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CHAPTER-1

INTRODUCTION

Today, the forces of competition, consolidation and convergence are exerting

continual pressure, on organizations and individuals alikge, to deliver the best value under the

fast changing complex economic, political and social environment all over the world. The

emerging complex confluences of market forces and technology have made business highly

competitive. Integration of global markets, reducing profit margins and fast changing

consumer preferences are forcing organizations to redefine and reengineer their businesses

and adopt different strategies. These trends have a more dominant impact on service industry

like banking where money market dynamics further compound the nature of competition.

Many progressive business institutions around the world have begun to internalize this new

reality and are redesigning the role of their human resources, in order to get the best value

out of their intellectual capital and India is not an exception to all this.

Human resources as the only active resource in organizations are very important

because effective and efficient utilization of other resources like money, materials, machines

and technology depend upon them. In a rapidly changing scenario when all the developing

nations are facing fierce competition in the wake of globalization, deregulated markets, the

application of e-technology to all aspects of a complex organization, continuous updating of

the staff skills is becoming more critical. There is pressure on Indian industry to produce

quality products and provide quality services in the fast changing competitive environment.

With day-to-day increasing pressures of competitive market forces, there is an urge to

become cost effective and cost efficient banking sector.

A well-designed Human Resource Management (HRM) mechanism focuses on

acquisition of efficient and cost effective human resources, their training and development,

compensations, their welfare and other benefits, health, safety, job analysis, job descriptions,

job specification, performance evaluation, and industrial relations. It has become extremely

essential to carry out a complete work on science of Human Resource Management. Today,

organisations are downsizing, merging with others, acquiring each other and becoming

increasingly affected by changes throughout the world. So, managers increasingly recognise

the value of human resources and strive to better understand people and their roles in

complex organisations and competitive business environment. By following the newer human

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resource management practices (HRMP), the enterprise itself shapes the behaviours and

actions of each individual who becomes a part of it.

Human resource management practices are gaining importance in the present fast

changing socio-economic scenario. Everyone must realise now the role of human resources in

all round development and growth of organisation and above all the country as a whole. The

recent scenario of economic liberalisation and process of globalisation have increased the

importance of Human Resource Management by manifold. Human beings are no longer

considered now simply wage earning labour but as assets and a purposeful resource of the

organisation. For effective human resource utilization, HRM has become very essential. All

the organisations whether they are government or non-government, industrial, business or

service, depend on people, i.e., human resource for their operations vis-a-vis their survival

and growth. Still in many organisations human resources are not treated as assets or resources

that can be drawn upon.

With the emergence of improved technologies and global competitive environment,

upgrading the work methods, work norms, improving technical and managerial skills and

employees‟ satisfaction, have become the need of the hour, both in manufacturing and

services sectors. There is a mounting pressure on Indian commercial banks to provide cost

effective and cost efficient quality services in the fast changing competitive environment.

After the economic liberalisation process began, a vibrant banking sector powered by both

improved-efficiency public sector banks and growth-hungry private ones emerged on the

economic scene. Indian banks making available the number of instruments and services to

both the retail and corporate clients globally and the levels of technology involved in

managing these products have become pure science-oriented over the last 23 years.

Every organization is set for the attainment of certain predetermined objectives and

which can be achieved only when various resources are brought together and managed in

such a way that they contribute their best. These resources are, human and non-human. Of all

the resources, human resource is the most significant and the only active factor of production.

The utilization of all other resources depends on efficient utilization of human resources. It is

a widely acknowledged fact that in the emerging highly competitive global market

conditions, only excellent performers would survive. Today‟s organizations are confronted

with challenges in improving productivity and successful meeting the intense level of global

competition. How successfully an organization responds to these challenges largely depends

on how well it utilizes its available human resources to the highest level of performance. As

such, the concept of HRM is rapidly gaining ground as a popular method of ensuring higher

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productivity and faster growth which is now widely regarded as the hallmark of corporate

excellence.

1.1 STRUCTURE OF BANKING INDUSTRY IN INDIA

The Indian commercial banks can be classified into unorganized sector banks and

organized sector banks. The unorganized sector consists of indigenous bankers including

non-banking financial companies. In the Indian money market system, the Reserve Bank of

India occupies the central position because it regulates and controls the credit supply of the

country. The commercial banks can be divided into two groups:

(A) The scheduled banks are those which have been included in the schedule

(second) of Reserve Bank Act, 1934.

(B) Non-scheduled banks are those banks which are not included in the list of

scheduled banks. The number of non-scheduled banks is continuously

declining.

Over the last six and a half eventful decades, banks have played a commendable role

in promoting savings and investments, helping the nation in its march towards economic

independence.

As on 31st March 2012, 26 commercial banks in public sector are working in the

country. Out of these, 19 banks are nationalized banks (earlier this number was 20 but New

Bank of India was merged with Punjab National Bank leaving this number to 19), SBI and 05

Associates and one other commercial IDBI Bank. Out of the 21 private sector commercial

banks, 14 are old and only 7 are new.

1.2 DESCRIPTION OF CONCEPTS

Human resources, being the principal source of the service industry, constitute the

total knowledge, skills, creative abilities, and aptitudes of workforce as well as the value,

attitude and beliefs of the individuals involved in them. One of the important and dynamic

activities is the management of the human resources. It is a challenging task because of the

dynamic and unpredictable nature of the people. Human resource management is actively

involved in recruiting and selecting human resources, fashioning their career paths,

improving their skill sets and rewarding them accordingly. The operative functional areas of

human resource management are related to procuring, developing, compensating and

integrating them and maintaining a workforce for attaining organisational goals. HRM policy

is a total commitment of the organisation to act in a specified way while dealing with its

manpower, and generally deals with personnel selection, promotion, compensation and

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training and development of its employees, their performance evaluation, personnel relations

and public relations. Here, a brief description of the conceptual areas of HRM practices

relating to employees‟ recruitment and selection, promotion, compensation packages, training

and development practices as covered under the study has been undertaken.

Human resources are the most important and vital of all the resources and play a

crucial role in management process. Human resources equipped with knowledge and skills

are considered meaningful resources today. All the other resources are freely moving but the

people with knowledge are to be grabbed for, as they are invaluable assets to the

organisation. They are in greater demand, good performance, better competence, desirable

quality are the by-products of knowledge. It is the people (human resources) who work

behind machines, manage organization; they plan, organise, direct, control and communicate

to fulfil the common objectives and meet the targets. Human Resource Management

envisages the human approach towards the people at work; and ignorance of Human

Resources can prove to be a curse for the enterprise. Human beings design or order the

equipment; they decide where and how to use computers; they modernize the technology

employed; they secure the capital needed and decide on the accounting and physical

procedures to be used. Every aspect of organisations activities is determined by the

competence, motivation and general effectiveness of its human resources.

1.2.1 Human Resource Management

Human Resource Management includes planning, job analysis, job design,

acquisition, training and development, compensation, appraisal, benefits, rewards, safety,

health, motivation, job evaluation, human relations, employee counselling and personnel

research of human resources. A HRM system is a set of procedures framed to control, e.g.,

the system of employment in HRM through selection involving a set of procedures of inviting

applications, conducting tests, interviews, physical examination, checking references, issuing

appointment letters, their compensations; and beyond that training and other processes to be

followed for effective management. And total efficiency of all the systems should be

effectively planned, developed and executed collectively by human resource manager in

consultation with other managers.

Human resources encompass knowledge, skills, creative abilities, talents, and the

aptitude obtained in the population; whereas from the point of individual enterprise, they

represent the total of the inherent abilities, acquired knowledge and skills as exemplified in

the talents and aptitudes of its employees (Megginson, 2003). Whereas Michael (1973) calls

these resources, human factors which refer to “as a whole consisting of inter-related, inter-

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dependent and interacting physiological, sociological and ethical components. As such,

human resources by nature are multi-dimensional factors in an organizational set-up which

strive for the accomplishment of business objectives. The terms human resources or human

assets or human capital or personnel are used inter-changeably and are in intangible form.

Human resources represent a source of strength, ability, skill, competence,

knowledge, attitude, enthusiasm, decision-making powers to be used for accomplishment of

organisational, individual, societal and national objectives in the sense they are the most

essential. Nothing can be achieved without their co-operation. HRM in coming years will not

be contended with mere personnel management or industrial relations, but be more involved

and concerned with developing, educating, team building, counselling, motivating, caring and

above all, organisational development. Moreover, presently the top managements of

commercial banks in India are paying increased attention to HRM because they have realised

that human resources need to be closely integrated with planning & decision-making. Now

for them the Human Resource Management means viewing people as vital social capital; and

an effective Human Resource Management has become a must to face challenges on

knowledge, skill and technology fronts occurring in global economy. And as such, the

effective Human Resource Management has become mandatory for all the industrial and

service organisations.

Human Resource Management is meant “to integrate all personal activities with each

other and strategically with organizational objectives”. Essentially, it first serves the

organizational interest and in that context, “It is an investment rather than a cost to the

organization”. The utilization of all other resources directly depends on efficient utilization of

human resources. Every organization needs to have well-trained and experienced people to

perform the activities that have to be done. As jobs have become more complex in the

banking sector, the importance of employee training has increased. In a rapidly changing

society, employee training is not only an activity that is desirable but also an activity that an

organization must commit resources to, if it is to maintain a viable and knowledgeable

workforce. Owing to the changing banking environment, HR department has to care for

appropriate response in equipping people who have to perform in the new environment.

Human Resources Management (HRM) is defined as the policies and practices

needed to carry out the “people” or human resource aspect of a management position,

including selection, job definition, training, performance appraisal, compensation, career

planning and encouraging employee participation in decision-making. From another point of

view, HRM is defined as a process for the development of abilities and the attitude of the

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individuals, leading to personal growth and self-actualization which enables the individual to

contribute towards organizational objectives. Much of the debate has been around the

meaning of HRM, yet there is no universally accepted definition of HRM. Some definitions

interchange HRM with personnel management.

Human Resource Management is also defined as a strategic and coherent approach to

the management of an organization‟s most valued assets-the people working there who

individually and collectively contribute to the achievement of its objectives. Storey (1989)

believes that HRM can be regarded as a „set of interrelated policies with an ideological and

philosophical underpinning‟. Becker and Gerhart (1996) have classified these components

into three levels: the system architecture (guiding principles), policy alternatives, and

processes and practices. Human resource management operates through human resource

systems that bring together in a coherent way:

HR philosophies describing the over arching values and guiding principles adopted in

managing people.

HR strategies defining the direction in which HRM intends to go.

HR policies, which are the guidelines defining how these values, principles and the

strategies should be applied and implemented in specific areas of HRM.

HR processes consisting of the formal procedures and methods used to put HR

strategic plans and policies into effect.

HR practices, comprising the informal approaches used in managing people.

HR programmes, which enable HR strategies, policies and practices to be

implemented according to plan.

The overall purpose of human resource management is to ensure that the organization

is able to achieve success through people. As Ulrich and Lake (1990) remark: “HRM systems

can be the source of organizational capabilities that allow firms to learn and capitalize on new

opportunities.”

Human capital can be regarded as the prime asset of an organization, and businesses

need to invest in that asset to ensure their survival and growth. HRM aims to ensure that the

organization obtains and retains the skilled, committed and well-motivated workforce it

needs. This means taking steps to assess and satisfy future people needs and to enhance and

develop the inherent capacities of people and their contributions, potentials and employability

by providing them learning and continuous development opportunities. It involves the

operation of rigorous recruitment and selection procedures, performance-contingent incentive

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compensation systems, and management development and training activities linked to the

needs of the business (Becker et al., 1997). It also means engaging in talent management and

the process of acquiring and nurturing talent, wherever it is and wherever it is needed, by

using a number of interdependent HRM policies and practices in the fields of resourcing,

learning and development, performance management and succession planning.

Recruitment and Selection

The success of any organisation depends ultimately on the calibre and the

effectiveness of its recruitment and selection procedure. Both recruitment and selection are

two phases of employment process. Recruitment being the first phase, which envisages taking

decisions regarding the choice of typing the source of human resource supply. While

selection is the second phase which involves exercising various types of tests and interview

on the candidates in order to select the right person for the right job.

Recruitment

The term „recruitment‟ applies to the process of attracting potential employees to the

organization or company. It is a systematic means of finding and inducting available

manpower to apply to the company or enterprise for employment. Since it involves the

process of searching for prospective employees, it is concerned with the range of sources of

supply of labour or personnel, and of recruitment practice and techniques. The recruiting

activity in itself is selective or pre-selective, through choosing among the various sources of

labour supply and by the decision as to which candidates applying for employment should be

permitted to go through subsequent selection or screening procedures.

The process of identification of different sources of human resources is known as

recruitment. It is a linking activity that brings together those offering job and the job seekers.

Recruitment refers to the attempt of getting interested applicants and creating a pool of the

prospective employees so that the management can select the right persons for the right job

out of this pool. Recruitment precedes the selection process, i.e., selecting the right person for

various positions in the organisation. It is a positive process as it attracts suitable applicants to

apply for the available jobs. Thus, the process of recruitment involves:

1. Identification of different sources of labour, which may be grouped as:

i) Internal sources (recruitment from within the organisation), and

ii) External sources (recruitment from outside sources).

2. Assessing their validity

3. Selecting the most suitable source or pool of sources.

4. Inviting applications from prospective candidates for the vacant jobs.

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Methods of Recruitment

There are two main sources of recruitment:

1. The Internal Labour Market, and

2. The External Labour Market.

Poaching and Raiding

Another trend in recruitment process is poaching which means employing a

competent and experienced person already working with another reputed company, which

may be a rival in the industry. A company can attract talent from another company by

offering attractive pay packages, and terms and conditions. In fact, it is raiding the rival firms

for potentially better candidates. It is also considered as a challenge for human resource

managers because poaching of a key bank officer by a rival company certainly weakens the

competitive strength.

E-recruitment

These days, majority of the organisations use internet as a source of recruitment.

The companies advertise the job vacancies from bottom to the key positions through the

worldwide web. The job seekers send their applications or curriculum vitae through e-mail or

by filling the online forms using the internet. Alternatively, job seekers display their

curriculum vitae through the worldwide web or internet which may be drawn by prospective

employers to meet their requirements.

Selection

After determining the number and kind of personnel required by the organisation the

Human Resource Management department proceeds with identification of sources of

recruitment and begins with the search of suitable candidates for employment. Normally,

various types of screenings and tests are administered to shortlist the most suitable

candidates. Shortlisted candidates are then called for interview. After their selection, medical

tests are conducted and finally, reference check is carried out. And the process ends with

issuance of selection letters to the selected candidates.

Promotion

Although the organization‟s very existence in the socio-economic environment and its

reputation may be sufficient to attract people to it and its reputation in the local labour market

may influence its recruitment activities, reliance on informal and casual method of attracting

potential employees or candidates is a narrow basis of selection and may lead to the risk of

deterioration in available employee skills. Therefore, modern business and other

organizations use highly sophisticated methods of recruitment to protect themselves against

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gaps and shortage of rank and file labour supplies and managerial or officer personnel in

banking sector. Evidences show that it is difficult to find competent managerial and officer

personnel at the right time and at the right place from the external sources. In such

circumstances, internal human resources prove to be the only solution.

Promotion as an internal source of recruitment of personnel refers to recruitment from

within the organization so as to conserve the existing manpower through implementation of

policies of promotions and transfers. The best employees may be often found from within the

organization. It is, therefore, desirable that, in times of need, first to search for suitable

manpower from within the organization. Vacancies filled through promotions and transfers

provide further entry positions for which recruitment from external sources may be done.

Several benefits are associated with recruitment from the internal labour market such as:

1. It cultivates and enhances the morale of the employees.

2. Stability from continuity of employment.

3. Better evaluation of the employees.

4. Loyalty by creating a sense of job security and personnel advancement making

them a contented employee.

However, certain drawbacks are also usually attributed to recruitment from the

internal sources. Prominent among them are the following:

1. Danger of “inbreeding”, i.e., new blood would be discouraged.

2. Inadequate and limited source of supply of manpower.

3. New ideas or innovations or suggestions are so important for development in a

competitive market which has been sidelined.

However, despite these shortcomings of recruiting the personnel from the internal

labour market, there is a general tendency among the employers in industrial, business and

service organization to rely on this source of recruitment.

Training and Development

Modern industrial organizations widely recognize the need for training of their

employees so as to acquaint them with the new technological developments. Every company

must have systematic training programme for the growth and developments of its employees.

Having the right person at the right place at the right time is the basic object of

successful human resource policy. It is the only people, who make the organisation

successful. An organization can grow if its people also grow and vice-versa. Human

Resource is the most and valuable asset of an organization which never depreciates.

Investment in Human Resource or employee leads to success of the organization. It is always

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essential for an organization to update the knowledge and skill of its employees as it results in

more productivity which ultimately provides an edge over its competitors. The need of today

is to place training and development at the heart of a business strategy so as to enable the

organization to build its competence as a domestic and international player.

Training enables the employees to get acquainted with jobs and also increase their

aptitude, and skill and knowledge. It makes newly recruited employees fully productive in the

minimum time. Even for the old workers, it is necessary to refresh them and to enable them

to keep up with new methods and techniques as well as new machines and equipments for

doing the work. Thus, training is not a „one-step process‟, but it is a continuous or never-

ending process because it increases the knowledge and skill of new employees in performing

their jobs and serves as a refresher course for the old employees. Training job will never be

finished as long as the organisation remains in operation. It also comprehends the ability to

think clearly about problems arising out of the job and its responsibilities and to exercise

sound judgment in making decisions affecting the work. The training of computerized

banking processes and procedures with proper guidance helps in turning the disguised talent

into a precious asset of the bank. The biggest achievement in the area of human resource

management has been the development of strong training system in banks.

Every organisation works for the development of its existing or potential bank

officers, in order to enable them to be more effective in performing the various functions of

management. In fact, the management of development focuses on developing in a systematic

manner, the knowledge base, attitudes, basic skills, interpersonal skills and technical skills of

the managerial cadre, (Mathis,1990).A bank officer‟s development programme aims at

increasing the capacities of the individual to achieve the desired objectives. Bank officers‟

capacities imply his personnel abilities and potentials. Desired objectives imply consideration

for the goal of the organisation and individuals. Increasing the capacities implies that change

must occur in the bank officer and through him in his subordinates. Thus, training is quite

beneficial for the employers as well as employees.

The Five-Step Training and Development Process

The processes of training and development are often confused. Training means

learning the basic skills and knowledge necessary for a particular job or a group of jobs. To

put it in other words, training is the act of increasing the knowledge for a particular job. But

development, on the other hand, means growth of the individual in all respects. According to

Dessler and Berkkey (2009), training programmes consist of five steps:

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1. The needs analysis includes the identification of the skills required for the specific job

performance, assessing the prospective trainees‟ skills and developing specific,

measurable knowledge and performance objectives based on deficiencies.

2. Instructional designs are decided, compiled, and training programme content are

produced, including workbooks, exercises and activities. By using the appropriate

techniques, such as on-the-job training and computer-assisted learning.

3. Validation, in which the bugs are worked out of the training programme by presenting

it to a small representative audience.

4. Implementing the programme, by actually training the targeted employees group.

5. Evaluation, in which management assesses the programme‟s successes or failures.

Employees‟ training is more easily identified and provided when mechanism of

competencies and acceptances are employed on them, thus, facilitating the

identifications of these core competencies that are to be developed in each case, and

thereafter training actions that are required.

Compensations Management

Compensation and benefits or rewards are concerned with paying workers and

administering their benefits package. Job salaries and benefits are not paid on a whim basis

rather than money value as assigned to positions is the outcome of elaborate investigation and

analysis which consists of logical job rankings to extensive analysis. Once these analyses are

over, job ratings are statistically compared to determine the relative worth of the job,

dimension of skills, job responsibility, efforts and accountability to the company. Other

factors, such as market conditions, position of labour supply in the market, global economic

environment, legal aspects, internal financial and liquidity position of the company, etc. are

also taken into consideration.

Pay practice is one of human resources management practice which normally refers to

pay, wage, salary and benefit, etc. The pay has an important role in implementation

strategies. First, a high level of pay and/or benefits relative to that of competitors can ensure

that the company attracts and retains high-quality employee, but this might have a negative

impact on the company‟s overall labour costs. Second, by tying pay to performance, the

company can elicit specific activities and level of performance from employee (Hollenbeck et

al., 2006). Generally, pay practice is very significant for the organizations and firms which

can attract employees to apply for the job as recruitment. On the other hand, the employees

have to retain the high performance of work in order to show their quality of work, otherwise,

will lose their work.

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As far as rewards management is concerned, many changes have occurred over the

past few decades and as such, these have become significantly most costly. The managements

are constantly looking for the low cost products for their employees such as health insurance,

while concurrently maintaining or improving quality outsourcing for other facilities, flexi

benefits programme and utilization review to help the organisations to cost cuts or cost

reductions. Inherently flawed incentive compensation practices in the financial sector were

one of the important factors contributing to the recent global financial crisis. High short-term

profits led to generous bonus payments to employees without adequate regard to the longer-

term risks they imposed on their firms. These perverse incentives amplified the excessive

risk-taking that severely threatened the global financial system and left firms with fewer

resources to absorb losses as risks materialized. The lack of attention to risk also contributed

to the large, in some cases extreme absolute level of compensation in the industry.

The rewards management set-ups also serve as facilitator for providing its employees

crucial information such as pay cuts options, recent tax law changes, details of perquisites

attached to various jobs at different levels. This provides the work force a great deal of

responsibility and sharing a long-term vision of the undertaking with its employees.

Employees are too often rewarded for increasing the short-term profit without employees‟

activities posed to the organizations. These perverse incentives amplified the excessive risk

taking that severely threatened the global financial system, resulting in the 109 banks failures

all over the world. The compensation issue has, therefore, been at the centre stage of the

regulatory reforms. To address the issues in a coordinated manner across jurisdictions, the

Financial Stability Board (FSB) has brought out a set of principles and implementation

standards on sound compensation practices in April and September 2009 respectively. The

principles intended to reduce incentives towards excessive risk taking that may arise from the

structure of compensation schemes. The principles call for effective governance of

compensation and its alignment with prudent risk taking and effective supervisory oversight

and stakeholder‟s engagements. The principles have been endorsed by the G-20 countries and

the Basel Committee on Banking Supervision (BCBS) and being implemented across

jurisdictions.

Pay practices have established correlation with job satisfaction and are also useful to

influence motivation of employees then achieved higher productivity. The efficiency wage

theories affirm that paying higher wage can sometimes increase workers‟ productivity. In

other words, the wage or pay practice has influenced employees‟ work and turnover as well.

Second, a higher wage increases effort by increasing workers' loyalty.

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1.2.2 Job Satisfaction

Job satisfaction is one of the most popular and widely researched topics in the fields

of organisational psychology and Business Management. Job satisfaction has been studied

both as a consequence of many individual and work environment characteristics and as an

antecedent to many outcomes. Employees who have higher job satisfaction are usually less

absent, less likely to leave, more productive, more likely to display organisational

commitment, and more likely to be satisfied with their lives.

Shrivastava and Purang (2009) describe that job satisfaction is in regard to one's

feelings or state-of-mind regarding the nature of one‟s work. Job satisfaction can be

influenced by a variety of factors, for example, pay practice, quality of one's relationship with

one‟s supervisor, quality of the physical environment in which one works whereby turnover

refers to the characteristic of a given company or industry, relative to rate at which an

employer gains and looses staff. For example, if an employer is said to have a high turnover,

it means that employees of that company have a shorter tenure than those of other companies

in that same industry. Job satisfaction and turnover are basically inter-related to each other

by which job satisfaction has a direct effect on the turnover.

Moreover, job satisfaction is, generally, believed as a higher job satisfaction which in

turn is associated with increased productivity, lower absenteeism, and lower employee

turnover. Amah (2009) stressed that job satisfaction was found to have a direct negative

relationship with turnover intention. These results indicate that the effect of job satisfaction

on turnover can be enhanced in two ways; namely, when employees find congruence between

their job and their self-identity, and when involvement in such jobs enhances their overall life

satisfaction. On the other hand, turnover can be considered as cost of running a business.

Khilji and Wang (2007) reported that the impacts of labour turnover on a hotel‟s bottom line

could be classified into direct costs and indirect costs. Direct costs are essentially financial

consequences that include administrative costs as a result of increased recruitment and

training expenditure of new employees. As such a satisfied workforce can increase

organizational productivity through less distraction caused by absenteeism or turnover, few

incidences of destructive behaviour, and low medical costs.

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1.3 BACKGROUND OF THE STUDY

With rapidly changing scenario when all the developing countries are facing fierce

competition in the wake of globalization, deregulated markets, the application of e-

technology to all aspects of a complex organization, people have become an important

resource because organizations are made of people and the way money, technology and

resources are used depends upon Human Resources. A well-designed human resource

management system includes; acquisition of human resources, their training and

development, compensations, other benefits, health, safety, job analysis, job descriptions, job

specification, performance evaluation and other information such as skill, competence,

experience, their increments, bonus, cost of acquiring HR and so on. Career planning requires

thorough check up one‟s own preferences, abilities, skills, competence and train them

accordingly before placing them at respective designations. Finally, popular management

laboratories have one thing in common; they each view all employees (Human Resources) as

critically valuable parts of organization set-up.

Human Resource management is gaining importance in today‟s fast changing global

socio-economic and political scenario. Everyone must realise now the role of human

resources in all round development and growth of organisation and above all the country as a

whole. Still in many organisations human resources are not treated as assets or resources that

can be drawn upon. Basically, human resources represent a source of strength, ability, skill,

competence, knowledge, attitude, enthusiasm, decision-making powers to be used for

accomplishment of organisational, individual, societal and national objectives in the sense

they are the most essential. Nothing can be achieved without their co-operation. Moreover,

nowadays, top managements of commercial banks in India are paying increased attention to

HRM because they have realised that human resources need to be closely integrated with

planning & decision-making.

Table 1.1, as given below, highlights the staff strength of public and private sector

commercial banks in India from 2002-03 to 2011-12, indicating the increasing importance of

human resources in the banking sector. For the purpose of getting the detail intersectoral

comparative analysis, public sector banks have been classified into two categories, viz.

nationalized banks, and SBI and its Associate banks (including IDBI), while private sector

banks have been classified into old private sector banks and new private banks.

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Table 1.1

The Staff Strength of Public and Private Sector Commercial Banks in India from

2002-03 to 2011-12

Years Public Sector Banks Private Sector Banks

Nationalised

Banks

SBI

Group

Combined Old New Combined

2002-03 474328 282923 757251 44048 21408 65456

2003-04 470951 280676 751627 43619 26976 70595

2004-05 467983 280668 748651 43558 37867 81425

2005-06 469177 274760 743937 43972 40675 84647

2006-07 466547 263181 729728 45061 76602 121663

2007-08 458147 257261 715408 48725 110573 159298

2008-09 455464 278799 734263 51412 124998 176410

2009-10 455049 279545 734594 55071 127596 182667

2010-11 458129 296973 755102 55432 132627 188059

2011-12 475697 295691 771388 62965 151339 214304

Average 465148 279048 744195 49387 85067 134453

SD 7814 12310 16100 6680 49895 56023

Variance 61056210 151524055 259205272 44615480 2489429630 3138517756

CAGR 0.03 0.40 0.17 3.30 19.46 11.39

Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector

Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.

Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.

The average number of employees of the nationalized banks, SBI group and its

associates has been 4,65,148 and 2,79,048 respectively over the period under study. On the

other side, the average number of employees of the old and new private sector banks has been

49,387 and 85,067 respectively. This shows that nationalised banks have got the Ist rank,

while SBI group and its associates are at the second position; and old private sector banks

have the lowest rank so far as the average number of employees is concerned. During the

period of study both the classes of public sector banks and the old private sector banks have

shown fluctuating staff strengths over the period under study. However, there has been a

constant rise in the staff strength of new private sector banks. SBI and its associates have

shown the highest strength of 2,96, 973 employees in the year 2010-11. During the remaining years,

nationalised banks have got the lead as compared to other banks in the matter of staff strength.

The Compound Annual Growth Rate (CAGR) of the new private sector banks have

been recorded to be the highest over the period under study, i.e., 19.46 per cent followed by

relatively very less growth rates of 3.30 per cent, 0.40 per cent, and 0.03 per cent in the case

of old private banks, SBI and its associates and nationalised banks respectively. The data

provided in the above table indicates that although the SBI and its associates have the highest

16

number of employees during some years of study in comparison to other banks but still their

growth is very low. The new private sector banks are at their developing stage and have

shown a remarkable compound growth rate during the period under study.

For the purpose of making an in-depth intersectoral comparative study, public sector

banks have been classified into two categories, nationalized banks, and the SBI and its

Associates (including IDBI). Similarly, private sector banks have been classified into old

private sector banks and new private banks. Table 1.2 carries the data showing the growth of branch

network of public and private sector commercial banks in India from 2002-03 to 2011-12.

Table 1.2

Branches of Public and Private Sector Commercial Banks in India

from 2002-03 to 2011-12

Years Public Sector Banks Private Sector Banks

Nationalised

Banks

SBI

Group

Combined Old New Combined

2002-03 33123 13585 46708 3573 961 4534

2003-04 33416 13678 47094 3713 1075 4788

2004-05 33537 13857 47794 3818 1465 5283

2005-06 34461 14037 48498 4050 1717 5767

2006-07 35810 14481 50291 4248 2338 6586

2007-08 37438 15616 53054 4529 3194 7723

2008-09 39574 16655 56229 4746 4277 9023

2009-10 41836 18188 60024 5071 5171 10242

2010-11 43962 19237 63199 4884 6834 11718

2011-12 48563 20339 68902 5462 8119 13581

Average 38212 15968 54180 4410 3515 7925

SD 5194 2509 7688 632 2515 3123

Variance 26978663 6292813 59103431 398672 6326194 9751309

CAGR 3.54 3.74 3.60 3.93 21.41 10.49

Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector

Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.

Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.

The table indicates that nationalized banks have 48,563 branches in the year 2011-12

which is the highest number in comparison to other banks. However, the old private sector

banks have the lowest number of branches, i.e., 5,462 in the year 2011-12 and 3573 in the

year 2002-03 . The number of branches of new private sector banks have increased constantly

and rapidly. It had only 961 branches in the year 2002-03 which rose to 8,119 branches in the

year 2011-12. These figures indicate that the nationalized banks have the highest number of

branches as compared to other banks followed by SBI group and its associates.

17

The new private sector banks have also enjoy a leading position in the case of

Compound Annual Growth Rate (CAGR) showing 21.41 per cent which is much higher than

the old private sector banks, SBI and its Associates, and the nationalized banks having the

growth rates of 3.93 per cent, 3.74 per cent and 3.54 per cent respectively.

Table 1.3 carries the data exhibiting deposits per employee of public and private

sector commercial banks in India from 2002-03 to 2011-12. For the purpose of making an in-

depth intersectoral comparative analysis, public sector banks have been classified into two

categories, namely, nationalized banks, the SBI and its Associates (including IDBI).

Similarly, private sector commercial banks have been classified into old private sector banks

and new private banks.

Table 1.3

Average Deposits per Employee of Public and Private Sector Commercial Banks in

India from 2002-03 to 2011-12

(Amount in Rs. Crore)

Years Public Sector Banks Private Sector Banks

Nationalised

Banks

SBI

Group

Combined Old New Combined

2002-03 1.49 1.29 1.43 1.78 4.18 2.54

2003-04 1.72 1.56 1.67 2.07 4.30 2.78

2004-05 2.01 2.35 2.12 2.25 4.32 2.91

2005-06 2.28 2.59 2.38 2.45 4.47 3.09

2006-07 2.87 2.69 2.81 2.87 4.39 3.35

2007-08 3.57 3.29 3.48 3.26 4.40 3.63

2008-09 4.45 4.97 4.78 3.82 4.32 4.17

2009-10 5.36 5.60 5.43 4.03 5.00 4.55

2010-11 6.44 6.10 6.35 4.63 5.90 5.05

2011-12 7.11 6.58 6.97 4.80 5.79 5.14

Average 3.73 3.70 3.74 3.20 4.71 3.72

SD 2.02 1.94 2.01 1.08 0.64 0.95

Variance 4.09 3.77 4.02 1.17 0.41 0.91

CAGR 15.27 15.95 15.48 9.44 3.00 6.61

Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector

Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.

Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.

The average deposits per employee of the nationalized banks and the SBI group taken

together in the public sector have been recorded as Rs. 3.73 crore and Rs. 3.70 respectively;

and the figures for old and new banks in the private sector for the same period have been

recorded as Rs. 3.20 crore and Rs. 4.71 crore respectively. This indicates that the new private

sector banks have achieved the highest deposits per employee followed by nationalized banks Rs.

3.73 crore, SBI and its Associates Rs. 3.70 crore and old private sector banks Rs. 3.20 crore.

18

The deposits per employee under both the classes of public sector banks have

increased gradually over the period under study which speaks about their growing business.

The deposits per employee in the case of old private sector banks have increased over the

period except the year 2008-09 when they came down to Rs. 4.32 crore from Rs. 4.40 crore. There

has been a fluctuating trend in case of deposits per employee in case of new private sector banks.

The Compound Annual Growth Rate (CAGR) of public sector banks is, again,

comparatively high with a rate of 15.27 per cent and 15.95 per cent in case the of nationalized

banks and SBI group respectively followed by 9.44 per cent and 3.00 per cent of old and new

private sector banks respectively. The data provided in the above table reveals that the

performance of public sector banks is better in comparison to the private sector banks.

Table 1.4 exhibits the data regarding average advances per employee of the public and

private sector commercial banks from 2002-03 to 2011-12. For the purpose of making an in-

depth intersectoral comparative analysis, the public sector banks have been divided into two

categories, namely, nationalised banks, and SBI and its Associates (including IDBI).

Similarly, private sector banks have been classified into old and new private banks.

Table 1.4

Average Advances per Employee of Public and Private Sector Commercial Banks in

India from 2002-03 to 2011-12

(Amount in Rs. Crore)

Years Public Sector Banks Private Sector Banks

Nationalised

Banks

SBI

Group

Combined

Old New Combined

2002-03 0.76 0.69 0.74 0.89 2.92 1.54

2003-04 0.88 0.83 0.87 0.95 2.62 1.48

2004-05 1.13 3.04 1.74 1.30 3.19 1.90

2005-06 1.46 2.61 1.83 1.56 3.18 2.08

2006-07 1.94 2.70 2.18 2.85 3.03 2.91

2007-08 2.47 3.33 2.75 2.16 3.18 2.49

2008-09 3.11 3.95 3.36 2.19 3.45 2.59

2009-10 3.70 4.34 3.89 2.59 4.05 3.05

2010-11 4.66 4.91 4.73 3.15 4.79 3.70

2011-12 5.30 5.35 5.31 3.50 4.98 4.02

Average 2.54 3.17 2.74 2.11 3.54 2.58

SD 1.61 1.56 1.56 0.92 0.80 0.86

Variance 2.58 2.44 2.44 0.85 0.64 0.74

CAGR 1937 20.51 19.69 13.22 4.96 9.12

Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector

Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.

Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.

19

The average amount of advances per employee of the nationalized banks and the SBI

group in the public sector has been Rs. 2.54 crore and Rs. 3.17 crore respectively and that of

the old and new private sector banks has been Rs. 2.11 crore and Rs. 3.54 crore respectively.

It is evident that the new private sector banks have the highest average amount advances per

employee. However, the combined average advances of both the public and private sector

banks are more or less at the same level, i.e., Rs. 2.74 crore and Rs. 2.58 crore respectively.

The advances per employee in the case of nationalized banks have shown an increase

during the whole period of study. In the case of SBI group and its Associates there is a

sudden rise in the advances from Rs. 3.04 crore in the year 2004-05 from Rs. 0.74 crore in

2003-04. However, the advances declined to Rs. 2.61 crore in 2005-06 and thereafter kept on

increasing again. In both old and new private sector banks, there is a gradual increase in the

advances. So far as the Compound Annual Growth Rate (CAGR) is concerned, SBI and its

Associates are ahead of all other banks, while it is the lowest in the case of new private sector banks.

Table 1.5 presents a comparative analysis of the average business per employee of

public and private sector commercial banks in India form the year 2002-03 to 2011-12. In

order to have an in-depth intersectoral comparative analysis, the public sector banks have

been classified into two categories, viz. nationalized banks, SBI and its associates (including

IDBI), while private sector commercial banks have been classified into old private sector

banks and new private sector banks.

TABLE 1.5

Average Business per Employee of Public and Private Sector Commercial Banks in India from

2002-03 to 2011-12

(Amount in Rs. crore)

Years Public Sector Banks Private Sector Banks

Nationalised

Banks

SBI

Group

Combined Old New Combined

2002-03 2.20 1.95 2.13 2.55 6.98 3.96

2003-04 2.56 2.18 2.45 2.82 6.57 4.02

2004-05 3.06 4.00 3.36 3.26 7.10 4.48

2005-06 3.70 5.05 4.14 3.82 7.36 4.95

2006-07 4.74 5.44 4.97 4.39 7.15 5.27

2007-08 6.01 6.80 6.27 5.11 7.45 5.86

2008-09 6.97 8.56 7.44 5.77 7.44 6.30

2009-10 8.90 9.32 9.02 6.57 8.33 7.13

2010-11 10.83 10.68 10.79 7.59 9.78 8.32

2011-12 12.16 11.69 12.03 7.62 9.00 8.49

Average 6.12 6.57 6.26 4.95 7.72 5.88

SD 3.53 3.42 3.48 1.89 1.01 1.66

Variance 12.47 11.71 12.12 3.58 1.01 2.76

CAGR 16.79 17.70 17.06 10.48 2.34 7.18

Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector

Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.

Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.

20

The average business per employee of the nationalized banks and SBI and its

Associates taken together in the public sector has been recorded as Rs. 6.12 crore and Rs.

6.57 crore respectively, and that of old and new banks in private sector for the under study

period has been Rs. 4.95 crore and Rs. 7.72 crore respectively. This reflects that the SBI and

its Associates have achieved the highest average business per employee as against other

public sector banks during the period. However, the combined average business per employee

of the public and private sector banks has been observed at Rs. 6.26 crore and Rs.5.88 crore

respectively.

The business per employee under both the categories of public sector banks has

shown a gradual increase during most of the years under study. However, during the years

2003-04 to 2004-05, SBI and its Associates have shown a remarkable increase from Rs. 1.95

crore to Rs. 4.00 crore. The old banks under the private sector segment have also registered a

rising trend, while in the case of new private sector banks a fluctuating trend was observed

throughout the period under study.

The nationalised banks have recorded the highest business per employee, i.e., Rs.

12.16 crore, followed by SBI and its Associates with Rs. 9.09 crore and old private sector

banks with Rs. 7.12 crore during the year 2011-12. But the new private sector banks have

shown the highest business per employee of Rs. 9.78 crore during the year 2010-11.

The Compound Annual Growth Rate (CAGR) of SBI and its Associates has been

recorded the highest over the period under study, i.e., 17.70 per cent, 16.79 per cent for the

nationalized banks and 17.06 per cent public sector banks taken together respectively.

However, in the case of private sector banks it has been 7.18 per cent, while it is 10.48 per

cent for the old private sector banks. The new private sector banks recorded the lowest

CAGR of 2.34 per cent. The analysis made above indicates that the nationalized banks are

showing a better business per employee as compared to the private sector banks.

The analysis made above leads us to conclude that the study of human resource

management practices has become an important and critical area in management and

organizational performance over the last decade only. The employees‟ satisfaction and

retention have become critical to the conduct of business in the competitive marketplace and

business environment today, and the banks are no exception to it. The commercial banks

have, thus, embarked on different management strategies as to promote employees‟ job

satisfaction and their retention. Employees‟ retention is contestably the biggest upshot

encountering corporate administrators as a sequence of the fragmentation of agile employees,

economic development and employee turnover. Employee retention confounds netting

21

measures to drive them to continue in the organization for the maximum time period. The

essential to employee retention is to presume the employees‟ apprehensions and secure

proper alignment of their needs with those of the organization.

1.4. SIGNIFICANCE OF THE STUDY

It can be clearly visualised that Human Resources is the only resource, which can

provide and produce unlimited out put through better ideas. There is no apparent limit to it.

In other terms, HR can be defined as the total knowledge, skills, creative abilities, talents and

aptitude, approaches and beliefs of individuals involved in the affairs of enterprises. HRM in

the coming years will not be contended with mere personnel management or industrial

relations, but should be more involved and concerned with developing, educating, team

building, counselling, motivating, caring and above all organisational development.

The recent scenario of economic liberalisation and process of globalisation has

increased the importance of Human Resource Management manifold. Human beings are no

longer considered now simply wage earning labour but an asset and a purposeful resource of

the organisation. For effective human resource utilization, HRM has become very essential.

All the organisations whether they are governmental or non-governmental, industrial,

business or service organisations depend on people, i.e., human resource for their operations

vis-a-vis their survival.

In this competitive environment, there is enormous pressure on the banking

managements to bring down the costs and improve the quality of their services. A good

number of researchers have pointed out that organizational profitability is due to the potential

employees; and the management must put them in the centre of development of all processes

to enhance the sense of ownership and to retain the asset employees. Every researcher has

described internal service quality in his own way. Bridging retention and preserving the

turnover rate under objective and business moulds is one of the dominant encountering issues

braving enterprises nowadays. From all manifestations, the issue will blend in future

eventuality, even as economic caveat modulates in current scenario.

Moreover, the doctrine of gratified employees for the endowment of satisfied clients

is prevalent and conceived by both academicians and practitioners. In fact, the considerations

of service marketing, communications, and human resource management are interdependent.

Despite all the recent excitement about the quality services, however, one bit of old advice is

still new, the goal of quality system is to help improve quality. Simply measuring quality

costs would not ensure the job done. To get things improved, organization machinery needs

22

its reengineering which originally divides quality into the categories of prevention, appraisal,

and failure. Recent human resources professionals are formally engaged in finding

appropriate Human Resource Management Practices (HRMP) to get maximum outcome for

the employees by recognizing their potentials and efforts.

The need of the hour is to search and tap the incredible characters of human resources

and manage their skills as a continuous process. The expenses incurred in this regard are

investment, which yield income over longer period. The effective human resources

management and their development are very essential for growth and prosperity of the

respective organisations. Top managements of organisations are now paying increased

attention to HRM because they have realised that human resources need to be closely

integrated with planning & decision-making.

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 risks are two key challenges faced by

the banks. How they manage the people and how they manage the risks determine their

success in the banking business. 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 choose 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.

The real problem of running a bank successfully and viably is that skilled manpower

is in short supply. No two arguments on this, HR resources are becoming scarce;both in

quality and quantity. And, it is a basic issue that any resource that is in short supply needs to

be properly managed for the benefit of society and, therefore, banks need to pay attention to

the entire Human Resource Management process. The entire spectrum of HRM practices

requires revolutionary changes if the banks have to survive. Managing the people is a key

challenge before the bank managements. Commercial banks in India are expected to take

necessary steps in such a way that their employees should feel that recruitment, selection,

training and development and compensation have become essential to enhance their

productivity and satisfaction.

1.5 PURPOSE OF THE STUDY

Human Resource Management is meant “to integrate all personnel related activities

with each other and strategically with organizational objectives” and “as an investment rather

23

than a cost to the organization”. The utilization of all other resources directly depends on

efficient utilization of human resources. Every organization needs to have well-trained and

experienced people to perform the activities that have to be done. As jobs have been

becoming more complex in the banking sector, the importance of employees‟ recruitment and

selections, promotion, compensation management, training and development and their job

satisfaction has increased.

In the banking industry, there is one common slogan that “all our stakeholders are

important” but clients are at the top. Clients can be satisfied when they receive desired

services at the lowest cost and increased efficiency with all protocols. This could be possible

only when all the human resources of the banks are fully committed, contended and involved

in their professional working. Moreover, in order to deliver excellent quality services to the

customers and strive for the business excellence, the employee satisfaction, productivity, and

maintenance and retention within the organization become of much importance. All these can

be achieved if the top level management takes extra care while developing excellent HRM

Practices starting from selection and recruitment process to recognizing employees with their

core expertise and setting up tremendous work design for the employees.

Owing to the changing banking environment, Human Resource Management should

care for appropriate re-designing their policies and practices in order to equip its human

resources with latest technology and professional skills, to perform in the new environment.

Many banks are now investing in human resource management but few banks still ignore this

area. But, unfortunately, in the Indian banking sector all these human resource practices are

becoming too complex due to which the employees are dissatisfied and they are unable to

deliver what is expected of them. These assumptions require to be tested carefully. The

purpose of this research study is to have a sector-wise comparison to establish a link between

existing and perceived human resources management practices in mediating environment of

employee‟s job satisfaction. This research is likely to signify a bottom line solution for Indian

commercial banking sector to recruit and retain skillful human resources.

SUMMARY

Every organization strives to accomplish its goal of higher productivity through its

committed and motivated workers. Therefore, job satisfaction of the employees is of utmost

importance. Some of the main variables of HRM practices, namely, recruitment and

selection, promotion, training and development, pay and compensation practices have been

playing a crucial role to enhance job satisfaction of organisation‟s human resources. A strong

positive relationship between these practices and job satisfaction helps an organisation to

24

motivate its employees to work efficiently and cost effectively. However, a negative

relationship adversely affects the turnover of employees, and it demands a good induction of

human resources, their proper training and development, better compensation, etc. Moreover,

through effective human resource management policies and practices, human resources in the

banking sector should be made to inculcate a sense in them that they are in bank not as its

employees only, on them rests to attain the zenith with best sustained and continuous efforts

and participate in it with pride and pleasure. They have to become the most significant and

effective part of Indian banking machinery. There is an urgent need to revamp the

recruitment system in Indian banks and linking rewards with performance and participation.

Thus, the success of any organization depends mainly upon the Human Resource

Management Practices.

*******