Article: Banking licences: Bumpy road ahead, says Dr Anil Khandelwal

Strategic HR

Banking licences: Bumpy road ahead, says Dr Anil Khandelwal

The banking sector will soon face a major talent crunch if no measures are taken to skill the workforce
Banking licences: Bumpy road ahead, says Dr Anil Khandelwal

Compensation is a key issue for young people, who have no reason to stay in lesser-paying jobs when they can get better salaries elsewhere


The Reserve Bank of India received 26 applications from major corporates and NBFCs, which are in the fray to float banks. While the licences will only be issued to a select few in the middle of next year, the move has already generated controversy. The United Forum of Bank Unions (UFBU) – the umbrella body of nine bank unions – has opposed the central bank’s move saying the role of PSBs is being denigrated. People Matters spoke to Dr Anil Khandelwal, Former CMD of Bank of Baroda, about the impact of RBI’s move and the talent challenges the sector will face. Dr. Khandelwal was the chairman of the Khandelwal Committee set up by the Government of India to examine HR issues in Public Sector Banks. Edited excerpts:

With the issuance of new banking licences, we will see five to six new players. These banks are obligated to ensure that 25 per cent of their branches are in rural areas underserved by other banks. Now, it is important to remember that banking is a line of work where you require experienced people. These new banks will immediately require experienced managers to staff their branches.

One cannot create a pool of such experienced branch managers overnight, so the pressure will be on the public sector banks (PSBs), which have a large cadre of such managers. PSBs provided the seed talent for private banks when they first arrived on the scene. Since PSBs are so large, the impact of losing some staff wasn’t felt.

The main draw of the private sector banks is the compensation. Compensation is a key issue for young people in the age group of 35-40, who have no reason to stay in lesser-paying jobs when they can command far greater salaries in private banks.

Secondly, private sector banks might offer to let the staff they are poaching from PSBs choose the cities they want to be posted in. This can be a very strong factor for experienced talent in the PSU sector to be drawn to the new private banks.

The other draw is that the career of a meritorious candidate with the right experience is likely to grow at a much faster rate in a newly-opened private bank that needs to expand quickly than in a PSB where career progression is traditionally slower.

Besides branch managers, the new banks will also require experienced bankers at the level of DGMs and GMs to guide the operations and undertake expansion of branches. Also, experienced senior officers will be required in functions like corporate credit, treasury operations, foreign exchange and risk management. With the entry of the new banks, the pressure and effect will be felt across the spectrum and not just on entry-level or mid-level talent.

Banks have well-established training institutes and should utilise them to skill the workforce and create excess capacity before the entry of the new banks. They should create specialists in reserve; a reservoir of people with the pivotal skills for the sector that they can dip into when the demand rises. In the next three years, each of these new banks would like to have between 100 and 200 branches each and that will require thousands of branch managers and credit officers etc, so there will be a strong demand for talent.

This advice isn’t limited to PSBs. The existing private banks will also be affected as the new banks will be very competitive about compensation and might position themselves as the more attractive employer. Other divisions within the financial sector shouldn’t be affected by the talent demand because banking is a specialist field that requires experienced people. While people for the lowest levels may be drawn from other sectors, it isn’t likely that someone from insurance, with no knowledge of banking, could move laterally.

As told to Avanija Sundaramurti

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Topics: Strategic HR, C-Suite, Performance Management, Talent Acquisition, #BestPractices, #HRInsights, #Trends, #ChangeManagement

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