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The ‘Indradhanush’ plan: Private solutions for public banks

Accordingly, the finance ministry is now set to work with PSBs on a policy to recruit officers at the mid-level taking into account requirements of the lenders and expected vacancies.

Written by Surabhi |
Updated: August 18, 2015 1:56:39 am
business759 Accordingly, the finance ministry is now set to work with PSBs on a policy to recruit officers at the mid-level taking into account requirements of the lenders and expected vacancies.

Departure Lounge: 78,800

Total number of employees retiring in 2015-16 and 2016-17

After inducting private sector professionals as heads of two major public sector banks, the finance ministry is now working on a policy to appoint mid-level officers from private banks.

“We are working on a policy to allow lateral hiring at mid level in public sector banks. We have to work it out. It is not easy for us to allow people to join at the middle level,” said Hasmukh Adhia, secretary, Department of Financial Services, adding that no further private sector appointments would be made for managing directors (MDs) and chief executive officers CEOs in the remaining 16 public sector banks (PSBs).

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Accordingly, the finance ministry is now set to work with PSBs on a policy to recruit officers at the mid-level taking into account requirements of the lenders and expected vacancies. Of this, about 19,000 officers would be retiring this year and other 18,000 next year.

In an interview to The Indian Express, Adhia said that the ministry will have to work on an appointment criteria to ensure that it is fair and transparent. “The problem is how do we recruit? Because unlike the private sector where the MD can interview and appoint, we have to have a transparent procedure with written tests. So those are the challenges and we will work it out with banks,” he pointed out.

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While for the post of MD and CEO, the finance ministry had offered a “flexible” pay package, for mid-level appointments, the government is unlikely to be able to match lucrative salaries and perks offered by private banks but could instead offer higher performance bonuses.

“Salaries will not change much. It is only when the Pay Commission comes in that it will increase. Salaries for MD and executive directors are indexed to the Sixth Pay Commission. But for other people, we can’t change the salary more than the settlement. But in terms of performance bonus, we will compensate by increasing its volume,” said Adhia.

Last Friday, while unveiling the seven-point reform agenda for PSBs called ‘Indradhanush’, the government had announced appointing private sector professionals to run two of its largest banks — Bank of Baroda and Canara Bank. While managing director and CEO of VBHC Value Homes Pvt Ltd PS Jayakumar, a former Citi banker was appointed to head Bank of Baroda, MD and CEO of private sector lender Laxmi Vilas Bank Rakesh Sharma was hired to head Canara Bank.

But the plan to hire laterally at the mid-level is partly fueled by the government’s wish to professionalise state-run lenders and improve their efficiency and partly from the large number of vacancies that are coming up in these banks.

The AK Khandelwal Committee report on human resource issues in PSBs had estimated that over 1 lakh employees, including 50,000 officers would retire from these banks in a five-year period between 2010 and 2015.

More recent estimates peg total vacancies in public sector banks at about 79,000 vacancies in the current and the next year.

Significantly, the two private sector bankers appointed last week to head Bank of Baroda and Canara Bank too are understood to have decided to work on government pay scales rather than the “flexible” pay offered to them.

However, former bankers as well as bank employee unions are not too happy with the proposal pointing out that it would impact morale of existing officers in the PSBs.

“Typically most banks have a distinct culture. So to some extent, it would be difficult for new entrants at the mid-level to understand it and fit in. Further, it could also impact morale of existing employees, who may feel that they have been left out of promotions,” said a former banker with one of the largest PSBs in the country.

The All India Bank Employees Union (AIBEA) too has opposed the move, pointing out that it would not only affect the morale of existing staff but also that the aim of PSBs is different from private banks. “Why should private sector individuals be hired? It will frustrate and demoralise existing workers. Private sector banks only look to make profits while public sector banks work for social banking,” said CH Venkatachalam, general secretary AIBEA.

AIBEA, which has also opposed appointment of private sector bankers to head Canara Bank and Bank of Baroda, will also take up the issue at the planned all India strike on September 2 by all Central trade unions and their affiliates.
The finance ministry, too, is aware of these concerns and is hoping that its policy on lateral hiring at the mid-management level will not create dissatisfaction amongst PSB officers.

“There are union problems and concerns that people down below may lose their promotion opportunity. The policy will have to take care of these,” said Adhia, while stressing that even the two private sector appointees are very competent and appointed through due process.

“Only 2 people came to apply and they were fully competent. They were all interviewed…” he stressed.
The other major challenge for recruitments from the private sector is the limited talent pool that is available. “The third challenge is that do we have enough bankers outside. The private sector pool is also limited and whether they will leave that job and come in is a question in doubt,” said the financial service secretary.

Meanwhile, the jury is still out on whether public sector banks will be able to go in for campus recruitments from business schools once again for entry-level hiring.

At the press conference last Friday, finance minister Arun Jaitley had said that PSBs are keen on campus recruitments, but there are legal difficulties.

“The banks are extremely keen to do that (campus hiring) …there is now judgement of the Supreme Court which is not giving adequate flexibility to government banks how to do it and that is handicapped which the banks have flagged. We are examining the legal position. But as of today there is a legal impediments in that,” he had said.

In August 2014, the finance ministry had barred PSBs from making any appointments against the permanent vacancies through campus recruitments or interviews after a Supreme Court ruling.

“Supreme Court has clearly said no as there is a lot of discretion involved there,” Adhia pointed out. At present, PSBs are expected to recruit through only through examinations such as those conducted by the Institute of Banking Personnel Selection.

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