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G.T.B. NAGAR,
SION,
MUMBAI - 400037.
A PROJECT REPORT ON
HUMAN RESOURCE MANAGEMENT IN PUBLIC
AND PRIVATE SECTOR BANKS
IN PARTIAL FULFILLMENT FOR
BACHELOR OF BANKING & INSURANCE
SUBMITED BY
PAVITRA DEVI SOKKALINGAM
ROLL NO. 04
TYBBI (SEMESTER V)
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2015 2016
ACKNOWLEDGEMENT
Date:
Place: Mumbai
Signature of Student
DECLARTION
Date:
Place: Mumbai
Signature of Student
(PAVITRA DEVI SOKKALINGAM)
CERTIFICATE
Guru Nanak College of Arts, Science & Commerce
This is to certify that Pavitra Devi Sokkalingam of T.Y. (Bachelor of Banking and
Insurance) Semester-V (Year 2015-16) has successfully completed the Project on
Human Resources Management in Public and Private Sector Banks under
the guidance of Miss S. Sudha.
Signature of Principal
Signature of coordinator
INDEX
Sr.no
Topic
Page no
1.
Introduction to Bank
07
2.
09
3.
Functions of Banks
13
4.
21
5.
24
6.
26
27
29
9.
32
34
11.
35
12.
36
Management
13.
39
14.
Suggestion
45
15.
47
Banks
5
16.
48
17.
Suggestion
51
18.
53
19.
55
20.
59
21.
61
22.
Comparative Analysis
69
23.
Suggestions
70
24.
Conclusion
73
25.
74
Introduction of Bank:
Finance is the life blood of trade, commerce and industry. Now-a-days,
banking sector acts as the backbone of modern business. Development of any
country mainly depends upon the banking system.
The term bank is either derived from old Italian word banca or from a
French word banque both mean a Bench or money exchange table. In olden days,
European money lenders or money changers used to display coins of different
countries in big heaps (quantity) on benches or tables for the purpose of lending or
exchanging.
A bank is a financial institution which deals with deposits and advances
and other related services. It receives money from those who want to save in the
form of deposits and it lends money to those who need it.
ATM Cards
Credit Cards
Reserve bank of India is the Central Bank of our country. It was established on
1st April 1935 under the RBI Act of 1934. It holds the apex position in the
banking structure. RBI performs various developmental and promotional
functions. It has given wide powers to supervise and control the banking
structure. It occupies the pivotal position in the monetary and banking structure
of the country. In many countries central bank is known by different names.
For example, Federal Reserve Bank of U.S.A, Bank of England in U.K, and
Reserve Bank of India in India, Central bank is known as a bankers bank. They
have the authority to formulate and implement monetary and credit policies. It
is owned by the government of a country and has the monopoly power of
issuing notes.
2. Commercial Banks:
These institutions run to make profit. They cater to the financial requirements of
industries and various sectors like agriculture, rural development, etc. it is a
profit making institution owned by government or private of both.
Commercial bank includes public sector, private sector, foreign banks and
regional rural banks:
a. Public sector banks:
It includes SBI, seven (7) associate banks and nineteen (19) nationalized
banks. Altogether there are 27 public sector banks. The public sector accounts for
90 percent of total banking business in India and State Bank of India is the largest
commercial bank in terms of volume of all commercial banks.
b. Private sector banks:
Private sector banks are those whose equity is held by private shareholders.
For example, ICICI, HDFC etc. Private sector bank plays a major role in the
development of Indian banking industry.
c. Foreign Banks:
Foreign banks are those banks, which have their head offices abroad. CITI
bank, HSBC, Standard Chartered etc. are the examples of foreign bank in India.
10
Commercial banks:
Banks are those institutions which conduct the business purely on profit
motive. Banks receive surplus money from the people who are not using it and
lend to those who need it for productive purpose. When we speak of a bank, we
generally mean a commercial bank. Commercial banks are those institutions
which conduct the business purely on profit motive. Commercial banks receive
surplus money from the people who are not using it and lend to those who need it
for productive purpose.
A commercial bank is a dealer in short and medium-term credit. It borrows
money from a group of people at a lower rate of interest and lends to the other
group of people at some higher rate of interest. The difference between the two
rates of interest is the profit of the bank.
12
highlighted
in
following
Diagram
or
Chart.
a. Saving Deposits:
This type of deposits encourages saving habit among the public. The rate of
interest is low. At present it is about 4% p.a. Withdrawals of deposits are allowed
subject to certain restrictions. This account is suitable to salary and wage earners.
This account can be opened in single name or in joint names.
b. Fixed Deposits:
Lump sum amount is deposited at one time for a specific period. Higher rate
of interest is paid, which varies with the period of deposit. Withdrawals are not
allowed before the expiry of the period. Those who have surplus funds go for fixed
deposit.
c. Current Deposits:
This type of account is operated by businessmen. Withdrawals are freely
allowed. No interest is paid. In fact, there are service charges. The account holders
can get the benefit of overdraft facility.
d. Recurring Deposits:
This type of account is operated by salaried persons and petty traders. A
certain sum of money is periodically deposited into the bank. Withdrawals are
permitted only after the expiry of certain period. A higher rate of interest is paid.
14
a. Overdraft:
These types of advances are given to current account holders. No separate
account is maintained. All entries are made in the current account. A certain
amount is sanctioned as overdraft which can be withdrawn within a certain period
of time say three months or so. Interest is charged on actual amount withdrawn. An
overdraft facility is granted against a collateral security. It is sanctioned to
businessman and firms.
b. Cash Credits:
The client is allowed cash credit upto a specific limit fixed in advance. It can
be given to current account holders as well as to others who do not have an account
with bank. Separate cash credit account is maintained. Interest is charged on the
amount withdrawn in excess of limit. The cash credit is given against the security
of tangible assets and / or guarantees. The advance is given for a longer period and
a larger amount of loan is sanctioned than that of overdraft.
15
c. Loans:
It is normally for short term say a period of one year or medium term say a
period of five years. Now-a-days, banks do lend money for long term. Repayment
of money can be in the form of installments spread over a period of time or in a
lumpsum amount. Interest is charged on the actual amount sanctioned, whether
withdrawn or not. The rate of interest may be slightly lower than what is charged
on overdrafts and cash credits. Loans are normally secured against tangible assets
of the company.
16
a. Transfer of Funds:
The bank transfer funds from one branch to another or from one place to
another.
b. Collection of Cheques:
The bank collects the money of the cheques through clearing section of its
customers. The bank also collects money of the bills of exchange.
c. Periodic Payments:
On standing instructions of the client, the bank makes periodic payments in
respect of electricity bills, rent, etc.
17
d. Portfolio Management:
The bank also undertakes to purchase and sell the shares and debentures on
behalf of the clients and accordingly debits or credits the account. This facility is
called portfolio management.
e. Periodic Collections:
The bank collects salary, pension, dividend and such other periodic
collections on behalf of the client.
18
b. Locker Facility:
The bank provides a locker facility for the safe custody of valuable
documents, gold ornaments and other valuables.
c. Underwriting of Shares:
The bank underwrites shares and debentures through its merchant banking
division.
19
e. Project Reports:
The bank may also undertake to prepare project reports on behalf of its
clients.
20
began
documenting
ways
of
creating business
value through
the strategic management of the workforce. The function was initially dominated
by transactional work, such as payroll and benefits administration, but due
to globalization, company consolidation, technological advances, and further
research, HR as of 2015 focuses on strategic initiatives like mergers and
acquisitions, talent
management, succession
before. HR departments strive to offer benefits that will appeal to workers, thus
reducing the risk of losing corporate knowledge.
Meaning:
Human Resource Management is the process of recruitment, selection of
employee, providing proper orientation and induction, providing proper training
and the developing skills, assessment of employee (performance of appraisal),
providing proper compensation and benefits, motivating, maintaining proper
relations with labour and with trade unions, maintaining employees safety,
welfare and health by complying with labour laws of concern state or country.
the
sector,
warn
industry
experts.
Every organizations desire is to have skilled and competent people to make their
organization more effective than their competitors. Humans are very important
assets for the organization rather than land and buildings, without employees
(humans) no activity in the organization can be done. Machines are meant to
produce more goods with good quality but they should get operated by the human
only.
22
"You must treat your employees with respect and dignity because in the most
automated factory in the world, you need the power of human mind. That is what
brings in innovation. If you want high quality minds to work for you, then you
must protect the respect and dignity. "
---Mr. N.R. Narayana Murthy, Chairman Emeritus, Infosys Ltd >>.
Our progress as a nation can be no swifter than our progress in education. The
human mind is our fundamental resource. - John F. Kennedy.
Great Quotations:
The greatest tragedy in America is not the destruction of our natural resources,
though that tragedy is great. The truly great tragedy is the destruction of our human
resources by our failure to fully utilize our abilities, which means that most men
and women go to their graves with their music still in them. - Oliver Wendell
Holmes.
The human mind is our fundamental resource. - John F. Kennedy.
23
management,
organization
of
procurement,
development,
compensation,
integration,
25
It is a continuous process.
26
I emphasize this - no matter how good or successful you are or how clever or
crafty, your business and its future are in the hands of the people you hire.
--- Akio Morita (Late) (Businessman and co-founder of Sony Corporation. Japan)
Ref: The Book: MADE IN JAPAN. Page.No.145
27
Identifies person for the future: Since employees are constantly trained, they
are ready to meet the job requirements. The company is also able to identify
potential employees who can be promoted in the future for the top level jobs.
Thus one of the advantages of HRM is preparing people for the future.
Allocating
the
jobs
to
the
right
person:
If
proper recruitment and selection methods are followed, the company will be
able to select the right people for the right job. When this happens the number
of people leaving the job will reduce as the will be satisfied with their job
leading to decrease in labour turnover.
28
and
development:
Every
employee
goes
under training
program which helps him to put up a better performance on the job. Training
program is also conducted for existing staff that have a lot of experience.
This is called refresher training. Training and development is one area where
the company spends a huge amount.
Performance appraisal: Once the employee has put in around 1 year of
service, performance appraisal is conducted that is the Human Resource
department checks the performance of the employee. Based on these
appraisal future promotions, incentives, increments in salary are decided.
Compensation planning and remuneration: There are various rules
regarding compensation and other benefits. It is the job of the Human
Resource department to look into remuneration and compensation planning.
30
The Human Resource Officer is responsible for providing support in the various
human resource functions, which include recruitment, staffing, training and
development, performance monitoring and employee counseling.
31
I. INTRODUCTION:
The study of human resource management practice has been an important and
critical area in management and organizational performance from last several years
especially in the banking industry. Influence of Human Resource Management
practices on organizational performance has been an important area of research in
past 25 years indicating positive relationship between HR practices and
organizational performance. Human resource management (HRM) practices are
being increasingly treated as dependent rather than independent variables in the
olden days, management gurus and researchers were involved in exploring how
HRM practices affected employee performance, and overall bank performance.
The banking industry, one of the major segments of the financial system plays a
crucial role in the economic and social development of a country. A strong and
healthy Banking system is indispensable in a modern society as a financial
intermediary and occupies a unique position in a nations economy. Indian banking
sector has been passing through different phases such as pre-nationalization, postnationalization and post liberalization phase.
Public sector banks are those banks that are owned by the government. The
government owns these banks. In India 20 banks were nationalized in 1969 and
1980 respectively. Social welfare is there main objective of these banks. They are
divided into two groups i.e. Nationalized Banks and State Bank of India and its
associates. Among them, there are 19 nationalized banks and 8 State Bank of India
associates. Public Sector Banks dominate deposits and advances in the banking
industry. Public Sector banks dominate the commercial banking scenario in India.
These public sector banks can be further classified into:
1) State Bank of India
2) Nationalized banks
3) Regional Rural Banks
32
These banks are those banks that are owned and run by private sector. An
individual has control over these banks in proportion to the shares of the banks
held by him. Private sector banks came into existence to supplement the
performance of Public sector banks and serve the needs of the economy better. As
the public sector banks were merely in the hands of the government, banks had no
incentive to make profits and improve the financial. The main difference is only
that public sector banks follow the RBI Interest rules strictly but private sector
banks can effect some changes but only after approval from the RBI!
In coming times, the very survival of the banks would depend on customer
satisfaction. Values need to be emphasized through concrete actions on the ground
and it would be the banks human resource that would deliver this.
33
35
CURRENT
CHALLENGES
FACED
BY
BANKS
IN
HUMAN
RESOURCE MANAGEMENT
Effective work force:
A time-consuming and hectic job is to hunt the right talent. Higher the
professional value of the vacancy, tougher is the search. Identifying the right
stuff followed by negotiation is the element which makes the job tough for the
employee. Banks are keenly interested to fill up two types of breeds of
professionals.
Ones who are outstanding professionals with high job hopping attitude--- these
are those who come-in-work for some time and then leave for better prospects.
Others are those who are keenly picked-up, trained and area somehow retained
to be developed as future management within the bank.
Banking jobs being apparently lucrative for many, attract a large number of
candidates against advertised vacancies in media creating a large database
management problem. This has been facilitated by specialized hiring agencies
who may take up the job of hiring in case of large number of vacancies.
Right People:
The most difficult agenda of HRM across the banking sector is to retain the
right people. Sudden growth of retail banking and other services has put
pressure on HR Managers in banks to engage more professionals within shorter
span of time thereby attracting manpower in other banks on attractive packages
has made the job market very competing.
A bank in a normal course invests time and money to hire and train the
appropriate workforce for its own operations. This readymade force is often
identified and subsequently picked-up on better terms by others.
36
Compensation:
How much to pay the right employee and how much to the outstanding
performer. Banks have traditionally followed pay scales with predetermined
increments, salary slabs, bonuses and time based fringe benefits like car and
house advance, gratuity, pensions, etc.
The situation is not the same anymore. An increment of Rs500-800 per annum
is no more a source of attraction for a professional anymore. A basic pay with
traditional formulas of linkage with medical and other facilities has no soothing
today.
A waiting period of 3-4 years in each cadre haunts the incumbents who strongly
believe in immediate compensation. A freshly hired professional requires a
brand new car or car loan n resuming office quite contrary to his previous breed
Of bankers who would wait for the job seniority to qualify for a car loan.
Job Satisfaction:
What the HR manager cannot afford is the dissatisfied employee who not only
disrupts the smooth working himself, but also spreads the negativity to others
by his de-motivated attitude.
37
Morale Boosting:
What has long been overlooked is the morale boosting of the employees by the
organization. Human beings even if satisfied of material wellbeing need to be
appraised and encouraged constantly.
Smart banks have realized this need and have taken steps to keep their work
force motivated through proper encouragement like man of the mouth awards,
repeat get-togethers, conferences, sports events, dinners, company sponsored
travel, reunions, etc. This is the way employees create a feeling of
belongingness.
38
Here are the ten challenges that the HR function in India faces:
1) The first and foremost challenge that HR function in India faces is to convert
the abundant population pool into useful human resource.
4) With the increase in number of job options available nowadays, the HR function
of an organization must take care that they hire those people who believe in longterm commitment to the organization. The HR then must take up the challenge of
retaining them by developing retention techniques like Holiday plans fun-at-work
etc.
5) Because of cutthroat competition, HR in India also faces the task of building
competitive ad-vantage for the company over national and international
competitors.
6) The growing importance that companies are nowadays giving to cost-cutting has
posed HR with the challenge to minimize expenditure on HR not compromising on
the productivity.
7) Since right-sizing has been a growing trend in Indian organization, the HR now
faces the task of identifying and retaining the key employees of an organization
and letting go those that do not suit its future requirements.
39
10) With multinational organizations on the rise, HR needs to focus on issues such
as cross-cultural training so that problems that can arise because of differences in
international professional values can be diminished.
Meeting HR Challenges:
The banking sector has been growing at a very fast pace in India not only in the
terms of its size but also in terms of the services being provided. With banks
reaching the remote areas in the country one can anticipate positive things like
financial aid to farmers and increased financial awareness. However, with the
increase in size and activities of banks, the number of banks in private sectors has
also increased thereby posing challenges like cost-efficiency, technological
advancement, and credibility related issues. The task before the HR is to develop
strategies that help banks in gaining competitive advantage and encourage
innovation in its products and services.
Managing Human Resource:
Considering the above HR challenges which our Indian banking industry is facing,
we can manage the human resources by proper Planning like
Hiring the right person for the right job
Retaining and Developing
Managing people/ conducting exit interviews
40
In assessing whether the "right person" has been selected for the "right job", the
most prominent theoretical concept that emerges is the concept of "fit". Different
writers emphasize different types of fit. Sekiguchi (2004: 179) in a review of
literature on person-environment fit discusses two types of fit that emerge as the
most prominent types of fit: person job fit and person-organization fit. In pursuing
person-job fit, companies seek to match the job holder's knowledge, skills and
abilities to the requirements of the job. Companies can ascertain personorganization fit by focusing on how well the individual fits with the culture or
values of the company and the individual's capacity to work well with other
company employees.
We may be able to get the most suited people for our work but then the challenge
is to retain these people and to develop them. There are several dimensions to this
issue such as training/ re-skilling of employees, performance measurement,
promotion policy, transfer policy, talent management, communication, etc. In this
study some of them for discussion:
Training and Development:
With drastic growth of banks it calls for efficient and well trained staff members to
handle/deal with the consumer needs. Banks are shaping up as financial hub for
their clients to grow in size and well recognized in the world market. To pull
consumers banks are offering traditional with advance services like SMS banking,
41
ATM, internet banking, priority banking, demat. So we can say that it caters to the
need of the bottom to the highest class of society providing something to everyone.
Universal banks have become modern days supermarket extending almost every
facility of banking under one roof.
Banks like Bank of Baroda are conducting Grooming and etiquettes programmes
for front line employees and also for employees selected for overseas posting in
order to improve their service levels and qualitative interaction with customers and
various stakeholders better. SEED (Self efficiency and effectiveness development)
programme being run for frontline staff of the Bank in order to improve their
service skills and servicing efficiency.
In Punjab National Bank, in the light of the large scale human resources gaps
that Bank is likely to face in the next few years need for Succession Policy has
been felt. The Policy envisages mapping of the 'existing pool' against the 'future
requirement' from the projected business figure to ensure that adequate number of
officials are available in the pool and also to foresee the surplus / deficit in the pool
for ascertaining the requirement of succession in a particular vertical. Bank has a
three tier training set up comprising of Central Staff College (CSC) at Delhi at
apex level catering to training needs of Top / Senior / Middle Management Grade
officers, three Regional Staff Colleges (RSCs) located at Belapur Navi Mumbai,
Lucknow and Panchkula for training needs of Senior / Middle /Junior Management officers as well as workman staff and seven Zonal Training Centres
(ZTCs) at Dehradun, New Delhi, Jaipur, Kolkata, Kozhikode, Ludhiana and Patna
looking after the training needs of Middle / Junior Management Grade officers &
Workman Staff. IT Training Centre located at Faridabad caters to the training
needs of officers exclusively in the areas of Information Technology.
Performance Management:
Banking service is one sector where a great degree of attention is being paid to
performance appraisal system. Several of the nationalized banks have changed
their performance appraisal system or are in the process of changing them. In most
of the banks that follows the traditional system, their officers are being assessed on
the following characteristics:
General Intelligence
Job Knowledge
42
In coming times, the work force will get complex and there will be a need to juggle
a wide variety of people with varied needs and preferences, resulting in an array of
relationships between the organization and those who work for it.
Peter Drucker had, more than a decade ago, expressed the need for what he called
non-traditional work relations: flexible schedules, contract arrangements, virtual
teams, etc.
HDFC Bank provides for gratuity to all employees. The benefit is in the form of
lump sum payments to vested employees on resignation, retirement, death while in
43
Employees of the Bank, above a prescribed grade, are entitled to receive retirement
benefits under the Banks Superannuation Fund. The Bank contributes a sum
equivalent to 13% of the employees eligible annual basic salary (15% for the
Managing Director, Executive Directors and for certain eligible erstwhile
Centurion Bank of Punjab (eCBoP) staff) to insurance companies, which
administer the fund. The Bank has no liability for future superannuation fund
benefits other than its contribution, and recognizes such contributions as an
expense in the year incurred, as such contribution is in the nature of defined
contribution.
Short Term Employee Benefits:
The Bank operates a Provident Fund scheme. All eligible employees are entitled to
receive benefits under the Banks Provident Fund scheme. The Bank contributes
monthly at determined rate (currently 10% of employees basic pay plus eligible
allowance). These contributions are remitted to a trust established for this purpose
and are charged to Profit and Loss Account. The Bank provides for pension to all
eligible employees. The benefit is in the form of monthly payments as per rules
and regular payments to vested employees on retirement, on death while in
employment, or on termination of employment. Vesting occurs at different stages
as per rules.
44
SUGGESTIONS
The banking sector has grown from a few institutions primarily involved in deposit
acceptance and trade finance into a complex multi-player markets where large
number of commercial banks, financial institutions and specialized banks are
operating with various product activities. Like many other organized sectors,
banking requires multi-layer manpower for its various requirements of
professionals and support staff. The range may require reasonably educated
security guards on the one hand and a highly educated and trained professional as
head of corporate finance. With liberalization of activities within the banking
sector, for example, more emphasis on consumer and house finance and personal
loans, etc. Banking has turned itself into a more market based business where
banks have expanded their reach more to customers door step in a big way making
banking more practical. This has further highlighted the need for proper
development of man power to run banks efficiently. Smart banks have realized this
need and have taken steps to keep their workforce motivated through proper
encouragement like man of the month award, repeat get-together, conferences,
sports events, dinners, company sponsored travel, reunions, etc.
In spite of all these facilitations there still exist several lacunas in the HRM
practices in banking industry.
Some of the specific suggestions based on survey of literature as well as the group
discussions and survey are given here under:
8) In order to become HRD conscious, the Public Sector Banks should allow
independent functioning of HRD section, where the top person should be himself a
good successful banker, a real HRD person free from any biases.
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10) Banks should have a system, whereby the training needs of an employee are
identified and are duly fulfilled at every stage of career growth.
11) Have special R & D wings in HRD Department for ongoing in house &
external research development, review and implementation of HRD policies.
47
Human resources management practices play a very vital role in achieving the
organizations goals and maintain the competitive advantage.
Keeping in view of HRM practices, it is understood that the HRM did not has
direct role in business development but was more concerned with centralized
recruitment to staff. In this context, the review of the study covers the following
most important indicators of HR practices, which were followed by any public
sector bank.
Job analysis:
Job analysis involves collecting information about the characteristics of a job using
one of several methods: observation, interviewing, questionnaires, or more
specialized job analysis methods such as position or functional analysis.
Organizations sometimes use a combination of job analysis methods (Hawthorne,
2004; Mathis & Jackson,
1997). All the Banking authorities reported that they follow a combination of
several methods for job analysis of the employee.
Recruitment and selection:
48
This total procedure is designed to cover all positions from bottom to top level.
Indian Public Sector Banks use both methods of recruitment i.e., internal and
external markets. Usually, for clerical and officer posts, external market is used
through advertising etc. On the other hand, the managerial/executive positions are
filled up through promotions and transfers i.e., for higher positions the internal
market is usually relied upon. In some of the PSBs in India, the practice of
recruiting specialists such as technical employees, management trainees etc.
directly from the reputed institutions through campus interviews have been started.
Some banks are also utilizing the services of consultants and employment on
contract basis.
Training and Development:
HRD as one of the major functional area in HRM. Continuing education and
training programmes are essential considerations to enrich their careers and excel
their development. Banking activities and knowledge is ever changing. In order to
cope up with these changes and to develop employees careers all banks
established their own training institute. Those institutes organized different types
of training and development programmes based on the employees need.
Those needs are identified by need assessment activities.Volume-3, Issue-12, Dec-
Training is more in IPSBs because the training system in the banking industry has
a strong structural base, and has capabilities to handle training in large numbers.
The system has also developed several innovative activities in the training area
such as on-location training, manager to messenger programmes. Further the
IPSBs have a good support to training efforts from apex level training institutions
such as National Institute of Bank Management (NIBM), Bankers Training College
(BTC), and College of Agricultural Banking (CAB). The IPSBs have more than
three hundred individual bank level training colleges and training centers.
49
Training is given emphasis by all banks, although not much systematic training
need analysis is carried out. The training colleges conduct training programmes for
relatively junior level bank staff. For most of the senior level training, banks
depend on external agencies, especially foreign training organizations. Training
establishments of some of the bigger banks complain of under utilization.
Performance Appraisal:
SUGGESTIONS
50
On the basis of review of this study the following suggestions are made for better
HRM practice in the Public sector banks in India:
In the recruitment and selection process of employees, the banks should give
priority to the candidates who has graduate and above degrees in Information
Technology, experience, skills, competencies etc. It is also suggested that
institutional training should provide effective skills to employee. Employees
should be motivated to utilize the material and libraries so that competency gap
would be reduced.
It is necessary for restructuring of salary to motivate employees in particularly
in public sector banks.
To develop human resources, the bank should undertake different human
resource development programmes including continuing education and training,
IT-orientation, career development, etc.
Banks can send bright employees to abroad on fellowship/scholarship for
higher studies and learn new technology in order to attain competence at global
level.
Banks should organize seminars, workshops, conferences, different short
courses, and training programmes on financial matters, current issues, software
up gradation on regular basis that would definitely help to develop
knowledgeable manpower, create awareness and change mental attitudes among
the professionals.
All banks should allocate sufficient budget and sends competent employees to
international conferences and seminars to prepare them for the competitive
knowledge global market.
Human Resource Department is essential to empower the department or
divisions for handling different issues in HRM in banks. The divisions should
be incorporated with well-organized human resource information systems and
modern information technology facilities.
51
Public sector banks should frequently invite staff for suggestions and their
active participation in meetings in order to encourage and staff satisfaction.
The training colleges conduct training programmes for relatively junior level
bank staff. For most of the senior level training, banks depend on external
agencies, especially foreign training organizations. It is to better to utilize of
bigger banks training institutions even for senior level instead of depending on
external agencies or foreign organizations.
It is suggested that employee potential should be evaluated based on objective
assessment but not on favoritism. Transparency in evaluation and promotion
policy also suggested.
52
State Bank of India is the nation's largest and oldest bank. Tracing its roots
back some 200 years to the British East India Company (and initially established as
the Bank of Calcutta in 1806), the bank operates more than 15,000 branches within
India, where it also owns majority stakes in six associate banks. State Bank
of India (SBI) has more than 80 offices in nearly 35 other countries, including
multiple locations in the US, Canada, and Nigeria. The bank has other units
devoted to capital markets, fund management, factoring and commercial services,
credit cards, and brokerage services. The Reserve Bank of India owns about 60%of
State Bank of India Human Resources Development Department
HRDD Vision
53
promoted to the next higher level/grade not because he is good, but because he is
better than everybody else at the current level/grade.
Vacation
Motivation,
Training
Establishments,
Mobility
54
HROB007
Case Length
04Pages
Period
2001
Organization
Pub Date
2001
Teaching Note
Available
Countries
India
Industry
Issues:
How poor manpower planning led to problems with the bank's VRS
Keywords:
State Bank of India, VRS, developments, Indian public sector bank, SBI, VRS,
reasons, employees, protesting, post-VRS scenario
"They are propagating the VRS in such a manner that the employees are being
compelled to opt for the scheme."
- V.K.Gupta, SBI employee's union leader in December 2000.
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VRS TROUBLES:
In February 2001, India's largest public sector bank (PSB), the State Bank of India
(SBI) faced severe opposition from its employees over a Voluntary Retirement
Scheme (VRS). The VRS, which was approved by SBI board in December 2000,
was in response to Federation of Indian Chambers of Commerce and Industry's
(FICCI)1 report on the banking industry. The report stated that the Indian banking
industry was overstaffed by 35%. In order to trim the workforce and reduce staff
cost, the Government announced that it would be reducing its manpower.
Following this, the Indian Banks Association (IBA)2 formulated a VRS package
for the PSBs, which was approved by the Finance ministry.
Though SBI promoted the VRS as a 'Golden Handshake,' its employee unions
perceived it to be a retrenchment scheme. They said that the VRS was completely
unnecessary, and that the real problem, which plagued the bank were NPAs 3. The
unions argued that the VRS might force the closure of rural branches due to acute
manpower shortage. This was expected to affect SBI's aim to improve economic
conditions by providing necessary financial assistance to rural areas. The unions
also alleged that the VRS decision was taken without proper manpower planning.
In February 2001, the SBI issued a directive altering the eligibility criteria for VRS
for the officers by stating that only those officers who had crossed the age of 55
would be granted VRS.
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Background Note:
The SBI was formed through an Act of Parliament in 1955 by taking over the
Imperial Bank. The SBI group consisted of seven associate banks:
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore
State Bank of Bikaner & Jaipur.
The SBI was the largest bank in India in terms of network of branches, revenues
and workforce. It offered a wide range of services for both personal and corporate
banking. The personal banking services included credit cards, housing loans,
consumer loans, and insurance. For corporate banking, SBI offered infrastructure
finance, cash management and loan syndication...
The Protests:
The SBI was shocked to see the unprecedented outcry against the VRS from its
employees. The unions claimed that the move would lead to acute shortage of
manpower in the bank and that the bank's decision was taken in haste with no
proper manpower planning undertaken.
They added that the VRS would not be feasible as there was an acute shortage of
officers (estimated at about 10000) in the rural and semi-urban areas where the
branches were not yet computerized. Moreover, the unions alleged that the
management was compelling employees to opt for the VRS. They said that the
threat of bringing down the retirement age from 60 years to 58 years was putting a
lot of pressure on senior bank officials to opt for the scheme...
57
58
60
Case Details:
Case Code
HROB157
Case Length
08 Pages
Period
2000-2013
Organization
ICICI Bank
Pub Date
2013
Teaching Note
Not Available
Countries
India
Industry
Themes:
Human Resources Management/ Leadership Development/ Mentoring
Issues:
Critically analyze talent management strategies at ICICI Bank.
Understand the mentoring process adopted by Kamath to groom young
employees at the bank.
Understand the need to set up a formal leadership development process at the
bank.
Understand the issues and challenges faced by the mentors while mentoring
employees.
61
Key Words:
ICICI Bank, Talent management, Leadership talent, Mentoring, Nurturing talent,
Leadership
development,
Performance
appraisal,
Human
capital,
Talent
assessment, Leadership pipeline, Entrepreneur model, Talent screening, 360degree performance management process, ICICI DNA, Talent retention
"Leadership is the ability to handle the job at the next level with comfort. Being
able to perform your future role in the present. It is especially important in an
industry like ours where people are our most important asset, and we depend on
people for growth. When your business focuses on growth, grooming talent is
crucial".
- Chanda Kochhar, Chairman and MD, ICICI Bank Ltd., in 2010.
"The bank's leadership in the industry is exemplary. But nothing to compare its
ability to spot, groom, and deploy leaders in-house".
- Indrajit Gupta, editor, Forbes India & George Smith Alexander,
reporter at Bloomberg, in 2008.
Introduction:
ICICI Bank Ltd. (ICICI Bank), the India-based financial banking institution, began
a process of identifying and nurturing talent in the 1980s. This practice paid rich
dividends, with ICICI Bank becoming known as a powerhouse of leadership talent.
Ever since N Vaghul (Vaghul) became the chairman and MD of Industrial Credit
and Investment Corporation of India Limited (ICICI) in 1985, the bank had
fostered a culture of nurturing young talent. Vaghul brought in a fresh and different
approach to working in the organization. He involved younger people at the bank
in big projects unlike CEOs of other organizations who preferred to pick senior
level managers.
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This was a bid to develop a talent pool at the bank. Vaghuls way of empowering
young people, nurturing talent, and developing a leadership pipeline became part
of the banks culture and was carried forward by former CEO and MD, KV
Kamath (Kamath) and present CEO and MD, Chanda Kochhar (Kochhar).
Kamath who joined ICICI Bank as CEO and MD in 1996, created an incredible
talent for spotting employees with leadership potential. He was instrumental in
grooming several people who later took up key positions at the bank. Kamath
nurtured people with potential leadership at the bank by moving them from one
assignment to another and making them take up different leadership roles and
serving the bank. Commenting on Kamaths ability to nurture talent, Kalpana
Morparia (Morparia), former joint managing director, ICICI Bank, said, "Mr
Kamath has an amazing ability to pick a leader and identify potential way beyond
what the people believed in. Less than 20-25% of us had any clue where we were
headed in our careers."
Kamaths vision was to enable ICICI Bank to surge ahead and capture a vital share
of the market. He planned to create leaders within the organization who could
foresee opportunities ahead of others.
The mentoring process started with picking young employees who had joined the
bank as management trainees and giving them hard-to-achieve targets to test their
potential. Employees passing the test were promoted to lead senior-level positions.
The success of the mentoring process led to the bank institutionalizing a formal
leadership development process that identified talented employees through a
performance appraisal system after which they were assessed for future leadership
roles.
Experts felt that the bank's successful transformation from a lending financial
institution to a retail powerhouse could be attributed to its mentoring and
leadership development process.
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Background Note:
ICICI Bank was founded in 1994 as a subsidiary of an Indian financial institution,
the Industrial Credit and Investment Corporation of India Limited (ICICI). ICICI
through its subsidiary, ICICI Bank, transformed itself from a developmental
financial institution offering services such as project finance into a diversified
financial services group offering an array of products and services directly as well
as through subsidiaries and affiliates such as ICICI Bank. In 1999, ICICI became
the first bank or financial institution from Asia barring Japan to be listed on the
New York Stock Exchange. In 2000, ICICI and ICICI Bank merged to benefit the
shareholders of ICICI Bank through a large capital base and scale of operations.
In October 2001, the Board of Directors at ICICI and ICICI Bank approved the
merger of ICICI with ICICI Bank and two of ICICI's wholly-owned retail finance
subsidiaries ICICI Personal Financial Services Limited and ICICI Capital
Services Limited.
ICICI Bank made phenomenal progress in a short period under the leadership of
Kamath, who joined ICICI Ltd. as its managing director and CEO in its embryonic
stage in 1996. It was at this time that the preliminary results of the liberalization
efforts that India had initiated in 1991 began to show.
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Over the years, ICICI Bank adopted smart initiatives in the rapidly growing
financial sector of India and created a state-of-the-art banking infrastructure in its
branches across India. The main strengths of ICICI Bank were its talent pool,
complete product suite, large capital base, extensive customer relationship, strong
brand franchise, technology-enabled distribution architecture, and universal
banking presence. Though ICICI Bank was mainly involved in retail banking, it
ventured into other products such as insurance, corporate banking, venture capital,
etc.
In 2007, ICICI Bank created history by raising US$ 5 billion in the largest-ever
public offering in India and emerged as a valuable financial organization. In 2009,
Kamath stepped down from the post of CEO and MD of ICICI Bank in favor of
Kochhar.
For the FY ended March 31, 2012, ICICI Bank had assets worth US$ 83.6 billion,
which made it the second largest bank in India.
employees leaving the bank for better options. This prompted Kamath to devise the
parking lot theory...
Grooming Successors:
The bank also used the leadership development process to groom successors at the
bank. Moreover, succession planning was essential as all the topnotch people such
as Lalita Gupte and Morparia were retiring in October 2006 and in 2007,
respectively...
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Other Initiatives:
While the formal leadership development system identified and nurtured young
professionals at the bank, ICICI Bank also took some initiatives to nurture leaders
at the senior management levels. For instance, in 2003, ICICI Bank came up with a
new leadership program called Mentoring the Mentors for professionals at the
senior management level. The program aimed to hone the mentoring abilities of
professionals. The bank also identified some corporate professionals from
companies across other sectors for this initiative. These professionals conducted
sessions on effective mentoring for the senior management level at the bank...
Results:
According to experts, ICICI Banks focus on nurturing young leaders helped the
bank move ahead of others in the Indian banking sector. Moreover, they felt that
the leadership development process had also helped the bank survive through the
crisis. For instance, in mid-2008, the global economic environment became very
challenging due to the global financial crisis. ICICI Bank also faced the heat due to
its heavy global exposure. Moreover, a rumor that began in Gujarat that ICICI
Bank would go bankrupt spread like wildfire...
Looking Ahead:
Experts felt that though ICICI Bank had a depth of talent, it also faced the risk of
becoming a poachers paradise. According to Kochhar, "When an organization
grows at 35-40 per cent per annum for 10 years and adds 10 new businesses during
that period, young professionals get the kind of exposure they would not have got
anywhere else. We have groomed people to build and run businesses like
insurance, securities, and retail. So if other players are looking to grow who would
they pick? The best person would be someone who has already run the business."...
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Exhibits:
Exhibit I: ICICI's Profit and Loss Statement
Exhibit II (A): Role of Top Management in Mentoring
Exhibit II (B): Employees Mentored by Kamath
Exhibit III: ICICI Bank's Talent Management Components
Exhibit IV: Women Leaders at ICICI Bank
Exhibit V: ICICI DNA Anchors
Exhibit VI: Kochhar's Career Path to the CEO
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Comparative Analysis:
ICICI is private global bank its HR practices are totally different SBI no.1 public
sector bank of India. Package given by ICICI is more enough than
salaries provided by SBI. Incentives and benefit policies of ICICI and SBI is
totally different. Selection process of ICICI is very lengthy and cost consuming.
RECOMMENDATIONS:
Recommendations for ICICI:
Simplify its recruitment and selection process.
Reduce salaries of employee and increase the incentives and benefits part in
their compensation.
Recommendations for SBI:
Competition in banking sector increases due to private banks. Private
sector banks giving higher salaries to attract the talent. Thus it is necessary
for SBI to increase its salaries.
Give more emphasis on training and development of employees.
Increase motivation by giving extra benefits.
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SUGGESTIONS:
Based on findings emerged from the analysis of the data collected through
questionnaires and interacting with the management officials of the public sector
banks, the following suggestions are offered to improve the HRM as prevalent in
banks.
1. An awareness is to be created at all levels that HRM is everybodys business and
systems for creating such awareness are to be developed.
2. Banks should establish a high power HRM Committee at the corporate level.
Alternatives, the form and the scope of the Training Advisory Committee will meet
atleast once in 3 months. HRM task force at various levels may also be set up to
implement various HRM measures as are initiated and approved by the HRM
Committee.
4. The HRM surveys should be carried out in the banks every 3 years and findings
of these surveys should be interpreted and suitable HRM interventions should be
made. The suggestions emerging from these surveys need to be examined and
followed up seriously.
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letting out pent up feelings if not for immediately solving them. This should be
followed up suitable communication from controllers.
9. More important personnal policies like transfer and promotion are to be viewed
periodically transfer placement policy should be implemented in fairness with
minimum adhocism and undue favouritism from either side. This will instill
confidence amongst all.
10. The system of reward and punishment should be made more clear and
transparent while there should be an institutionalized system for calling periodical
information, good work done by staff for prompt appreciations of their deeds and
punishment to the erring employees should be quick and proper to serve as a
deterrent to others.
11. A thorough and scientific screening of the participants should be done before
selecting employees for training so that the right type of personnel are selected for
the right type of training.
12. The development oriented PAS should be integrated with the entire HRM
system of the organization. The appraisal data should be used not only for
promotion decisions but also identification of staff training needs, job placements,
job enrichment and enlargement, talent spotting and career planning.
13. A basic commitment and willingness on the part of the management and
employees along with sustained planning efforts are required for the entry of
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14. New manual for computer audit should be prepared and the access to software,
kind of access and the risks involved are required to be assessed periodically, so
that of computerized branches serve the purpose of an audit and does not become a
routine.
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CONCLUSION:
The face of banking is changing rapidly.
Competition is going to be tough and with human resources management of
public and sector private banks.
Banks in India will have to benchmark themselves against the best in the world.
These are some of the issues that need to be addressed if banks are to succeed,
not just survive, in the changing milieu.
Taking the banking industry to the heights of international excellence will
require a combination of new technologies, better processes of credit and risk
appraisal, treasury management, product diversification, internal control and
external regulations and not the least, human resources.
A high level of performance is rewarded by a system of performance bonus.
The ratio of variable bonus to fixed salary is finally high to attract and retain the
best talent in the bank.
The scope of public sector and private bank have great human resource
management is different but the competition which have various system.
Specializing in various human resource management tasks and functional
leadership engaging in strategic decision-making across the business.
To train practitioners for the profession, institutions of higher education,
professional associations, and companies themselves have established programs
of study dedicated explicitly to the duties of the function.
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BIBLIOGRAPHY
REFERENCE BOOKS:
Human Resource Management in Public and Private Sector Banks
H.R Machiraju. Indian Financial Systems, UBS Publishers and
Distributors LTD., India.
Principles of Banking Macmillum.
Joy, O.M.: Introduction to Financial Management (Madras: Institute for
Financial Management and Research., 1978).
WEBLIOGRAPHY
SOURCES:
www.google.com
www.googleimages,com
www.yahoo.com
www.yahooimages.com
www.wikipedia.com
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