`PSBs need 70,000 staff annually`

This can unleash about Rs 200,000 crores of value, over half of which will go to the government, according to a report released by The Boston Consulting Group called value creation in banking and NBFCs."

The report highlighted that although the assets of the PSU banks have grown at a CAGR of 17 per cent from 2004-07, the employee growth rate is a negative one per cent. the other hand, the assets of new private banks have grown by 38 per cent, while the employee induction rate is 43 per cent.

 

Incase of foreign banks, the CAGR is 27 per cent, while the employee growth rate is 22 per cent.Saurabh Tripathi, partner and director, BCG, said, "The PSU banks have reached a stage where they have to hire 60,000 to 70,000 employees a year. Otherwise they will start losing market share."

Similarly in terms of IT usage, the PSU banks had spent just 2.5 per cent of their revenues on information technology in 2006-07. Most PSU banks are not yet over with the first step of getting their transactions on a core platform.

In contrast, the private banks have moved to world-class customer relationship management, integrated applications and provide a single customer view across all business units.

The report has recommended the introduction of parameters such as total shareholder returns, valuation multiples and market capitalisation to realign the public sector banks with the new market reality. It has also suggested measures such as the introduction of specialised roles and careers by business units and functions, performance-linked incentives, market-linked compensation and lateral hiring at market rates.

Private sector banks, on the other hand, need to look at capital-efficient profitable growth, prevent bad debts and cost oversight in the pursuit of growth, the report said. The report also pointed out that the growth of bank branches in India has been at a very slow rate of 2 per cent between 2001 and 2007 and this needs to be improved sharply. India had 57,829 bank branches at the end of 2007.

Despite suffering the heaviest correction in Q4 last year, Indian banking topped the charts in value creation among all major economies in FY 2007-08. In India, Axis and BoI were the most consistent toppers in value creation among the banks. Shriram Transport and Reliance Capital were the non banks figuring in this list.

"The NBFS segment has given higher returns across all time frames compared to banking. This depicts the enormous opportunities that the changing nature of demand in India are throwing up and new players are emerging to take advantage of the opportunities", said Tripathi.