Business Manager-HR Magazine: Article on HR in Banks

Article published in Business Manager, December 2012 under Cover feature. Others who contributed articles to the cover feature were Dr Anil Khandelwal, Dr K C Chakrabarty (excerpts from the inaugural address at HR conference of public sector banks at Mumbai on 1.6.12) and Dr deepti Bhargava



HRM in Banks

Talent deficit is

the product of deliberate

neglect of HR issues



The absence of talent in banks today is the product of a deliberate neglect of HR related issues. The ageing top level, problems in succession plans at various levels caused by, among other things a ‘recruitment holiday’, since circa 1991, during which period ‘outsourcing’ and adhocism forced distorted priorities in recruitment and skill development are all grave issues affecting the functioning of banks.



M G WARRIER

(Former General Manager, Reserve Bank of India)



The need of the hour is a thorough overhaul of HR policy and practices in banks, from Board Room to front desk. The casual approach to HR management is behind many of the problems being faced by the financial sector today.



Thanks to the strong legislative foundation provided through Banking regulation Act, 1949 and the efficient regulatory supervision and guidance by the Reserve bank of India, India can feel proud about the successful functioning of banks in the country, within the existing constraints.



Actually, the private-public sector divide in regard to meeting social responsibility obligations/commitments and a discriminatory approach between the two sectors, when it comes to government policy support is a legacy of the British Raj. Once it is accepted that the resources of the country belong to the people and irrespective of the nature of ownership (whether government or private individuals/groups/families/organisations), all are handling public funds/resources in a trusteeship sense, this divide can be bridged to a great extent. This approach is all the more relevant for banks, as after all, their resources come from public deposits and their major business comprises providing credit and services to the public.



If the financial sector has to rise to the expectations in regard to credit delivery, especially to agriculture and service sectors, the banking infrastructure will need structural reforms, skill development and a change in outlook on management of human resources and related issues.



In July 2010, Reserve Bank of India came out with the idea of experimenting ‘executive interns’ in RBI, proposing contract employment of candidates for short periods with a consolidated salary. This writer responded to the report on the subject in a financial newspaper on the following lines:



“Although on the face of it, the proposal may seem like a normal HR initiative at infusing young blood with expertise and enthusiasm at a lower cost, no in-depth analysis may be needed to find that this is a short-term remedy being tried out for a long term problem.

Sooner than later, the RBI, government and public sector organisations will have to wake up to the reality that their recruitment, training, placement and compensation strategies need thorough overhaul and this they have to do taking their existing employees into confidence. A long-term solution may have to be found for the HR-related problems, including the inability to hire experts at market-related compensation. The Government and public sector organisations may have to consider how best the ‘cost-to-company' (C to C) principles can be integrated into their existing recruitment, training, placement and career progression policies. This may involve the following:

• Taking the existing employees into confidence with an assurance that the changes will only improve the working results of the organisation and they will get an opportunity to share the benefits and new job opportunities and so long as they are prepared to learn new things/upgrade their skills, the infusion of ‘experts' will not eat into their career progression opportunities.

• Inter-mobility of executives in all cadres among comparable organisations. For instance, a banking/financial sector service could be evolved for institutions including those in the private sector and regulatory bodies in the financial sector.

• A transparent guidance for remuneration package based on paying capacity/need for skills for different sectors. Proposals like the present one by RBI of shifting to C to C to reduce costs will send wrong and unhealthy signals.”



Though aware about the oddity in quoting oneself, two and a half years down the line, the above observations gets relevance as it is gathered that the executive interns experiment in RBI did not meet with much success and the entire financial sector is slowly reconciling to the idea that HR in financial sector is different from say, managing mine workers or farm labour. RBI has recently appointed a panel to review HR practices in the central bank. Adhoc recruitment of Executive Interns without planning their future deployment or absorption, succumbing to pressure on promotion policies, not being able to convince GOI on need to implement competitive remuneration packages for recruiting and retaining efficient officers, failure to decide on updation of retirement benefits at least on par with GOI are just some examples where even an organisation of the stature of RBI can go wrong when preoccupied with other priorities. When it comes to infusing professionalism in specialized areas like supervision and forex and debt management RBI is facing several constraints, many of them emanating from its failure to argue with North Block as Finance Ministry shows an attitude akin to master-servant relationship.



Now that RBI has woken up, we may expect other statutory bodies and public sector organisations followed by GOI (we can expect like that only) will follow suit and think of an overhaul in their Human Resources Development and Management (HRMD) practices. The absence of talent in banks today is the product of a deliberate neglect of HR related issues. The ageing top level, problems in succession plans at various levels caused by, among other things a ‘recruitment holiday’, since circa 1991, during which period ‘outsourcing’ and adhocism forced distorted priorities in recruitment and skill development are all grave issues affecting the functioning of banks.



HRD at the top across sectors should become a national priority, if professionalism is to be restored at lower layers which directly interact with the clientele. Guidance for an overhaul of HR practices in banks should come from GOI and RBI factoring in, among others, the following:

i) A long-term recruitment policy taking into account the skill and aptitude needs for rural, urban and metropolitan services

ii) Job security including social security to ensure that the employees develop a sense of belonging to the institution

iii) An institution-specific wage structure up to junior management levels ensuring ‘living wage’ and incentives for performance, service in rural areas or tough terrains etc

iv) GOI and IBA should provide overall guidance in HR management, but leave details to individual banks who should be made more responsible for in-house management

v) Ideally, from middle management level and upwards, easier inter-organizational mobility of staff should be thought of

vi) An Institute for Financial Sector Management and an Indian Financial Sector Service could take care of further skill development needs at higher levels.



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