RBI for overhaul of banks' HR practices

K C Chakrabarty questions wisdom in hiring from top B-schools

The Reserve Bank of India (RBI) has called for a complete overhaul of human resource practices at banks, especially public sector ones where several staffers are due to retire in seven to eight years.

K C Chakrabarty, one of the central bank’s deputy governors, says this sort of increasing intervention in the affairs of public sector banks was needed due to lack of management capacities at the latter.

Earlier, PSBs had expressed discomfort at increasing interference from above in day-to-day operations on credit sanctioning, loan pricing, and human resource (HR) issues. The Union finance ministry had recently asked all banks to follow a uniform practice on promotion and recruitment.

At a HR summit of PSBs, Chakrabarty said: “Why are the promoters and owners being made to take a keen interest in your routine affairs? Efficient and effective HR systems are the key here. In my opinion, this may be due to something lacking in the management capacity of the banks.”

The deputy governor made these comments at an event on Saturday. A copy of the speech was put up on the RBI website on Tuesday. Saying this would be a “retirement decade” for PSBs, as tens of thousands were set to retire by 2020, he said this would be the best time to transform HR processes and implement some new-age concepts.

Emphasising on acquiring the right people, the deputy governor questioned banks’ enthusiasm to recruit from major management institutes. “Is the mad rush to top campuses justified? Will the people recruited from top management institutes understand financial inclusion drives? Will these people have empathy towards the poorest of the poor?” Chakrabarty asked the bankers.

Lenders often talk about the challenge of finding people keen to work in rural areas, he said. “Does it not indicate that there is something amiss in the way we recruit people? Is it not better to recruit people from smaller cities?”

Indicating there was no proper mechanism of performance management in PSBs, Chakrabarty said the results of not having one could be disastrous.

“We are all having to deal with the problem of people who are ‘promotable’ but not ‘postable’ and people who are ‘postable’ but not getting promoted. This is because we have failed to discriminate between performers and non-performers,” Chakrabarty said.

He called on the senior management of banks and the board to spend more time on performance management. There is a need for complete job description and clear delineation of job roles of chairman and managing directors, and executive directors, he added.