India's nationalised banks seem set for a major recruitment drive once again to meet growth needs and fresh vacancies that will arise when a large number of employees retire in the next three-four years
Public and private sector banks in India are expected to hire over 45,000-50,000 people this year alone as probationary officers (POs) as well as clerks. While Indian banks today employ over 7.25 lakh persons, the new recruitment drive is taking place due to three factors—staff needs arising out of growth and expansion, preparing for the large number of bank employees who are expected to retire in the coming three-four years and mitigating staff shortage caused by the belt-tightening over the past two years.
“Recruiting more people has now become a 'compulsion' for public sector banks (PSBs) as most of the employees working there had joined after 1970 and are near their retirement," CH Venkatachalam, general secretary, All India Bank Employees Association (AIBEA) and convener for the United Forum of Bank Unions (UFBU) told Moneylife. Another top union leader told us that a large number of employees will be retiring in the next three years.
Leading the recruitment in 2010 is the country's largest lender State Bank of India (SBI), which plans to hire around 4,500 officers and about 25,000 clerks, while its associate banks would hire another 1,700 officers. Bank of Baroda, the country's third largest State-run lender, is planning to recruit about 3,500 employees that would include around 1,800 to 2,000 officers.
"With most banks entering diversified business segments, they need to recruit people and train them properly, as there are many changes taking place in the banking domain. Earlier, banks used to recruit people as clerks without any proper training in banking. But now they will have to change their hiring process as required," Mr Venkatachalam said.
With a number of employees retiring over the next few years, there would be a dearth of knowledgeable people in the banking system. The freeze on recruitment in the past years has also caused PSBs to face a real drought in talent. This is true for junior level employees and also top management.
"Chairmen and managing directors of some PSBs are going to retire over the next few months. However, there still is no plan for their succession. The case is similar with senior management. Earlier, an assistant general manager would automatically become general manager when the post fell vacant. But this is no longer the case at most banks," the union leader said. The vacancies are not filled immediately and the workload is often redistributed among existing employees.
Besides regular bank jobs, banks are also planning to start a new chapter in banking services with the recruitment of business correspondents (BCs), mainly in rural areas. SBI alone is planning to hire 15,000 BCs during FY11. SBI’s plans are in tune with the Budget decision to provide banking facilities in all domiciles with more than 2,000 people.
However, unions are against the new banking model. "Using BCs as a front, private corporates and entities may enter PSBs and can misuse the banking system. Therefore, we are opposing the idea to hire BCs, as banks themselves can go to the last mile and provide banking services," Mr Venkatachalam said.
"Bank unions would protest the move and launch an agitation, if needed," the union leader added.
More and more road developers are seeking underwriters for their road projects in order to achieve financial closure faster and bid for more national projects
With the National Highways Authority of India (NHAI) insisting on financial closure of existing projects—or at least a financial assurance for these projects—road developers are looking at banks to underwrite or syndicate debts for their projects. Bankers too seem more than happy to do so.
“We could see more (underwriting) for them (road projects) in FY11, especially with more and more projects coming up and with NHAI coming up with new bidding norms,” said Ashish Chandak, executive director- infrastructure banking (corporate finance), Yes Bank. A similar trend has been observed by two other bankers, who requested anonymity.
In the underwriting or syndication process, a bank underwrites the entire debt for a certain project, for a certain fee. The bank then seeks funds from other banks for the debt. This helps the developer tie up funds for projects easily and thus enables work on a project to move along at a faster pace.
Hindustan Construction Company (HCC) and Gammon Infrastructure Projects Ltd (GIPL) are two such road companies who are in favour of underwriting. “We are surely open to the option of underwriting,” said Parvez Umrigar, managing director, GIPL.
Praveen Sood, CFO, HCC, had stated last week, “We are looking for underwriters. A number of banks have shown interest in underwriting our projects. We have almost finalised the bank for one of our projects, which we would be announcing in a couple of days.”
However, there are companies like IRB Infrastructure who still prefer the traditional method of financial closure. The road development company announced financial closures for all three projects it was working on. “We are not looking for underwriting, we would be achieving financial closure for our three road projects in this month through the normal procedure,” V Mhaiskar, managing director, IRB Infrastructure, had told Moneylife last week.
While underwriting is surely a lucrative option for road companies to enable them to bid for more projects, banks too are looking at the brighter side of such ventures. “If it is a good project, the banker is happy to get the extra amount in the form of an underwriting fee,” stated Mr Chandak.
“We have received very good response from banks,” stated Mr Sood. According to sources, Axis Bank, United Bank of India and Bank of Baroda are among the other banks interested in the underwriting process.
Banking channels are starting to gain a foothold for selling mutual funds, but will this new distribution model help out investors?
Many private banks are already selling mutual funds (MFs) and now public sector banks are planning to enter this space. According to media reports, the country’s largest public sector bank, State Bank of India (SBI), has trained some 18,000 employees to sell MFs.
But can the new banking foot-soldiers be as good as independent financial advisors (IFAs)?
A relationship manager (RM) needs to have a minimum qualification of an MBA. The remuneration he would get—on an average—is Rs15 lakh per annum.
Considering the remuneration, the RM has to generate 10 times his salary as business to justify his package—a revenue of approximately Rs1.5 crore. If the RM achieves his target or even exceeds it, then he may be promoted to a higher branch where more high net-worth individuals (HNIs) would be available. If the RM does not achieve his target, he may be moved to a suburban branch. So an investor would come across new faces every year.
“Banks factor (in) every cost into the employee. I know of many banks who calculate the average rent they pay per employee for the premises that they are using. When the market was in a bull run, banks used to churn clients’ money three to four times and easily earn 2.25% brokerage,” said a distributor.
When asked about the recent Securities and Exchange Board of India’s (SEBI) diktat on upfront commission, a distributor described the market watchdog’s rules as “working towards systematic elimination of brokers and intermediaries.”
Before the ban on entry loads, MF distributors were providing door-to-door services to their clients. After SEBI banned entry loads and subsequently cracked down on upfront commissions, distributors can only hope to profit from trail commissions (an insignificant amount, which again depends on the MF client staying invested with the distributor).
Most IFAs have developed a good rapport with their investors in the area which they operate, so the chances of any mis-selling can be less. Even if they do indulge in mis-selling, they remain with their establishments, while relationship managers have to work keeping in mind the ambitious targets set by bank managements.
“On an average, you get to meet one relationship manager for one year. Then you have a new face (in the bank), while an IFA cannot keep hopping from one colony or housing complex to another by mis-selling to clients he meets. His bandwidth to source new clients is limited,” said Rajesh Krishnamoorthy, MD, iFast Financial India.
SEBI has brought about sweeping changes in the MF industry over the past few months. The latest move mandating asset management companies from paying upfront commissions from load accounts to distributors is yet another dampener for IFAs.
“India definitely needs regulation for financial advisors. What is important is that regulatory changes must not force the choice of any particular distribution channel on the investor,” suggested Mr Krishnamoorthy.
“The cost of losing a client is a lot higher than the revenue from a ‘high commission’ bearing product,” he added.
Moneylife had earlier reported on how banks have indulged in mis-selling of products and how they get direct access to accounts of their banking clients for selling MFs.
(For more, read here and here)