Academy of BFSI,

TALENT CRISIS AND SOLUTIONS – BFSI INDUSTRY

Banking industry all over the world is passing through tough times presently. Indian banking industry is right now facing perhaps the biggest crisis in its history. A series of scams and huge defaults in the corporate sector has pushed the industry to its worst crisis. The banking system of country which successfully withstood the banking crisis of 2008 is facing its most difficult test a decade later. Questions are being asked about necessity of continuing of Public Sector Banks. Certain developments in private sector banks are also posing serious questions pertaining to banking jobs. Bankers are passing through turbulent times.

On the other side, there is abundant scope for growth in line with the growing economy of the country.  Growth opportunities in resource mobilization are constantly increasing with channelizing of savings from domestic sector and inflow of investment funds from abroad.  Financial inclusion targeting sections of the society who were left behind earlier is also contributing its mite here. Expectations of higher growth in the economy are likely to drive credit growth further and provide channels for profitable credit dispensation, despite concerns of bad loans (NPAs).

Higher demand for credit from service sector and savings generated from “Generation Y” is contributing its share for growth of the economy and thereby BFSI sector. Higher absorption of technology leading to development of innovative products coupled with upswing in use of alternate delivery channels (ADCs) would ensure the continuation of this trend for the next decade.

Amidst all these happenings, there is a major cause of concern for the BFSI industry. Challenges on the financial front can be met with the available resources, innovation in technology and product range. But needs on the human resources front requires a focused and revised strategy to remedy the crisis that has already set in and is threatening the very foundations of the industry. This article discusses the situation prevailing in the industry related to bank careers and suggests alternative strategies for talent management in the banks.

Understanding the problem 

Social control over banks followed by nationalization of major banks in 1969 and 1980 changed banking in India from “Class banking” to “Mass Banking”.  Large branch expansion in the 1970s and early 1980s was a watershed in the Indian Banking Industry.  Priority sector lending and expansion in rural and unbanked areas necessitated opening of large number of branches in nooks and corners of the country.

Banking operations were handled manually at that time and most of the operations were done by clerical and first level officers. Entire operations were being done as per the directives of RBI and banks did not have any freedom to frame their own policies to develop and monitor different segments of banking. The manpower requirement was met by large scale recruitment of clerical and Probationary Officers. The bank exam tested the candidate’s basic knowledge of RBI and bank guidelines for these posts.

No concept of skilled talent 

There was hardly any need for additional skills or specialist employees. Even credit management was subject to “Selective Credit Controls” and “Credit Authorization”. Mere recruitment of young men and women from the employment market was sufficient to meet the HR needs. As there was no additional skill requirement at higher levels, internal promotions took care of the requirement at the middle and higher levels as well. Internal training system of banks with apex training colleges supported by regional/zonal training centers met the needs of training and development of staff and officers.

Financial Sector reforms and advent of Globalization and Liberalization in 1991 marked the next major development in both business composition and HR processes.  This brought in increased liberalization and freedom to banks for formulating their own policies, products and strategies.  Large scale computerization and use of new technology changed the complexion of the industry and its contours.

Introduction of “Core Banking Solutions” (CBS) and advent of new generation of private sector banks changed rules of the game.  Focus on the business front shifted from “Deposit Mobilization” and “Priority Sector lending” to “Profitability”. Each branch was expected to be a profit center and cost cutting became a major action point for banks. Increased use of CBS and other technology applications resulted in large scale redundancy of staff brought up on manual operations. These staff members, most of them past middle age, struggled to adapt to computerized environment.

Recruited in the 1970s and 1980s, they were drawing high emoluments and were not involved in useful work. They could not take up the type of jobs that were generated by the new environment. Thus banks were forced to think in terms of “Golden Handshake” and “VRS schemes”.  Staff members were encouraged to seek early retirement and a “Recruitment Holiday” replaced the basic HR function of recruitment and training.

The looming crisis      

The above developments were not only necessary but inevitable too. Stiff competition and stress on net interest margins were indeed forcing cost cuts. Staff expenses being one of the biggest non-interest demands naturally received due attention. However, in the maze of profitability and cost-cutting one vital factor was missed; that of requirement of people with enhanced skills to run specialized areas of bank’s functions. Talent management was lost sight of; recruitment freeze took its toll and gradually shortage of skilled manpower started showing its impact. Banks tried to train some of the existing staff to man these specialized seats and met with limited success.

Early part of the last decade saw many more changes in the use of technology and addition of a variety of products and services. Technology made large numbers of staff doing manual work redundant, but started creating many new roles requiring manpower with higher skills.  Universal banking and providing a wide range of complex products and services needed highly skilled manpower. Ban on recruitment had reduced quantity of manpower. Now there was shortage of quality of manpower as well. A crisis was looming in the horizon.

Present scenario 

Financial Inclusion has brought banking to a similar stage as it was during nationalization. More and more branches are being opened in unbanked areas to cover every single person in the country with banking facility. All extension counters have been converted into full-fledged branches due to CBS advantage.

There is a higher need for specialized branches to take care of international trade finance, hi-tech agriculture, investment banking and portfolio management and NRI banking. Risk management and technology management have become new focus areas.  The shortage of staff created by a long recruitment holiday is showing its effects. Above all, large number of officers recruited in the 70s and 80s started retiring. The vacuum in terms of numbers is confounded by vacuum in talent availability.

To fill the vacancies arising out of retirement of existing staff, recruitment has been speeded up. This has somewhat filled the gap of manpower requirement at lower levels. But they are too inexperienced to handle higher responsibilities. Faster promotions to higher levels have become the norm. Some banks could not find the required number of candidates to meet the targets for internal promotions even after relaxing eligibility norms in terms of length of service. Promoted officers are with inadequate experience. A yawning gap in requirements for managing positions and potential available in promotes has surfaced.

Retirement of over 150,000 mid-level managers in the next three years is going to increase the problem manifold. There is a severe shortage of trained manpower at each level in middle management. This will extend to senior management level in a few years. This situation threatens the very foundations of sound management of banks in the coming years. This also has a significant impact on the productivity and quality of banking services to the clientele, many of whom are from the next generation. A hallmark of this generation is the expectation of quick and quality service and impatience to tolerate inefficiency. The situation requires drastic remedies and without any delay.

A part of this manpower gap is being filled by recruitment of specialist officers directly to middle level manager positions. Credit management, risk management and technical officers are thus recruited. These people are also to be trained in some degree of basic banking operations before they can effectively discharge their duties for their assigned special positions.

One possible solution to this crisis is providing intensive and focused training to these newly promoted and recruited middle level managers. Who should give them this type of focused training? Banks internal training system is unable to meet this need as senior trainers have themselves retired or retiring shortly.  There is a shortage of skilled trainers handling bank work and internal training programs in bank careers tend to become stereotyped in such situations.

Exposure of the middle level managers to interaction with similar workforce from other banks will bring a whiff of fresh air in the training dimensions. Cost of extending the training infrastructure is also an issue in the background of shortage of resources. Any extension of the training infrastructure would result in an unused capacity in a few years as the situation will reach a new equilibrium in the next five or six years. 

Importance of middle management 

Middle management professionals holding banking jobs are the key functionaries of any banking institution. While the Generals plan a war and the foot soldiers fight it out, it is the Majors and Colonels that actually win the wars. Middle management cadre acts as the bridge between front line staff and customers. They are the key decision makers in the chain with front line staff on one side and policy makers at the other. Lending portfolio and recovery mechanism is the key to the profitability of any bank. Large volume of credit dispensation in banks takes place through “ELBs and VLBs”. These extra-large branches and very large branches are usually headed by AGMs and Chief Managers. These positions are endowed with substantial credit sanction powers, often ranging up to Rupees 10 crores to 20 crores.

Higher corporate lending also takes place through such branches and monitoring health of such Borrowal accounts requires specialized skills. Similarly, these positions are crucial in administrative and corporate offices as well as all major implementation and monitoring is done by such officers. A quick action by banks now can retrieve the situation of shortage and skill deficiency and remedy it before these high positions are managed by junior and under equipped managers.

The solution 

The possible solutions for resolving the present “Talent Management Crisis” in the BFSI industry revolves on the following key areas:

  • Preparing a blueprint of manpower requirement for the next 5 to 10 years, especially at the junior and middle management levels. Such plan should take into account projected requirement for expansion as well.
  • Recruiting junior level (entry level) officers for banking jobs after identifying them and getting them trained by a reputed training agency/institution, on a no-cost basis.
  • Meeting identified training requirements of existing staff without creating idle capacity in the internal training establishment.
  • Providing exposure to the middle level managers already promoted and likely to be promoted shortly in training programs with similar managers from other banking institutions.
  • Utilizing the services of experienced training professionals and ex-industry trainers and leaders to bridge the trainer requirement gap.
  • Tying up with a strategic training partner who provides bank-specific training, both in general banking and specialized functional areas. Short term training programs or banking classes, say one to two weeks for middle level managers is the key to bridge the training gap.
  • Retraining the managers put through such training at periodical interval to update skills and build confidence levels.
  • Concentrating on core business activities and enlisting the support of a trusted partner for jointly managing the present talent crisis.
  • Well established and reputed training institutions like Manipal Global who have specialized in training manpower for banking industry have a vital role in supporting such initiatives. The global standard infrastructure, well-set training system coupled with experienced faculty meets the important requirements for conducting such programs. Programs may be tailor made for the requirements of each bank drawing from the extensive support of each bank. 

The present “Talent Management Crisis” in banks can be met by aligning with a suitable strategic training partner who provides cost-effective and competitive model of training to both existing employees as well as ready-to-employ candidates on an on-going basis. Providing specialized re-training to middle level managers provides an effective core management team for the present and a pool of talent for meeting future top level management personnel thereafter. 

About the Author

Professor P Keshava Murthy has worked in the banking industry for 38 years, having worked in Punjab National Bank during 1973 to 2011. He holds degrees in Science, Law and is a Certified Associate of Indian Institute of Bankers. He is a Certified Psychometric Analyst and Certified Instructional Designer. He has wide experience in banking having worked in all areas of banking like branch banking, credit, foreign exchange, risk management and inspection divisions.

Professor Murthy has been a trainer in the bank’s training system and a mentor for students doing internship in the bank, in the areas of credit, foreign exchange and risk management. He has been with Manipal Global Academy of BFSI for the last six years, presently working with Baroda Manipal School of Banking, Manipal County, Bengaluru.

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