New entrants may face hurdle to man branches in unbanked areas

Prospective banking entrants are likely to face human resource challenges in implementing the Reserve Bank of India's (RBI) directive on having 25 per cent of their branches in unbanked rural centres. According to experts and bankers, many new lenders might have a problem funding sufficient skilled personnel to work in such branches.

Unbanked rural centres are places with a population up to 9,999, according to the latest Census.

"It is the operational bankers (for branches, especially rural) which will be of great demand. State Bank of India and other top five public sector banks, including Bank of Baroda and Union Bank will be the ground to hunt talent," said A K Khandelwal, ex-chairman and managing director, Bank of Baroda, and author of a report on human resource issues on public sector banks.

He added a good number of experienced people at the middle level (assistant general managers, etc) in public sector banks will move to new private banks. Better compensation and recognition of experience will drive them to the new banks.

Human resource experts said talent would be poached from private and public sector banks having significant presence in rural areas and qualified personnel working in those regions. "While private banks may be able to retain their rural talent with better salary, public sector banks, including the large ones, may be constrained by their inability to pay exorbitant salaries to retain people," said a senior official with a head-hunting firm in Mumbai.

According to experts, new banks would be able to get talent to these areas only if they are able to pay a higher salary. However, one constraint for paying attractive salary is that these branches may not become profitable soon.

"While the suggested condition that 25 per cent of the branches of new private banks be opened in new areas could compel them to spread out into smaller towns and improve their market share there, the stipulation could also have adverse implications for their profitability," said rating agency Icra.

Sangeeta Lala, vice-president of human resource firm TeamLease, said the new banks would already have a preferred list of people who are top performers in their respective organisations. "Moving around within a state where an individual has been placed would happen, coupled with an appropriate package and good role in the organisation," she said.

This is not the first time India will be facing a challenge in attracting talent to rural areas. The one-year mandatory rural stint for medical professionals was met with discontent by students, with most skipping this exercise. The government is now looking at mandating six to eight months rural posting for medical graduates.

Sunil Goel, director of New Delhi-based consultancy GlobalHunt, anticipated that these new banks would recruit locally and train them. "District level management institutes will act as a talent pool for the banks, for establishing operations in rural areas," he said.

Another possibility, according to E Balaji, managing director and CEO of Randstad India, was recruiting candidates from Tier-II or Tier-III locations. He said since they belonged to a non-metro, they would be comfortable working in a similar location in any part of India.

He said candidates from urban regions could also be attracted, if offered a good position and a pre-defined time-frame to work in rural areas.

The report on Trend and Progress of Banking in India 2011-12 by RBI showed that private sector banks had 1,581 branches in rural areas as on March-end 2012, while public sector banks had 22,188 branches. State Bank of India lead the list among public sector banks with 6,582 branches.

Supreet Singh, founder and CEO of Altor Executive Search, said hiring will happen at three levels: strategic management, senior people in operations especially for branches, and field staff. "On priority, banks will cobble up the top-team and select people senior people for operations. The recruitment for persons who will work in branches and field will follow," he said.