State-owned banks, which employ over 800,000 people, could move towards performance-based pay soon, a move that would put them on the same platform as their private sector peers, while helping keep costs under check.
A committee headed by Anil Khandelwal, former chairman and managing director of Bank of Baroda, which had looked into outdated human resource practices at public sector banks, had proposed that salaries be linked to performance. The committee submitted its report two years ago.
This suggestion could now become part of the new wage structure. Talks have already started between banking unions and IBA on wage revision. In 2009, when the last pay revision was announced, public sector bank employees got a 17.5% hike, with retrospective effect from November 1, 2007.
While Indian Banks' Association is in favour of bringing uniform compensation culture among private and public sector banks, banking unions are opposed to moving to a performance-based pay structure.
About 30% of the staff in government banks would retire by this year. "Talent crunch is a major factor and until we look into the HR policies, it would be difficult for us to attract talent, especially in this competitive environment," a senior executive at large public sector bank, who did not wish to be identified, told Hindustan Times.
The attrition rate in state-owned banks has also increased significantly in the last few years, with a large number of banks coming up in the private sector space and offering substantially more attractive pay packages.
The Khandelwal Committee report noted that there was an acute shortage of talent in PSU banks, and fresh graduates were reluctant to join a government bank as they failed to provide concrete career growth path to their employees.
The report also underlined that instead of the present industry-level arrangement, wage decisions should percolate to the bank level.
At present, there are 26 public sector banks in India.