PSBs in the country have been under reeling pressure as many banks continue to face human resource crisis for quite some time now. Currently, the top positions at Punjab National Bank, Bank of Baroda and Canara Bank remain vacant; and Bank of India and IDBI Bank both are next in line. The background to this scenario can be traced back to 2014, when the government terminated the UPA appointed 8 CMDs and 14 EDs of state-run banks, and reforms were initiated including the splitting of the roles of the Chairman and MD/CEO. The appointments to the top positions came under scrutiny after the arrest of the then Syndicate Bank’s chairman and MD SK Jain by the CBI for accepting bribes; and that he was favored during the selection process.
The lack of top management for guidance is even more unnerving presently because the sector has witnessed 86% rise in forgery and cheating in the recent past with loan frauds running into thousands of crores as per the Reserve Bank of India. Related to this is the fact that the profits have also been crashing for a while now; where Edelweiss, in a report on the performance of PSBs, has pointed out that profitability for public sector banks took a severe beating and was down by more than 50 per cent.
The appointment process in PSBs has been opaque for quite some time now as against the transparent broad-driven mechanism applied by private sector banks. Until now the government fixed the eligibility criteria, interviewing the candidates, and also played a dominant and leading role in processing the applications. Further, multiple changes in the selection criteria by the government in charge for determining the ‘eligible candidate’ to fill the top position has also caused delays.
The Hudson report that was released few years ago identified hiring right talent and as one of the most critical HR challenges of PSBs in India. However, the crisis has not been met with effective and long-lasting solution as of yet.
Currently, as a part of the new management reform initiative, psychometric tests are now being introduced as part of the selection program of top positions in PSBs. Global management consulting firm Hay Group has been given the task to shortlist Managing Directors and CEOs of five PSBs including Punjab National Bank and Bank of Baroda. The candidates will now be required to undergo a three-stage process that includes background checks, personal interviews and the two psychometric tests.
Psychometric tests are concerned with the measurement of skills, knowledge, abilities, attitudes, personality traits, educational achievement and situational judgement skills. The test is being designed in alignment with the requirements of the sector. The questionnaires outlined for the test cover personal issues such as the biggest setback in the candidate’s life, his/her response to the challenge and other similar questions that will help understand the candidate’s judgement calls during demanding situations. The objective of these tests is to ascertain whether a candidate is fit for the demanding role in an already-down trodden sector.
But how effective is this newly adopted process of psychometric testing going to prove in hiring the right top level executives of Indian PSBs is yet to be seen.