Banks face challenges of fin inclusion, HR: survey

India's banking industry will face two challenges--an economically viable solution for financial inclusion and human resources framework--in the next one decade, a survey said.

"The first pertains to the rising expectations from banks to find an economically viable solution for financial inclusion and the second pertains to human resources," the survey by Boston Consulting Group (BCG) and Indian Banks' Association (IBA), said.

"While the first challenge demands unusual innovation and experimentation, the second threatens to cripple the ability of the largest segment of the banking industry from being able to innovate and stay competitive," the survey said.

Due to the legacy of several decades, public sector banks will witness an unprecedented loss of skills and competencies in the form of retiring senior and middle management executives over the next few years.

"That coupled with the need for large-scale re-skilling, attracting and retaining fresh talent, controlling growing employee costs and introduction of performance discipline are significant challenges," it said.

Boston Consulting Group, Partner and Director, Suarabh Tripathi, said: "Banks need to create a business model for financial inclusion from scratch to keep it true to its economic imperative and ring-fence it from the current business. The unique complexities of the public sector make conventional HR solutions ineffective."

"We hope public sector banks would hire over 5-6-lakh of talent in the next ten-years," he said.

According to the survey, the banking industry witnessed a spectacular growth of 18 per cent per annum coupled with an increase in profitability in the last decade and will continue to grow on the back of certain key opportunities in the coming decade.

"Retail banking will be immensely benefited from the Indian demographic dividend. Mortgages will grow fast and will cross Rs 40 lakh crore by 2020," the survey said.

The total mortgages in the books of the banks have grown from 1.5 per cent to 10 per cent of the total bank advances in a period of ten-years.

If by 2020, this ratio were to reach 20 per cent, a number similar to that of China, we could expect the mortgage industry growing at an average rate of over 20 per cent during the next decade, it said.

The survey further said branches and ATMs will need to grow two and five times, respectively, to serve the huge addition to bankable population. A low-cost branch network with smaller sized branches will be adopted in the next decade, it said.

"There will be a requirement of at least 40,000-50,000 additional branches and 1,60,000-1,90,000 additional ATMs in the coming decade. This will be three times more than the branches and ATMs launched in the last decade," the survey said.