HR PRACTICES: A COMPARATIVE STUDY OF PUBLIC AND

PRIVATE SECTOR BANKS IN INDORE

Garima Shrivastava*, Dr. P.K. Gupta**
ABSTRACT:
In current era of highly volatile business environment organizations are facing emerging challenges
in form of acquisition and optimization of human resource. Being valuable and scarce capabilities,
human resources are considered as a source of sustainable competitive advantage. The success
of an organization depends upon several factors but the most crucial factor that affects the
organization performance is its employee. Human resources play an integral role in achieving an
innovative and high-quality product/ service. The present study is an attempt to examine and
compare the impact of human resource management practices between public and private sector
banks with reference to Indore city. In the study, it has been observed that the private and public
sector banks follow HR Practices suiting to their customer needs customization. This is because
employee policies directly influence the satisfaction or dissatisfaction of customers needs by
and large the major differences in the areas of recruitment, training and development, performance
appraisal, organization policy and culture, career planning and employee participation.
Keywords: HRM Practices, Public Sector Banks and Private Sector Banks.
INTRODUCTION
In current era of highly volatile business environment organizations are facing emerging challenges in
formof acquisition and optimization of human resource. Being valuable and scarce capabilities, human
resources are considered as a source of sustainable competitive advantage. The success of an organization
depends upon several factors but the most crucial factor that affects the organization performance is its
employee. Human resources play an integral role in achieving an innovative and high-quality product/
service. If the employees of an organization are satisfied with their jobs, the organization can achieve its
goals very straightforwardly. In any organization HRM practices focuses on optimal utilization and
management of their human resource effectively in order to achieve maximumoutput. Managing people
is concerned with deciding approaches and strategies to find alternatives of how to achieve organization
*Assistant Prof., Altius College of Universal Studies, Indore, MP, India
**Professor, Institute of Management Studies- DAVV, Indore, MP, India
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goals. Khan (2010) revealed that in energetic business atmosphere, there is a need of an approach to
achieve better performance, to originate and implement HRM practices. In considerable and insubstantial
extent the organizations need to invest in such practices to get a competitive advantage.
HUMAN RESOURCES MANAGEMENT PRACTICES
Human resources management practices play a very crucial role in achieving the organizations goals
and maintain the competitive advantage. HRM practices refer to organizational activities directed at
managing the pool of human resource and ensuring that the resources are employed towards the fulfillment
of organizational goals (Schuler & Jackson 1987). Human resource management practices is the
management of people within the internal environment of organizations, comprises the activities, policies,
and practices involved in planning, obtaining, developing, utilizing, evaluating, maintaining, and retaining
the appropriate numbers and skill mix of employees to achieve the organizations objectives (Appelbaum
2001). Presently organizations are competing through implementing the unique HRM practices and due
to the globalization organizations adopt the most up-to-date HRM practices in order to accomplish the
organizational goals. Best HRM practices are advantageous for both employee and employer; it plays
an important role in constructive growth of the organization.
Job satisfaction is an attitude which is an outcome of harmonizing and summation of numerous precise
likes and dislikes experiences with the job. Job satisfaction for an employee is the level of satisfaction
according to job. Job satisfaction is a crucial indicator of how employees feel about their job and
describes how much they are contented with his or her job. The satisfaction level of employees also
associated with increase output of the organization. Job satisfaction of an employee is essential to the
success of an organization. In an organization a high rate of employee contentedness is directly related
to a lower turnover rate. Thus, keeping employees satisfaction in their jobs with their careers should be
a foremost priority for every organization. Bogdanova et al (2008) stated that HRM practices try to
develop and allocate human capital in the best possible ways in order to achieve long-termgoals; they
provide themwith many benefits and good environments that would boost employees motivation, job
satisfaction, and increase their performance. Grbz (2009) remarked that in order to sustain in the
market human resource management (HRM) practices and job satisfaction of employees have many
significant benefits for organization.
PUBLIC SECTOR BANKS
Public sector banks are those banks that are owned by the government. The government owns these
banks. In India 20 banks were nationalized in 1969 and 1980 respectively. Social welfare is there main
objective of these banks. They are divided into two groups i.e. Nationalized Banks and State Bank of
India and its associates. Among them, there are 19 nationalized banks and 8 State Bank of India
associates. Public Sector Banks dominate 75% of deposits and 71% of advances in the banking industry.
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Public Sector banks dominate the commercial banking scenario in India. These public sector banks can
be further classified into:
1) State Bank of India
2) Nationalized banks
3) Regional Rural Banks
PRIVATE SECTOR BANKS
These banks are those banks that are owned and run by private sector. An individual has control over
these banks in proportion to the shares of the banks held by him. Private sector banks came into
existence to supplement the performance of Public sector banks and serve the needs of the economy
better. As the public sector banks were merely in the hands of the government, banks had no incentive
to make profits and improve the financial. The main difference is only that public sector banks follow
the RBI Interest rules strictly but private sector banks can effect some changes but only after approval
from the RBI! Private sector banks are banks which are controlled by private lenders with approval
fromthe RBI. Their interest rates are slightly higher as compared to Public sector banks.
WHY HUMAN RESOURCE MANAGEMENT IS IMPORTANT FOR BANKS:
Human Resource Management is important for banks because banking is a service industry. Management
of people and management of risk are two key challenges faced by banks. Efficient risk management
may not be possible without efficient and skilled manpower. Banking has been and will always be a
People Business. Though pricing is important, there may be other valid reasons why people select
and stay with a particular bank. Banks must try to distinguish themselves by creating their own niches or
images, especially in transparent situations with a high level of competitiveness. In coming times, the
very survival of the banks would depend on customer satisfaction. Those who do not meet the customer
expectations will find survival difficult. Banks must articulate and emphasize the core values to attract
and retain certain customer segments. Values such as sound, reliable, innovative, international,
close, socially responsible, Indian, etc. need to be emphasized through concrete actions on the
ground and it would be the banks human resource that would deliver this.
REVIEW OF LITERATURE
KC Chakraborty, 2012 HR Management in Banks- Need for a new perspective concluded that
Human Resource Management is important for banks because banking is a service industry. Management
of risks and Management of people are two key challenges facing banks. He has focused more on the
emerging needs of HRM in banking sector in todays world. Deepti Bhargava, 2010 concluded in her
research that Human resources play an integral role in achieving an innovative and high-quality product/
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service. Zulfqar Bowra and Kabir Niazi in their research paper Impact of human resource practices
on employee perceived performance in banking sector of Pakistan (2011) found that The HR practices
and employee perceived performance has positive and significant relationship and it is very crucial for
banks to understand that their HR practices affect the performance of employees and in turn affect the
overall performance of a bank be it private sector or public sector. Many researchers have recognized
numerous HR organizing practices that significantly influence performance. Tessema and Soeters (2006)
have conducted study on eight HR practices including compensation, training and other aspects.
Literature indicates that the performance of the private and foreign banks have been stronger than that
of public sector banks (IBA, 2008). A recent study (Selvaraj, 2009) reveals that private banks are
more successful vis--vis public sector banks in terms of implementing human resource management
practices, customer focus, and top management commitment. Furthermore, public and private sector
banks differ with respect to their compensation structures, working environments, technology, growth
opportunities, and job security provided to the employees. Public sector banks structure compensation
in a way such that there are lower pay differentials between the employees, long-termtenure is rewarded
and there is a high base pay, whereas in the private sector banks, there are larger pay differentials,
fewer rewards for tenure, and pay for performance (DSouza, 2002). In addition, the working
environment in private sector banks has been found as growth driven, technologically advanced, and
devoid of bureaucracy, where employees promotions are highly contingent on their performance and
merit. However, private sector banks do not provide job security and would lay off their employees in
cases of poor performance or adverse market conditions (Jha, Gupta & Yadav, 2008; Singh & Kohli,
2006; Thakur, 2007). Bajpai and Srivastava (2004) studied the satisfaction levels of employees of two
public sector and two private sector banks in India. The results indicated that layoff threats, quick
turnover, less welfare schemes, and less scope for vertical growth increased job dissatisfaction. In
contrast, secure job environment, welfare policies, and job stability increased the degree of job satisfaction.
In their study, Kumudha and Abraham (2008) compared 100 managers from 13 public and private
sector banks and found that the programs related to self-development, information about job openings,
opportunities to learn new skills and retirement preparation programs greatly influence the feelings of
career satisfaction.
Public and private sector banks also differ with respect to their background and work culture. It has
been observed that the work culture of public sector banks was based on the concept of socio-
economic responsibility, in which profitability is secondary. On the other hand, private sector banks
work towards profitability. Because these differences between the sectors hold an important factor in
shaping the work culture of an organization, it needs to be explored how they would likely influenced by
their HRM Practices. For the success and sustained growth of Indian banks, it is imperative to create
a pool of committed employees by determining whether they are job satisfied. Their satisfaction would
affect their performance and commitment, which would eventually influence the banks growth and
profitability.
The study of human resource management practice has been an important and critical area in management
and organizational performance fromlast several years especially in the banking industry. Influence of
Human Resource Management practices on organizational performance has been an important area of
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research in past 25 years indicating positive relationship between HR practices and organizational
performance Human resource management (HRM) practices are being increasingly treated as dependent
rather than independent variables in the olden days, management gurus and researchers were involved
in exploring how HRM practices affected employee performance, and overall bank performance.
RESEARCH OBJECTIVE
Now here under this study we have the research objectives:
To compare the HR Practices followed by public and private sector banks.
Hypothesis
H0: There is no difference in the HR Practices of Public and Private Banks.
RESEARCH DESIGN
In order to carry out this study sample of 37 employees comprising of 18 from private and 19 from
public sector in Indore city were chosen using convenience sampling procedure as no specific list of
employees were available from the banks for using any random sampling procedure. The sample size
though very small but was so chosen that if represents every level of employee from various banks.
TOOLS AND MEASURES
The data was collected from the selected sample using questionnaire designed for the purpose of the
study. The questionnaire covered the following HR practices areas, which were presumed to be followed
by any bank. The presumption for the selection of broad areas was made simply on the basis that the
areas represent almost whole gamut of possible HR practices and these areas includes:
Recruitment
Training and development
Performance appraisal
Organization policy and culture
Career planning
Employee participation
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DATA ANALYSIS AND INTERPRETATION
A self structured questionnaire was used as data collection instrument. A personal assistance is given to
the respondents so that they do not have any doubts while responding to the questionnaire. This study
was conducted in public and private sector of banks in Indore city, on a sample of 37 employees
representing both banks. In this study Z-test and SPSS 16.0 is used to calculate the results.
Distribution of Respondents
Table 1.1
Bank N %
Private 18 48.64
Public 19 51.35
Total 37 100.00

Distribution of Respondents According To Age Group
Table 1.2

Age Group
Private Banks Public Banks
N % N %
20-35 yrs 4 21.05 7 38.88
35-45 yrs 6 42.10 4 22.22
>45 yrs 8 21.05 8 42.10
Total 18 19

Distribution of Respondents According To Experience
Table 1.3

Experience
Private Banks Public Banks
N % N %
<=10 yrs 4 22.22 4 21.05
11-20 yrs 3 16.66 4 21.05
21-30 yrs 7 38.88 7 36.84
31-40 yrs 4 22.22 4 21.05
Total 18 19

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The above table shows that total number of respondent were 37. These respondents are from the
public and private banks. The maximum respondents were above 45 years and having 21-30 years
experience.
Test for Difference of Means for different HR factors through different questions between Private and
Public Sector Banks.
Group Statistics
Table 2.1
Bank N Mean Std. Deviation Std. Error Mean
Q1 Public 19 3.53 1.020 .234
Private 18 3.50 .924 .218
Q2 Public 19 3.95 .780 .179
Private 18 3.67 .767 .181
Q3 Public 19 4.05 1.026 .235
Private 18 3.50 1.043 .246
Q4 Public 19 3.89 .994 .228
Private 18 3.44 1.381 .326
Q5 Public 19 4.00 .943 .216
Private 18 2.94 1.259 .297
Q6 Public 19 3.89 .994 .228
Private 18 3.28 1.018 .240
Q7 Public 19 4.11 .875 .201
Private 18 4.00 .840 .198
Q8 Public 19 3.89 1.100 .252
Private 18 3.17 1.339 .316
Q9 Public 19 3.74 .991 .227
Private 18 3.56 1.097 .258
Q10 Public 19 4.26 .933 .214
Private 18 3.67 .840 .198
Q11 Public 19 4.47 .513 .118
Private 18 3.61 .916 .216
Q12 Public 19 4.21 .535 .123
Private 18 3.78 1.060 .250
Q13 Public 19 4.05 .524 .120
Private 18 2.94 1.305 .308
Q14 Public 19 3.21 1.084 .249
Private 18 3.72 .669 .158
Q15 Public 19 3.53 1.172 .269
Private 18 3.11 1.323 .312
Q16 Public 19 4.21 .419 .096
Private 18 3.61 .979 .231
Q17 Public 19 4.21 .419 .096
Private 18 4.17 .383 .090
Q18 Public 19 3.42 1.261 .289
Private 18 3.50 .985 .232
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Group Statistics
Table 2.2
Banks Mean N SD
Public Banks 3.87 342 (N1) 0.99
Private Banks 3.49 324 (N2) 1.092867
Standard Error 0.080978
Z-Test 4.62790143

CONCLUSION
In this study, it is presumed that there is no difference in the HR practices being followed by private
sector and public sector banks. The analysis reveals in contrary to the hypothesis that two groups of
respondents belonging to different sectors differ in their HR practices. On general observation also it is
evidentially clear fromthe observations of work environment in different banks.
SUGGESTION
Indian commercial Banks have been using human resource practices to gain competitive advantage.
Both Commercial Banks have planned career planning Appraisal system. In private sector, Bank
employee can progress as his/her performance but in public sector he/she can get promotion as per
policy. Some flexibility is there in transfer system. Meeting held frequently in which they invite staff
suggestion so staff are more satisfied.
It is suggested that the Bank may introducing open appraisal system wherein the marks awarded to
the reviewer is disclosed. In many organizations open appraisal systems are working. There may be
open discussion between manager & employee of that employee would know weak areas of performance
and them to develop and performwell. It is also suggested that institutional training should provide
effective skills to employee. Employees should be motivated to utilize the material and libraries so that
competency gap would be reduced.
It is suggested that apart from that leaving can be sued. It involves use of computer, and information
technology like video conferencing, internet etc. So leaving methodology becomes effective tool of
leaving. Mostly promotions are given in accordance with the performance of the job. It is suggested
that employee potential should be evaluated based on objective assessment but not on favoritism.
Transparency in evaluation and promotion policy also suggested.
Transfers in both Banks are according to the policy of Bank. They have fixed time private of employees
in one branch after that they are transferred to different branch as per needs of the Bank. The employees
of both Banks have same perception toward transfer system. They want more improvement in the
system. It is suggested that there should be fair transfer policy. They introduce transfer as a leaving tool.
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Some additional benefits can be given to the employees along with transfer who act as motivational
factor. Some of the activities which should be happen in the Bank are-:
I Staff Meetings
II Brain Storming Sessions
III Study Circle
LIMITATIONS
1. As this study was conducted only in Indore city, the findings cannot be generalized for overall
India.
2. Primary data has its own limitations.
3. If sample size could be taken a bit larger more accurate, we could have reached to more
accurate results.
REFERENCES
1. Ahuja, K. K., Personnel Management, (New Delhi: Kalyani Pub., 1998). Bass, Bernard M.
2. Bhargava Deepti, HR Practices in Public and Private Sector Bank, (Rajsamand: IJBEMR,
2010)
3. Chakrabarty KC, RBI Monthly Bulletien Human Resourse Management in Banks-Need for a
New Perspective (2012).
4. Dwivedi, R.S., Dynamics of Human Behaviour at Work, Oxford & IBH Publishing.
5. Jyoti Sadhum Human Resource Development in Banking Sector/. New Delhi, Serials Pub.,
2008, x, 198 p., tables, ISBN 81-8387-172-3.
6. Pareek, V. and Rao, T.V. (1981). Designing and Managing Human Resource Systems, Oxford
& IBH Publishing Co., New Delhi.
7. Professional Banker-the icfai university press
8. Rao, T.V. and Pereira, D.F. (1986). Recent Experiences in Human Resource Development,
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10. Tessema and Soeters (2006) Eight HR practices.
11. Vaughan, James A. Training in Industry: The Management of Learning, (Belmont, California:
Wadsworth, 1966).
12. Zulfqar Bowra and Kabir Niazi (2011). Impact of human resource practices on employee
perceived performance in banking sector of Pakistan, Pakistan.
13. www.bob.comd
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