Bank frauds and the HR factor in PSU banks

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Context:

  • One common strand running through the cacophony on the bank frauds making the news is the human resource (HR) failure in implementing measures for “preventive vigilance”.
  • So much so that the central vigilance commissioner has had to step in and order the transfer of all officers who have exceeded three years and clerks, five years, in the same position and office.

Enhanced Access and Service Excellence (EASE)

  • It was proposed last year by the department of financial services (DFS)
  • This outlines the duties and responsibilities of public sector banks for their healthy growth
  • It recognizes that banking is intrinsically human-centric despite the increasing invasion of machines

Helping the profession bounce back will require focusing on a 4R policy: recruitment, remuneration, reskilling and research.

Recruitment:

  1. The current practice of common recruitment by an outside agency needs to be shunned
  2. Instead, every PSU bank needs to recruit depending on its specific requirements
  3. Banks, being “special”, need specialized talent, as observed globally
  4. Banking has become increasingly knowledge and information intensiv
  5. Now, PSU banks need a wide spectrum of specialists in the policy and operation cycle, encompassing all activities, rather than jacks of all trades

Remuneration:

  1. 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
  2. However, the more crucial point is the current “different banks same pay” practice based on five-yearly bipartite settlements with unions
  3. This has built-in perverse incentives
  4. It undermines enterprise not only among the workers of the underperforming banks but also the well-performing ones, thus doubly jeopardizing systemic efficiency and flouting economic principles and logic
  5. Therefore, instead of collective bargaining, the salaries of PSU bank employees need to be linked to the respective bank’s “ability to pay” with components of variable pay

Reskilling:

  1. In any profession, skilling/reskilling is the most valuable link in the entire HR chain of recruitment to retirement
  2. For this, the 2014 RBI suggests the importance of both internal and specialized certification-based external training programmes, coupled with appropriate placement policies in banks, to bridge the talent deficit
  3. The report needs to be implemented without delay

Research

  1. Banking must be recognized as a knowledge-based industry, like information technology, where decisions necessitate constant research and development
  2. In general, the research quotient in PSU banks’ decision-making process is minimal.
  3. Only a few large banks have research units—which are, by and large, devoted to macroeconomic studies
  4. PSU bank leadership must embrace the knowledge and learning ecosystem

Way Forward:

As a Harvard Business Review survey revealed, HR capabilities have a strong correlation with business results. Steven Wynn, promoter of the most popular Las Vegas casinos (also currently implicated by the #MeToo campaign), stated that “HR isn’t a thing we do; it’s the thing that runs our business”. In PSU banks, the time has come to move on from episodic HR initiatives to connecting HR to the mainstream corporate strategy and transformation agendas.