20 lakh new banking jobs, but is there sufficient talent?

20 lakh new banking jobs will be created in the next 5-10 years, but are banks adequately poised to handle this staffing challenge?

In an environment where headlines have focused on jobless growth and apocalyptic scenarios of millions returning to low wage, low productivity farm jobs, a new report by HR services major Randstad India provides much to cheer about.

With licenses for new banks to be issued soon and penetration of financial services expected to expand to rural areas in the years to come, the sector could create as many 7-10 lakh new jobs in the next 5-10 years according to Randstad India. The Manipal Academy of Banking pegs this number at a much higher 20 lakh positions.

A bulk of this hiring will happen in the public sector banking space as 50% of the PSB working force in the mid and lower level bracket is set to retire in this period. McKinsey & Company estimates 60 to 90 percent of deputy general managers/general managers at PSU banks too are set to retire as early as 2016-17 and this number could jump to 93 to 100 percent by 2020, creating staffing challenges not just at the low & mid levels, but also in management and leadership positions.

 

The report should give prospective job seekers much reason to celebrate. But indications are that banks are simply not adequately poised to handle this massive staffing challenge that confronts them. An Op-Ed (Read here) in this newspaper last month highlighted some of the problem areas particularly for the PSBs that are expected to absorb a majority of this new workforce.

 

Part of the current predicament is because of legacy issues - caused by the freeze on recruiting probationary officers through the 1990s as well as the fact that growth in employee numbers did not keep up with the growth balance sheet. Manpower increase has been a meager 0.5 per cent, compared with balance sheet growth of 22 per cent according to BCG. But where banks have begun recruitment, the appointment process is often mired in bureaucracy - tenders for appointment of even HR consultants are unnecessarily prescriptive, with a larger focus on procedures rather than the task of filling vacancies.  
 

Shortages have also meant, banks are taking shortcuts, fast tracking promotions and imparting bare training, with fresh recruits joining the ranks with hardly a week of preparation. Then there is also a mindset issue. At a time when lateral recruitment is required to bring in specific skill sets for specific roles, it has accounted for barely 2 percent of employments in PSU banks as opposed to 53 percent in the private sector.  

 

"Going forward getting manpower, given the demographic dividend we have, is not going to be so as much of a challenge  as re-skilling the workforce. Unlike an L&T which is having trouble finding engineers to work on site, finding talent for entry level banking jobs will be fairly easy. The real challenge today is knowledge updation, training and re-skilling of the existing staff. They haven't been able to keep pace with the rapid changes in technology, and that could pose problems" says Diwakar Gupta, Ex-MD at SBI.

 

Reorientation of skills will also be critical says Ashwin Parekh - Partner & National Leader, Financial Services at E&Y. "It will arise not only out of technological changes and the sheer number of new locations that need to be penetrated - 8640 new areas according to the RBI, but also because documentation, data gathering requirements have become more stringent with Basel 3 pushing banks towards evidence based rather than judgment based lending."  

 

With a bulk of the hiring expected to happen in smaller towns as banks expand networks to meet financial inclusion goals, banks will also have to put in a huge effort in induction along with recruitment adds Parekh. "They will no longer be able to hire post-graduates, and expect them to learn on the job. And currently neither our private nor public sector banks have robust induction procedures, barring exceptions like HDFC Banks and to an extent ICICI and Axis"

 

As new licensees set up operations, increased competition and higher attrition as a result will also pose a significant challenge to PSBs. There have been calls in certain sections to raise the retirement age. But "unlearning can prove more expensive than learning" says Parekh as upping the age of retirement would only amount to kicking the can down the road.

 

The only option for banks, is to step up to the challenge with a strategic plan and the urgency it merits.