 1991 reforms there has been radical and perceptible
transformation in the operational environment of the banking
sector
It aimed at increasing the profitability and efficiency of the 27
public-sector banks that controlled about 90% of all deposits
The IT revolution is changing the way banking is carried out
Banks are setting up alternative delivery channels to contain
operating costs like off-site ATMs, internet banking, telebanking,
outsourcing.

Market Concentration
ICRA provides the following statistics(2011)
The PSUs hold nearly 75% of the market.
Private bank holdings are 18%
Foreign banks holdings are 7%

PSU Banks-Definition
Public Sector Banks (PSBs) are banks where a
majority stake (i.e. more than 50%) is held by a
government.
The remaining shares of these banks are listed on
stock exchanges.
There are a total of 26 PSBs in India

Emergence of PSU Banks

The Central Government entered the banking business with the
nationalization of the Imperial Bank Of India in 1955
A 60% stake was taken by the Reserve Bank of India and the new
bank was named as the State Bank of India
The next major nationalisation of banks took place in 1969 when
the government of India, under prime minister Indira Gandhi,
nationalised an additional 14 major banks
This move increased the presence of nationalised banks in India, to
84%
The next round of nationalisation took place in April 1980 when the
government nationalised six more banks.

Challenges Faced by PSUs in

India
Technology up gradation
Customer centric
Response to competition
Transparency
Skilled workforce(HR Issues)

SWOT Analysis of PSUs in HR

context
STRENGT
HS
1)
1) High
High skilled
skilled personnel
personnel
in
in middle
middle and
and low
low levels
levels in
in
the
the banks
banks
2)
2) Aggression
Aggression towards
towards the
the
development
development of
of the
the
existing
existing standings
standings
3)
3) Presence
Presence of
of intellectual
intellectual
capital
capital to
to face
face the
the change
change
in
in implementation
implementation with
with
good
good quality
quality

WEAKNE
SS
1)
1) Poor
Poor technology
technology
infrastructure
infrastructure
2)
2) Presence
Presence of
of more
more
number
number of
of smaller
banks.
banks.
3)
3) Poor
Poor compensation
compensation
system
system
4)
4) Poor
Poor talent
talent
management
management

SWOT Analysis of PSUs in HR

context

Why human resource management

is important for Banks?
Human Resource Management is important for banks because
banking is a service industry
Banking has been and will always be a "People Business".
Though pricing is important, there may be other valid reasons
why people select and stay with a particular bank
Values such as "sound", "reliable", "innovative",
"international", "close", "socially responsible", "Indian"
Those who do not meet the customer expectations will find
survival difficult in transparent situations with a high level of
competitiveness

HR Issues/Challenges in Banking
According to the Hudson report (2008)
The critical HR challenges are hiring right staff, retaining
talent, staff, staff development, salary inflation, external
threats, etc
Other challenges are Changing working conditions, reskilling, compensation etc.
Massive technology adoption programme

Major HR Issues in PSU Bank

Positioning a HR policy
The quality of human asset present is the prevailing problem
Little initiatives have been taken in the last few years
The demands on the banking system are increasing and it
priorities are refocused to create sustainability and
profitability
It is time to restructure and position the HR policies in place
HR goals and aligning these goals with the banks goals and
vision

HR planning
Human Resource planning is a process by which the
management of an organization determines its
future human resources requirements and how the
existing human resource can be effectively utilize to
fulfil these requirements.
Banks have to suitably realign their existing human
resources
About 70% staff in each bank constitutes clerical
and subordinates staff
Job redesigning and role restructuring is
recommended at this level in the banking system.

Talent Management
Human Resource undoubtedly plays the most
important part in the functioning of an organization.
The potentials, abilities, capacities, and skills, can
be developed through continuous interaction in an
organization
Activities performed all contribute in some way or
other to the development of human potential
Hence, it is essential for an organizational to take
steps for effective utilization of these resources.

Training and Development

Training is a continuous learning process in human resource
managerial and interpersonal skills
In which increase motivation, and improve the effectiveness of
people employed in an organization
It also helps to achieve between corporate and personal goals
The strength of any organization lies in the strength of its
people
Training is undoubtedly the most important part of
organizational renewal as an on going process

Performance Assessment
The new generation banks are depending upon
competency assessment, performance evaluation
and skills rating.

TRANSFORMING THE MINDSET

These changes are creating challenges, as
employees are made to adapt to changing
conditions.
Acceptance of technology is slow but the
utilization is not maximized.

Increasing efficiency
Deregulation has made the banking sector more
competitive
Decontrolled interest rate and liberalized norms for foreign
exchange.
Increased competitiveness has made it necessary to look
for efficiencies in the business

CUSTOMER LOYALITY

Customers are reacting to favourably to the value added

ofference.
Customers have also become more demanding and their
loyalties are diffused.
Employees need to operate with a more customer centric
in their operations.

Comparison of Staff Expenses

Comparison of Staff Expenses

The above table suggests that PSBs are no longer the
major employment providers in the financial market
Their per employee expenses have gone above that of
Private Sector Banks
The staff strength of PSBs have gone down between 199899 and 2010-2011
The competitive advantage in terms of staff costs that was
thought the PSBs had is no longer there
The absence of the cost advantage coupled with the
problem of lower productivity makes HR reforms critical

Two-day strike from 24th August

Bank employees in India began a two-day strike on
Wednesday.
To protest against proposed reforms that would ease mergers
and allow more private capital, including foreign investment
Engaged by one million employees and affect 70,000 bank
branches
India, Asia's third-largest economy, has struggled to reform
and liberalise important sectors like banking, retail and
insurance, partly because of political opposition and fears of
the exploitation of domestic interests by foreign investors.