Beruflich Dokumente
Kultur Dokumente
G.T.B. NAGAR,
SION,
MUMBAI - 400037.
A PROJECT REPORT ON
HUMAN RESOURCE MANAGEMENT IN PUBLIC
AND PRIVATE SECTOR BANKS
IN PRATIAL FULFILLMENT FOR
BACHELOR OF BANKING & INSURANCE
SUBMITED BY
PAVITRA DEVI SOKKALINGAM
ROLL NO. 04
TYBBI (SEMESTER V)
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2015 2016
ACKNOWLEDGEMENT
Date:
Place: Mumbai
Signature of Student
DECLARTION
Date:
Place: Mumbai
Signature of Student
CERTIFICATE
Guru Nanak College of Arts, Science & Commerce
This is to certify that Pavitra Devi Sokkalingam of T.Y. (Bachelor of Banking and
Insurance) Semester-V (Year 2015-16) has successfully completed the Project on
Human Resources Management in Public and Private Sector Banks under
the guidance of Miss S. Sudha.
Signature of Principal
Signature of coordinator
INDEX
Sr.no
Topic
Page no
1.
Introduction to Bank
07
2.
09
3.
Functions of Banks
13
4.
21
5.
26
27
29
8.
32
9.
34
10.
11.
35
36
Management
12.
39
13.
Suggestions
45
14.
47
Banks
15.
48
16.
Suggestions
51
17.
53
18.
55
19.
59
20.
61
21.
Comparative Analysis
69
22.
Suggestions
70
23.
Conclusions
73
24.
Bibliography
74
Introduction of Bank:
Finance is the life blood of trade, commerce and industry. Now-a-days,
banking sector acts as the backbone of modern business. Development of any
country mainly depends upon the banking system.
The term bank is either derived from old Italian word banca or from a
French word banque both mean a Bench or money exchange table. In olden days,
European money lenders or money changers used to display coins of different
countries in big heaps (quantity) on benches or tables for the purpose of lending or
exchanging.
7
These institutions run to make profit. They cater to the financial requirements of
industries and various sectors like agriculture, rural development, etc. it is a
profit making institution owned by government or private of both.
Commercial bank includes public sector, private sector, foreign banks and
regional rural banks:
a. Public sector banks:
It includes SBI, seven (7) associate banks and nineteen (19) nationalized
banks. Altogether there are 27 public sector banks. The public sector accounts for
90 percent of total banking business in India and State Bank of India is the largest
commercial bank in terms of volume of all commercial banks.
b. Private sector banks:
Private sector banks are those whose equity is held by private shareholders.
For example, ICICI, HDFC etc. Private sector bank plays a major role in the
development of Indian banking industry.
c. Foreign Banks:
Foreign banks are those banks, which have their head offices abroad. CITI
bank, HSBC, Standard Chartered etc. are the examples of foreign bank in India.
The cooperative banks in India play an important role even today in rural cooperative financing. The enactment of Co-operative Credit Societies Act, 1904,
however, gave the real impetus to the movement. The Cooperative Credit Societies
Act, 1904 was amended in 1912, with a view to broad basing it to enable
organization of non-credit societies.
Three tier structures exist in the cooperative banking:
i. State cooperative bank at the apex level.
ii. Central cooperative banks at the district level.
iii. Primary cooperative banks and the base or local level.
4. Scheduled and Non-Scheduled banks:
A bank is said to be a scheduled bank when it has a paid up capital and
reserves as per the prescription of RBI and included in the second schedule of RBI
Act 1934. Non-scheduled bank are those commercial banks, which are not
included in the second schedule of RBI Act 1934.
5. Development banks and other financial institutions:
A development bank is a financial institution, which provides a long term
funds to the industries for development purpose. This organization includes banks
like IDBI, ICICI, IFCI etc. State level institutions like SFCs SIDCs etc. It also
includes investment institutions like UTI, LIC, and GIC etc.
Commercial banks:
Banks are those institutions which conduct the business purely on profit
motive. Banks receive surplus money from the people who are not using it and
lend to those who need it for productive purpose. When we speak of a bank, we
generally mean a commercial bank. Commercial banks are those institutions
which conduct the business purely on profit motive. Commercial banks receive
surplus money from the people who are not using it and lend to those who need it
for productive purpose.
A commercial bank is a dealer in short and medium-term credit. It borrows
money from a group of people at a lower rate of interest and lends to the other
12
group of people at some higher rate of interest. The difference between the two
rates of interest is the profit of the bank.
13
highlighted
in
following
Diagram
or
Chart.
14
The bank collects deposits from the public. These deposits can be of
different types, such as:a. Saving Deposits
b. Fixed Deposits
c. Current Deposits
d. Recurring Deposits
a. Saving Deposits:
This type of deposits encourages saving habit among the public. The rate of
interest is low. At present it is about 4% p.a. Withdrawals of deposits are allowed
subject to certain restrictions. This account is suitable to salary and wage earners.
This account can be opened in single name or in joint names.
b. Fixed Deposits:
Lump sum amount is deposited at one time for a specific period. Higher rate
of interest is paid, which varies with the period of deposit. Withdrawals are not
allowed before the expiry of the period. Those who have surplus funds go for fixed
deposit.
c. Current Deposits:
This type of account is operated by businessmen. Withdrawals are freely
allowed. No interest is paid. In fact, there are service charges. The account holders
can get the benefit of overdraft facility.
d. Recurring Deposits:
This type of account is operated by salaried persons and petty traders. A
certain sum of money is periodically deposited into the bank. Withdrawals are
permitted only after the expiry of certain period. A higher rate of interest is paid.
15
a. Overdraft:
These types of advances are given to current account holders. No separate
account is maintained. All entries are made in the current account. A certain
amount is sanctioned as overdraft which can be withdrawn within a certain period
of time say three months or so. Interest is charged on actual amount withdrawn. An
overdraft facility is granted against a collateral security. It is sanctioned to
businessman and firms.
b. Cash Credits:
The client is allowed cash credit upto a specific limit fixed in advance. It can
be given to current account holders as well as to others who do not have an account
16
with bank. Separate cash credit account is maintained. Interest is charged on the
amount withdrawn in excess of limit. The cash credit is given against the security
of tangible assets and / or guarantees. The advance is given for a longer period and
a larger amount of loan is sanctioned than that of overdraft.
c. Loans:
It is normally for short term say a period of one year or medium term say a
period of five years. Now-a-days, banks do lend money for long term. Repayment
of money can be in the form of installments spread over a period of time or in a
lumpsum amount. Interest is charged on the actual amount sanctioned, whether
withdrawn or not. The rate of interest may be slightly lower than what is charged
on overdrafts and cash credits. Loans are normally secured against tangible assets
of the company.
17
a. Transfer of Funds:
The bank transfer funds from one branch to another or from one place to
another.
18
b. Collection of Cheques:
The bank collects the money of the cheques through clearing section of its
customers. The bank also collects money of the bills of exchange.
c. Periodic Payments:
On standing instructions of the client, the bank makes periodic payments in
respect of electricity bills, rent, etc.
d. Portfolio Management:
The bank also undertakes to purchase and sell the shares and debentures on
behalf of the clients and accordingly debits or credits the account. This facility is
called portfolio management.
e. Periodic Collections:
The bank collects salary, pension, dividend and such other periodic
collections on behalf of the client.
19
20
b. Locker Facility:
The bank provides a locker facility for the safe custody of valuable
documents, gold ornaments and other valuables.
c. Underwriting of Shares:
The bank underwrites shares and debentures through its merchant banking
division.
e. Project Reports:
The bank may also undertake to prepare project reports on behalf of its
clients.
21
began
documenting
ways
of
creating business
value through
the strategic management of the workforce. The function was initially dominated
by transactional work, such as payroll and benefits administration, but due
to globalization, company consolidation, technological advances, and further
research, HR as of 2015 focuses on strategic initiatives like mergers and
acquisitions, talent
management, succession
22
Meaning:
Human Resource Management is the process of recruitment, selection of
employee, providing proper orientation and induction, providing proper training
and the developing skills, assessment of employee (performance of appraisal),
providing proper compensation and benefits, motivating, maintaining proper
relations with labour and with trade unions, maintaining employees safety, welfare
and health by complying with labour laws of concern state or country.
the
sector,
warn
industry
experts.
Every organizations desire is to have skilled and competent people to make their
organization more effective than their competitors. Humans are very important
assets for the organization rather than land and buildings, without employees
(humans) no activity in the organization can be done. Machines are meant to
produce more goods with good quality but they should get operated by the human
only.
"You must treat your employees with respect and dignity because in the most
automated factory in the world, you need the power of human mind. That is what
brings in innovation. If you want high quality minds to work for you, then you
must protect the respect and dignity. "
---Mr. N.R. Narayana Murthy, Chairman Emeritus, Infosys Ltd >>.
Our progress as a nation can be no swifter than our progress in education. The
human mind is our fundamental resource. - John F. Kennedy.
Great Quotations:
The greatest tragedy in America is not the destruction of our natural resources,
though that tragedy is great. The truly great tragedy is the destruction of our human
resources by our failure to fully utilize our abilities, which means that most men
and women go to their graves with their music still in them. - Oliver Wendell
Holmes.
24
management,
organization
organization.
Edwin Flippo defines - HRM as planning, organizing, directing,
controlling
of
procurement,
development,
compensation,
integration,
27
I emphasize this - no matter how good or successful you are or how clever or
crafty, your business and its future are in the hands of the people you hire.
--- Akio Morita (Late) (Businessman and co-founder of Sony Corporation. Japan)
Ref: The Book: MADE IN JAPAN. Page.No.145
28
Identifies person for the future: Since employees are constantly trained, they
are ready to meet the job requirements. The company is also able to identify
potential employees who can be promoted in the future for the top level jobs.
Thus one of the advantages of HRM is preparing people for the future.
Allocating
the
jobs
to
the
right
person:
If
proper recruitment and selection methods are followed, the company will be
able to select the right people for the right job. When this happens the number
of people leaving the job will reduce as the will be satisfied with their job
leading to decrease in labour turnover.
29
30
employee is selected thus recruitment and selection are yet another important
area of Human Resource Management.
Orientation and induction: Once the employees have been selected
an induction or orientation program is conducted. This is another important
area of Human Resource Management. The employees are informed about
the background of the company, explain about the organizational culture and
values and work ethics and introduce to the other employees.
Training
and
development:
Every
employee
goes
under training
program which helps him to put up a better performance on the job. Training
program is also conducted for existing staff that have a lot of experience.
This is called refresher training. Training and development is one area where
the company spends a huge amount.
Performance appraisal: Once the employee has put in around 1 year of
service, performance appraisal is conducted that is the Human Resource
department checks the performance of the employee. Based on these
appraisal future promotions, incentives, increments in salary are decided.
Compensation planning and remuneration: There are various rules
regarding compensation and other benefits. It is the job of the Human
Resource department to look into remuneration and compensation planning.
32
The Human Resource Officer is responsible for providing support in the various
human resource functions, which include recruitment, staffing, training and
development, performance monitoring and employee counseling.
35
Responsibilities:
To be the principal sponsor & guardian of HR policies in the Bank.
To propose and obtain agreement on changes to these policies which have been
agreed are being implemented throughout the Bank.
To contribute fully to the task of meeting the business challenges which the
bank has to face by supporting Branch / Unit Managers in continuously
developing the potential of employees and in creating conditions in which all
the employees are motivated to meet the objectives of the Bank.
To continuously monitor the Banks strategies to ensure that HR policies are
appropriate and that employees numbers and skills are fully supportive of such
strategies.
To deliver a full range of personnel services in support of line management.
These services include manpower planning, recruitment/transfer, remuneration,
training and employee welfare.
To support line management in their day-to-day management of the workforce
by providing advice and consultancy on personnel and performance
management issues.
CURRENT
CHALLENGES
FACED
BY
BANKS
IN
HUMAN
RESOURCE MANAGEMENT
Effective work force:
A time-consuming and hectic job is to hunt the right talent. Higher the
professional value of the vacancy, tougher is the search. Identifying the right
stuff followed by negotiation is the element which makes the job tough for the
37
Compensation:
How much to pay the right employee and how much to the outstanding
performer. Banks have traditionally followed pay scales with predetermined
increments, salary slabs, bonuses and time based fringe benefits like car and
house advance, gratuity, pensions, etc.
38
The situation is not the same anymore. An increment of Rs500-800 per annum
is no more a source of attraction for a professional anymore. A basic pay with
traditional formulas of linkage with medical and other facilities has no soothing
today.
A promise of future growth, learning culture and corporate loyalty is out of
dictionary and does not mean anything to this energetic and competent
performer today.
A waiting period of 3-4 years in each cadre haunts the incumbents who strongly
believe in immediate compensation. A freshly hired professional requires a
brand new car or car loan n resuming office quite contrary to his previous breed
Of bankers who would wait for the job seniority to qualify for a car loan.
Job Satisfaction:
Everybody in the bank wants to work in the professional department,
preferential location, city of his own choice and boss of his liking. An
administrative deviation from any of these results in lowered job satisfaction.
Although hiring is normally based on regional requirement matching the area of
activity with that of employees nativity yet other elements like appointment in
the department of choice and preference makes the job of HR manager quite
challenging.
What the HR manager cannot afford is the dissatisfied employee who not only
disrupts the smooth working himself, but also spreads the negativity to others
by his de-motivated attitude.
Morale Boosting:
What has long been overlooked is the morale boosting of the employees by the
organization. Human beings even if satisfied of material wellbeing need to be
appraised and encouraged constantly.
39
Smart banks have realized this need and have taken steps to keep their work
force motivated through proper encouragement like man of the mouth awards,
repeat get-togethers, conferences, sports events, dinners, company sponsored
travel, reunions, etc. This is the way employees create a feeling of
belongingness.
40
1) The first and foremost challenge that HR function in India faces is to convert
the abundant population pool into useful human resource.
4) With the increase in number of job options available nowadays, the HR function
of an organization must take care that they hire those people who believe in longterm commitment to the organization. The HR then must take up the challenge of
retaining them by developing retention techniques like Holiday plans fun-at-work
etc.
5) Because of cutthroat competition, HR in India also faces the task of building
competitive ad-vantage for the company over national and international
competitors.
6) The growing importance that companies are nowadays giving to cost-cutting has
posed HR with the challenge to minimize expenditure on HR not compromising on
the productivity.
7) Since right-sizing has been a growing trend in Indian organization, the HR now
faces the task of identifying and retaining the key employees of an organization
and letting go those that do not suit its future requirements.
41
10) With multinational organizations on the rise, HR needs to focus on issues such
as cross-cultural training so that problems that can arise because of differences in
international professional values can be diminished.
Meeting HR Challenges:
The banking sector has been growing at a very fast pace in India not only in the
terms of its size but also in terms of the services being provided. With banks
reaching the remote areas in the country one can anticipate positive things like
financial aid to farmers and increased financial awareness. However, with the
increase in size and activities of banks, the number of banks in private sectors has
also increased thereby posing challenges like cost-efficiency, technological
advancement, and credibility related issues. The task before the HR is to develop
strategies that help banks in gaining competitive advantage and encourage
innovation in its products and services.
Managing Human Resource:
Considering the above HR challenges which our Indian banking industry is facing,
we can manage the human resources by proper Planning like
Hiring the right person for the right job
Retaining and Developing
Managing people/ conducting exit interviews
Banks like Bank of Baroda are conducting Grooming and etiquettes programmes
for front line employees and also for employees selected for overseas posting in
order to improve their service levels and qualitative interaction with customers and
various stakeholders better. SEED (Self efficiency and effectiveness development)
programme being run for frontline staff of the Bank in order to improve their
service skills and servicing efficiency.
In Punjab National Bank, in the light of the large scale human resources gaps
that Bank is likely to face in the next few years need for Succession Policy has
been felt. The Policy envisages mapping of the 'existing pool' against the 'future
requirement' from the projected business figure to ensure that adequate number of
officials are available in the pool and also to foresee the surplus / deficit in the pool
for ascertaining the requirement of succession in a particular vertical. Bank has a
three tier training set up comprising of Central Staff College (CSC) at Delhi at
apex level catering to training needs of Top / Senior / Middle Management Grade
officers, three Regional Staff Colleges (RSCs) located at Belapur Navi Mumbai,
Lucknow and Panchkula for training needs of Senior / Middle /Junior Management officers as well as workman staff and seven Zonal Training Centres
(ZTCs) at Dehradun, New Delhi, Jaipur, Kolkata, Kozhikode, Ludhiana and Patna
looking after the training needs of Middle / Junior Management Grade officers &
Workman Staff. IT Training Centre located at Faridabad caters to the training needs
of officers exclusively in the areas of Information Technology.
Performance Management:
Banking service is one sector where a great degree of attention is being paid to
performance appraisal system. Several of the nationalized banks have changed
their performance appraisal system or are in the process of changing them. In most
of the banks that follows the traditional system, their officers are being assessed on
the following characteristics:
General Intelligence
Job Knowledge
Initiative and resourcefulness
Supervision
Business Capacity
44
45
basic salary payable for each completed year of service. Vesting occurs upon
completion of five years of service.
Superannuation:
Employees of the Bank, above a prescribed grade, are entitled to receive retirement
benefits under the Banks Superannuation Fund. The Bank contributes a sum
equivalent to 13% of the employees eligible annual basic salary (15% for the
Managing Director, Executive Directors and for certain eligible erstwhile
Centurion Bank of Punjab (eCBoP) staff) to insurance companies, which
administer the fund. The Bank has no liability for future superannuation fund
benefits other than its contribution, and recognizes such contributions as an
expense in the year incurred, as such contribution is in the nature of defined
contribution.
Short Term Employee Benefits:
In State Bank of India the undiscounted amount of short-term employee benefits,
such as medical benefits, casual leave etc. which are expected to be paid in
exchange for the services rendered by employees are recognized during the period
when the employee renders the service.
The Bank operates a Provident Fund scheme. All eligible employees are entitled to
receive benefits under the Banks Provident Fund scheme. The Bank contributes
monthly at determined rate (currently 10% of employees basic pay plus eligible
allowance). These contributions are remitted to a trust established for this purpose
and are charged to Profit and Loss Account. The Bank provides for pension to all
eligible employees. The benefit is in the form of monthly payments as per rules
and regular payments to vested employees on retirement, on death while in
employment, or on termination of employment. Vesting occurs at different stages
as per rules.
46
SUGGESTIONS
The banking sector has grown from a few institutions primarily involved in deposit
acceptance and trade finance into a complex multi-player markets where large
number of commercial banks, financial institutions and specialized banks are
operating with various product activities. Like many other organized sectors,
banking requires multi-layer manpower for its various requirements of
professionals and support staff. The range may require reasonably educated
security guards on the one hand and a highly educated and trained professional as
head of corporate finance. With liberalization of activities within the banking
sector, for example, more emphasis on consumer and house finance and personal
loans, etc. Banking has turned itself into a more market based business where
banks have expanded their reach more to customers door step in a big way making
banking more practical. This has further highlighted the need for proper
development of man power to run banks efficiently. Smart banks have realized this
need and have taken steps to keep their workforce motivated through proper
encouragement like man of the month award, repeat get-together, conferences,
sports events, dinners, company sponsored travel, reunions, etc.
In spite of all these facilitations there still exist several lacunas in the HRM
practices in banking industry.
Some of the specific suggestions based on survey of literature as well as the group
discussions and survey are given here under:
8) In order to become HRD conscious, the Public Sector Banks should allow
independent functioning of HRD section, where the top person should be himself a
good successful banker, a real HRD person free from any biases.
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10) Banks should have a system, whereby the training needs of an employee are
identified and are duly fulfilled at every stage of career growth.
11) Have special R & D wings in HRD Department for ongoing in house &
external research development, review and implementation of HRD policies.
49
Job analysis:
Job analysis involves collecting information about the characteristics of a job using
one of several methods: observation, interviewing, questionnaires, or more
specialized job analysis methods such as position or functional analysis.
Organizations sometimes use a combination of job analysis methods (Hawthorne,
2004; Mathis & Jackson,
1997). All the Banking authorities reported that they follow a combination of
several methods for job analysis of the employee.
50
(BTC), and College of Agricultural Banking (CAB). The IPSBs have more than
three hundred individual bank level training colleges and training centers.
Training is given emphasis by all banks, although not much systematic training
need analysis is carried out. The training colleges conduct training programmes for
relatively junior level bank staff. For most of the senior level training, banks
depend on external agencies, especially foreign training organizations. Training
establishments of some of the bigger banks complain of under utilization.
Performance Appraisal:
Performance appraisal is the systematic, periodic and an impartial rating of the
employees excellence in matters pertaining to his present job and of his
potentialities for a better job.(Edwin B. Flipp).
Public Sector Banks in India give more attention towards performance appraisal in
the organizations. Performance appraisal based on quality of output, potential of
the employee within the organization etc. need to be incorporated across all grade,
cadres and levels. This will not only ensure maximizing productivity, but also go a
long way in motivating star performers aligning with the long-term mission and
vision of banks.
Compensation:
In general, the compensation in Public Sector banks is mostly based on seniority or
work experience. The Indian public sector banks should reward their professionally
qualified employees by scale up-gradation and special increments besides
motivating and encouraging them to acquire new knowledge. Common pay
structures based on number of years of service with the bank put in etc need to be
phased out in a planned manner.
52
SUGGESTIONS
On the basis of review of this study the following suggestions are made for better
HRM practice in the Public sector banks in India:
In the recruitment and selection process of employees, the banks should give
priority to the candidates who has graduate and above degrees in Information
Technology, experience, skills, competencies etc. 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 necessary for restructuring of salary to motivate employees in particularly
in public sector banks.
To develop human resources, the bank should undertake different human
resource development programmes including continuing education and training,
IT-orientation, career development, etc.
Banks can send bright employees to abroad on fellowship/scholarship for
higher studies and learn new technology in order to attain competence at global
level.
Banks should organize seminars, workshops, conferences, different short
courses, and training programmes on financial matters, current issues, software
up gradation on regular basis that would definitely help to develop
knowledgeable manpower, create awareness and change mental attitudes among
the professionals.
All banks should allocate sufficient budget and sends competent employees to
international conferences and seminars to prepare them for the competitive
knowledge global market.
53
State Bank of India is the nation's largest and oldest bank. Tracing its roots
back some 200 years to the British East India Company (and initially established as
the Bank of Calcutta in 1806), the bank operates more than 15,000 branches within
India, where it also owns majority stakes in six associate banks. State Bank
of India (SBI) has more than 80 offices in nearly 35 other countries, including
multiple locations in the US, Canada, and Nigeria. The bank has other units
devoted to capital markets, fund management, factoring and commercial services,
credit cards, and brokerage services. The Reserve Bank of India owns about 60%of
State Bank of India Human Resources Development Department
HRDD Vision
The Vision of the Human Resources Development Department (HRDD) is
essentially to facilitate the Bank to carry out central banking activities, i.e. to create
an enabling environment to enhance the efficiency of the organization. To draw out
from our staff the very best by a system of proper placements, incentives, To create
an atmosphere of trust, a certain security of expectations and feeling that the
organization cares about the well-being and personal aspirations of the staff. This
would help align personal aspirations with professional goals and help enhance
efficiency.
The Mission of HRDD is to create a facilitating environment to enhance the
efficiency of the Bank; to empower the staff so as to draw out the latent potential;
and to catalyze conditions for a more wholesome quality of life on the work
as wells personal front. Functions of to evolve HR policies on Recruitment: For the
decade as a whole, for the SBI group, 25.4% of the staff were officers, 51.0% were
clerks, and 23.6% were subordinate staff. The composition of staff was the same
for the nationalized banks with 27.9% of staff being officers, 50.7% being clerks,
and 21.4% being subordinate staff.
Performance and Potential Appraisal: The promotion to a higher management level
is best thought of through the lens of a tournament model (Lazar and Rosen, 1981)
where the prize in terms of compensation for a position in the hierarchy is fixed in
advance and is independent of absolute performance. In effect, an employee is
promoted to the next higher level/grade not because he is good, but because he is
better than everybody else at the current level/grade.
55
Vacation
Motivation,
Training
Establishments,
Mobility
Staff Welfare,
Case Details:
Case Code
Case Length
Period
Organization
Pub Date
Teaching Note
Countries
Industry
:
:
:
:
:
:
:
:
HROB007
04 Pages
2001
State Bank of India
2001
Available
India
Banking and Finance
Issues:
How poor manpower planning led to problems with the bank's VRS
Keywords:
State Bank of India, VRS, developments, Indian public sector bank, SBI, VRS,
reasons, employees, protesting, post-VRS scenario
"They are propagating the VRS in such a manner that the employees are being
compelled to opt for the scheme."
- V.K.Gupta, SBI employee's union leader in December 2000.
VRS TROUBLES:
In February 2001, India's largest public sector bank (PSB), the State Bank of India
(SBI) faced severe opposition from its employees over a Voluntary Retirement
Scheme (VRS). The VRS, which was approved by SBI board in December 2000,
57
Background Note:
The SBI was formed through an Act of Parliament in 1955 by taking over the
Imperial Bank. The SBI group consisted of seven associate banks:
58
The Protests:
The SBI was shocked to see the unprecedented outcry against the VRS from its
employees. The unions claimed that the move would lead to acute shortage of
manpower in the bank and that the bank's decision was taken in haste with no
proper manpower planning undertaken.
They added that the VRS would not be feasible as there was an acute shortage of
officers (estimated at about 10000) in the rural and semi-urban areas where the
branches were not yet computerized. Moreover, the unions alleged that the
management was compelling employees to opt for the VRS. They said that the
threat of bringing down the retirement age from 60 years to 58 years was putting a
lot of pressure on senior bank officials to opt for the scheme...
after they attained the retirement age by the end of 2001. Analysts felt that this
would lead to a tremendous increase in the workload on the existing workforce
building and gives an impetus to the effort put in achieving business goals more
efficiently. A seminar was conducted in January 1999 which enabled the Bank to
establish clearly the link between businesses strategy and human resource strategy.
Accordingly, different kinds of mindsets were worked out to ascertain there
requirement in the staff in the three main lines of business corporate banking, retail
banking and treasury operations. In the foreign banks and private sector banks,
however, there has been growing recruitment amongst the officers' cadre with a
decline in the recruitment of clerical and subordinate staff. Private Banks started
the decade with 24.5% of staff as officers, 54.8% as clerical, and 20.7% as
subordinate staff. By the end of the decade 36.2% of the staff were officers,
45.9%were clerical, and 17.9% were subordinate staff. A new organizational
structure effective April 1, 1999 was implemented successfully with the change
agent role played by the HR Department. Three different job profiles viz.,
customer service and cross selling of products, back office operations and
marketing and sales emerged after the new organizational structure was put in place.
The recruitment process has been fine-tuned through specially devised processes
that identify an individuals degree of customer orientation the principal trait
needed in the banking business. New recruits have been provided training in skill
up gradation and team building and development of an appropriate mindset
for better conduct of banking business. Training programs of shorter duration
were designed for the existing staff, with specific focus on product information,
customer service, cross selling of products and operational excellence. The
promotion process has been designed on the principles of openness and
transparency. Career progression is based on performance of employees being
above an acceptable level with emphasize on those with high business drive
and potential. These exercises are carried out by the Career Development Centre,
which offers a comprehensive competency building program. This process has
been followed for the last 5 years and has been perceived as being fair and credible by the
employee.
A high level of performance is rewarded by a system of performance bonus. The
ratio of variable bonus to fixed salary is fairly high to attract and retain the best talent in
the Bank. In the private and foreign banks there are larger pay differentials, fewer
rewards for tenure, and individual incentives are high. Further, to ensure that the
Bank does not lose high performers and to increase the motivation levels and instil a
feeling of ownership, the Bank has introduced an Employee Stock Option Scheme (the
Scheme). The first grant of stock options under the Scheme was made during the
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year. The total number of staff of the Bank increased from 891 as on March 31,
1999 to1, 344 as on March 31, 2000. On an average, an employee received 37
hours of training during the year. The Bank conducted 34 internal and 67 external
training programs involving 658 and 198 employees respectively. Further, 22
employees were a part of overseas training programs.
Case Details:
Case Code
Case Length
Period
Organization
Pub Date
:
:
:
:
:
HROB157
08 Pages
2000-2013
ICICI Bank
2013
62
Teaching Note
Countries
Industry
:
:
:
Not Available
India
Banking and Finance
Themes:
Human Resources Management/ Leadership Development/ Mentoring
Issues:
Critically analyze talent management strategies at ICICI Bank.
Understand the mentoring process adopted by Kamath to groom young
employees at the bank.
Understand the need to set up a formal leadership development process at the
bank.
Understand the issues and challenges faced by the mentors while mentoring
employees.
Key Words:
ICICI Bank, Talent management, Leadership talent, Mentoring, Nurturing talent,
Leadership
development,
Performance
appraisal,
Human
capital,
Talent
"Leadership is the ability to handle the job at the next level with comfort. Being
able to perform your future role in the present. It is especially important in an
industry like ours where people are our most important asset, and we depend on
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people for growth. When your business focuses on growth, grooming talent is
crucial".
- Chanda Kochhar, Chairman and MD, ICICI Bank Ltd., in 2010.
"The bank's leadership in the industry is exemplary. But nothing to compare its
ability to spot, groom, and deploy leaders in-house".
- Indrajit Gupta, editor, Forbes India & George Smith Alexander,
reporter at Bloomberg, in 2008.
Introduction:
ICICI Bank Ltd. (ICICI Bank), the India-based financial banking institution, began
a process of identifying and nurturing talent in the 1980s. This practice paid rich
dividends, with ICICI Bank becoming known as a powerhouse of leadership talent.
Ever since N Vaghul (Vaghul) became the chairman and MD of Industrial Credit
and Investment Corporation of India Limited (ICICI) in 1985, the bank had
fostered a culture of nurturing young talent. Vaghul brought in a fresh and different
approach to working in the organization. He involved younger people at the bank
in big projects unlike CEOs of other organizations who preferred to pick senior
level managers.
This was a bid to develop a talent pool at the bank. Vaghuls way of empowering
young people, nurturing talent, and developing a leadership pipeline became part
of the banks culture and was carried forward by former CEO and MD, KV
Kamath (Kamath) and present CEO and MD, Chanda Kochhar (Kochhar).
Kamath who joined ICICI Bank as CEO and MD in 1996, created an incredible
talent for spotting employees with leadership potential. He was instrumental in
grooming several people who later took up key positions at the bank. Kamath
nurtured people with potential leadership at the bank by moving them from one
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assignment to another and making them take up different leadership roles and
serving the bank. Commenting on Kamaths ability to nurture talent, Kalpana
Morparia (Morparia), former joint managing director, ICICI Bank, said, "Mr
Kamath has an amazing ability to pick a leader and identify potential way beyond
what the people believed in. Less than 20-25% of us had any clue where we were
headed in our careers."
Kamaths vision was to enable ICICI Bank to surge ahead and capture a vital share
of the market. He planned to create leaders within the organization who could
foresee opportunities ahead of others.
The mentoring process started with picking young employees who had joined the
bank as management trainees and giving them hard-to-achieve targets to test their
potential. Employees passing the test were promoted to lead senior-level positions.
The success of the mentoring process led to the bank institutionalizing a formal
leadership development process that identified talented employees through a
performance appraisal system after which they were assessed for future leadership
roles.
Experts felt that the bank's successful transformation from a lending financial
institution to a retail powerhouse could be attributed to its mentoring and
leadership development process.
Background Note:
ICICI Bank was founded in 1994 as a subsidiary of an Indian financial institution,
the Industrial Credit and Investment Corporation of India Limited (ICICI). ICICI
through its subsidiary, ICICI Bank, transformed itself from a developmental
financial institution offering services such as project finance into a diversified
financial services group offering an array of products and services directly as well
as through subsidiaries and affiliates such as ICICI Bank. In 1999, ICICI became
the first bank or financial institution from Asia barring Japan to be listed on the
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New York Stock Exchange. In 2000, ICICI and ICICI Bank merged to benefit the
shareholders of ICICI Bank through a large capital base and scale of operations.
In October 2001, the Board of Directors at ICICI and ICICI Bank approved the
merger of ICICI with ICICI Bank and two of ICICI's wholly-owned retail finance
subsidiaries ICICI Personal Financial Services Limited and ICICI Capital
Services Limited.
ICICI Bank made phenomenal progress in a short period under the leadership of
Kamath, who joined ICICI Ltd. as its managing director and CEO in its embryonic
stage in 1996. It was at this time that the preliminary results of the liberalization
efforts that India had initiated in 1991 began to show.
In the changing environment, ICICI transformed itself from a traditional
development finance institution to a customer-centric private-sector bank. It was
not just merely a growth story of a corporate but the success of a clearly envisaged
leadership strategy adopted by Kamath for the growth and development of the
bank leveraging human capital and technology. In January 2002, the merger was
approved by shareholders of ICICI and ICICI Bank. In March 2002, the merger
was approved by the Gujarat High Court and in April 2002 by the High Court of
Judicature at Mumbai and the Reserve Bank of India. Subsequently, ICICI Group's
finance and banking operations - wholesale as well as retail - were integrated into a
single entity. It was reported that Kamath's ability to sense potential in the retail
business ahead of others and inspire his people to go for it was a major contributor
to ICICI's success. From 2001 to 2006, ICICI Bank bagged The Asian Banker's
Best Retail Bank in India' award.
Over the years, ICICI Bank adopted smart initiatives in the rapidly growing
financial sector of India and created a state-of-the-art banking infrastructure in its
branches across India. The main strengths of ICICI Bank were its talent pool,
complete product suite, large capital base, extensive customer relationship, strong
brand franchise, technology-enabled distribution architecture, and universal
banking presence. Though ICICI Bank was mainly involved in retail banking, it
ventured into other products such as insurance, corporate banking, venture capital,
etc.
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In 2007, ICICI Bank created history by raising US$ 5 billion in the largest-ever
public offering in India and emerged as a valuable financial organization. In 2009,
Kamath stepped down from the post of CEO and MD of ICICI Bank in favor of
Kochhar.
For the FY ended March 31, 2012, ICICI Bank had assets worth US$ 83.6 billion,
which made it the second largest bank in India.
genius. This, they felt, was required as the bank was scaling up from a 1,000
member organization to a strong team of 7000 employees. Moreover, they felt that
the previous process of grooming leaders which had been heavily dependent on the
board members contribution had started looking obsolete...
Grooming Successors:
The bank also used the leadership development process to groom successors at the
bank. Moreover, succession planning was essential as all the topnotch people such
as Lalita Gupte and Morparia were retiring in October 2006 and in 2007,
respectively...
Other Initiatives:
While the formal leadership development system identified and nurtured young
professionals at the bank, ICICI Bank also took some initiatives to nurture leaders
at the senior management levels. For instance, in 2003, ICICI Bank came up with a
new leadership program called Mentoring the Mentors for professionals at the
senior management level. The program aimed to hone the mentoring abilities of
professionals. The bank also identified some corporate professionals from
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companies across other sectors for this initiative. These professionals conducted
sessions on effective mentoring for the senior management level at the bank...
Results:
According to experts, ICICI Banks focus on nurturing young leaders helped the
bank move ahead of others in the Indian banking sector. Moreover, they felt that
the leadership development process had also helped the bank survive through the
crisis. For instance, in mid-2008, the global economic environment became very
challenging due to the global financial crisis. ICICI Bank also faced the heat due to
its heavy global exposure. Moreover, a rumor that began in Gujarat that ICICI
Bank would go bankrupt spread like wildfire...
Looking Ahead:
Experts felt that though ICICI Bank had a depth of talent, it also faced the risk of
becoming a poachers paradise. According to Kochhar, "When an organization
grows at 35-40 per cent per annum for 10 years and adds 10 new businesses during
that period, young professionals get the kind of exposure they would not have got
anywhere else. We have groomed people to build and run businesses like
insurance, securities, and retail. So if other players are looking to grow who would
they pick? The best person would be someone who has already run the business."...
Exhibits:
Exhibit I: ICICI's Profit and Loss Statement
Exhibit II (A): Role of Top Management in Mentoring
Exhibit II (B): Employees Mentored by Kamath
Exhibit III: ICICI Bank's Talent Management Components
Exhibit IV: Women Leaders at ICICI Bank
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Comparative Analysis:
ICICI is private global bank its HR practices are totally different SBI no.1 public
sector bank of India. Package given by ICICI is more enough than
salaries provided by SBI. Incentives and benefit policies of ICICI and SBI is
totally different. Selection process of ICICI is very lengthy and cost consuming.
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RECOMMENDATIONS:
Recommendations for ICICI:
Simplify its recruitment and selection process.
Reduce salaries of employee and increase the incentives and benefits part in
their compensation.
Recommendations for SBI:
Competition in banking sector increases due to private banks. Private
sector banks giving higher salaries to attract the talent. Thus it is necessary
for SBI to increase its salaries.
Give more emphasis on training and development of employees.
Increase motivation by giving extra benefits.
SUGGESTIONS:
Based on findings emerged from the analysis of the data collected through
questionnaires and interacting with the management officials of the public sector
banks, the following suggestions are offered to improve the HRM as prevalent in
banks.
1. An awareness is to be created at all levels that HRM is everybodys business and
systems for creating such awareness are to be developed.
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2. Banks should establish a high power HRM Committee at the corporate level.
Alternatives, the form and the scope of the Training Advisory Committee will meet
atleast once in 3 months. HRM task force at various levels may also be set up to
implement various HRM measures as are initiated and approved by the HRM
Committee.
3. All efforts must be continuously mode by banks to develop an overall HRM
culture and climate at all levels. It is very important that line managers and other
functionaries take appraisals of employees as an important part of their portfolio
and do not consider it to be the job of either personnel or HRM alone at the
corporate level.
4. The HRM surveys should be carried out in the banks every 3 years and findings
of these surveys should be interpreted and suitable HRM interventions should be
made. The suggestions emerging from these surveys need to be examined and
followed up seriously.
5. Scope of employee suggestion schemes needs to be expanded to make it more
participative and effective practical and useful suggestions should be encouraged.
6. Visiting faculty(with some behavioural science background) should be made to
visit all the branches over a period of time, by giving advance notice to the
branches and inviting questions and suggestions about the day-to-day problems.
These could be discussed in a brainstorming session at the branches with a view to
letting out pent up feelings if not for immediately solving them. This should be
followed up suitable communication from controllers.
7. Tasks/assignments/paper presentation to individuals/group of participants should
make as a regular feature experience sharing among participants to facilitate
meaningful interaction should be provided for. To the extent feasible, structured
and unstructured role plays in training sessions should be introduced.
8. Welfare measures particularly relation to hospitalization scheme, canteen
facilities at branches, scholarships for children of staff holiday homes and library
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facilities at branches need reexamination and whenever feasible, these and other
such welfare measures may be suitably modified for the benefit of staff.
9. More important personnal policies like transfer and promotion are to be viewed
periodically transfer placement policy should be implemented in fairness with
minimum adhocism and undue favouritism from either side. This will instill
confidence amongst all.
10. The system of reward and punishment should be made more clear and
transparent while there should be an institutionalized system for calling periodical
information, good work done by staff for prompt appreciations of their deeds and
punishment to the erring employees should be quick and proper to serve as a
deterrent to others.
11. A thorough and scientific screening of the participants should be done before
selecting employees for training so that the right type of personnel are selected for
the right type of training.
12. The development oriented PAS should be integrated with the entire HRM
system of the organization. The appraisal data should be used not only for
promotion decisions but also identification of staff training needs, job placements,
job enrichment and enlargement, talent spotting and career planning.
13. A basic commitment and willingness on the part of the management and
employees along with sustained planning efforts are required for the entry of
computer in Indian banks. Bank managers should be prepared to manage the
people so that right type of data can be used in the computer at the right time.
Commitment of all the section of employees to computerization should be evolved
to cover various sections of employees. The executives and administrators must
make use of Computer Based Management Information System(CBMIS) to
enhance the quality of their decisions.
14. New manual for computer audit should be prepared and the access to software,
kind of access and the risks involved are required to be assessed periodically, so
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that of computerized branches serve the purpose of an audit and does not become a
routine.
CONCLUSION:
The face of banking is changing rapidly.
Competition is going to be tough and with human resources management of
public and sector private banks.
Banks in India will have to benchmark themselves against the best in the world.
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These are some of the issues that need to be addressed if banks are to succeed,
not just survive, in the changing milieu.
Taking the banking industry to the heights of international excellence will
require a combination of new technologies, better processes of credit and risk
appraisal, treasury management, product diversification, internal control and
external regulations and not the least, human resources.
A high level of performance is rewarded by a system of performance bonus.
The ratio of variable bonus to fixed salary is finally high to attract and retain the
best talent in the bank.
The scope of public sector and private bank have great human resource
management is different but the competition which have various system.
Specializing in various human resource management tasks and functional
leadership engaging in strategic decision-making across the business.
To train practitioners for the profession, institutions of higher education,
professional associations, and companies themselves have established programs
of study dedicated explicitly to the duties of the function.
BIBLIOGRAPHY
REFERENCE BOOKS:
Human Resource Management in Public and Private Sector Banks
H.R Machiraju. Indian Financial Systems, UBS Publishers and
Distributors LTD., India.
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WEBLIOGRAPHY
SOURCES:
www.google.com
www.googleimages,com
www.yahoo.com
www.yahooimages.com
www.wikipedia.com
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