Issues Around HRM in Public Sector Banks

 “The condition upon which God hath given liberty to man is eternal vigilance”. These are the words said by the noted Irish orator, politician, lawyer and judge and it holds very true for the current scenario in India. The recent bank frauds have brought out failures on part of human resource (HR) in implementing measures for preventive vigilance. This resulted in central vigilance commissioner stepping in and ordering the transfer of all officers who have exceeded three years and clerks, five years, in the same position and office.

When and how did the need for vigilance in public sector banks arise?

As early as in the 1960s the Government of India had set up the Committee on Prevention of Corruption (Santhanam Committee) in order to study the importance of vigilance on anti-corruption issues in banks and give recommendations. On the basis of these recommendations the Central Vigilance Commission (CVC) was formed in February 1964. Three aspects of vigilance of public sector banks were highlighted: preventive, punitive and participative. Preventive vigilance is very essential in the current scenario as it helps in identifying current lapses in the system, but requires continuous efforts. It keeps a watch on the activities and lifestyle of the employees like having a flashy lifestyle with lesser means indicated. Participative vigilance calls for identifying lacunae in the existing system and provide measures for reducing scope of misconduct by putting swift detection systems in place. The issue arises due to lack of any preventive vigilance system in place even after its emphasis at the time of formation of CVC.

What are the initiatives that have been taken in this regard?

This is an opportune time to have another look at the Enhanced Access and Service Excellence (EASE) agenda proposed last year by the department of financial services (DFS).

The main issue now is how to rejuvenate the enterprise and risk propensity of public sector bankers who have gone into hibernation in the last decade due to the system-wide ramifications of problem loans and frauds. The 4R policy of recruitment, remuneration, reskilling and research can help the revamping of human resource management.

Recruitment

• Every PSU bank needs to recruit depending on its specific requirements. PSU banks need a wide spectrum of specialists in the policy and operation cycle, encompassing all activities, rather than jacks of all trades. Hence the current practice of common recruitment by an outside agency needs to be shunned.

Remuneration

• As per RBI data, the compound annual growth rate of per employee wages and salaries, which was 13.7% from 2004-05 to 2010-11, decelerated to 6.4% from 2010-11 to 2016-17. The current “different banks same pay” practice based on five-yearly bipartite settlements with unions has built-in perverse incentives. It undermines enterprise not only among the workers of the underperforming banks but also the well-performing ones thus doubly jeopardizing the systemic efficiency and flouting economic principles and logic. The salaries of PSU bank employees need to be linked to the respective bank’s “ability to pay” with components of variable pay. Senior management should also have employee stock ownership plans.

Reskilling

• Skilling/reskilling is the most valuable link in the entire HR chain of recruitment to retirement. The 2014 RBI committee on capacity-building in banks and non-bank institutions made recommendations for the development of a talent pool/pipeline in banks on a “buy and build basis” to enable them to keep pace with rapid technological advancements. The report needs to be implemented without delay. Both internal and specialized certification-based external training programmes, coupled with appropriate placement policies in banks must be encouraged to bridge the talent deficit.

Research

• Banking must be recognized as a knowledge-based industry where decisions necessitate constant research and development. The research quotient in PSU banks decision-making process is minimal. A research unit must be built to first contribute to the prosperity of its own bank directly or indirectly, and then to systemic efficiency of the macroeconomy.

 Has the SBI adopted any different strategy? What is it?

It is believed that a banker who never goes on a holiday is involved in suspicious activities with customers like granting of funny loans , fake trades etc. He or she does not go on a leave with the fear that a new person taking up the job can cause the loopholes in the work to be identified. So, in the light of the recent fraud the SBI has asked its employees to take a leave termed as ‘preventive vigilance leave’ (preventive vigilance is the most important issue now) for atleast 10 days in every financial year. During this time period, another employee is unanimously selected to do this job. This has come up because as per the data the officers involved in the fraud are the ones who are very dedicated and hardworking.

What steps have been taken by foreign banks? Can Indian banks adopt it?

Some foreign banks are also appointing compliance officers to scan the books of the holidaying employees especially in the matters of issuance of bonds, foreign currency trading etc. This additional step needs to be complied with in India too.