Industry
Private lenders take lead in employee strength ahead of PSU peers
Summary
PSU banks have been losing employees over the last several years and headcount has shrunk by over 60,000 in the past five years.Mumbai: India’s private sector banks now have more employees than their state-owned peers. The development, a first in the industry, is a significant pointer to the increasing role of private lenders in creating jobs that were once the stronghold of public sector banks (PSBs).
Recent data from Reserve Bank of India (RBI) showed that private banks have moved ahead of PSBs by a margin of about 100,000 staff in FY24. As of 31 March 2024, private banks had 846,530 employees and PSBs, 746,679.
Recruiters said this has happened because private banks have ramped up hiring in information technology (IT) and digital banking, besides other roles. A big move by private banks into rural and semi-urban India, where PSBs have traditionally been present, has also meant they needed to hire more people in those parts.
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At the same time, state-owned banks are not moving fast enough to replenish roles falling vacant through retirement. Others pointed to the swifter growth potential at private banks and the lack of publicity by state-owned peers about their openings as reasons why private banks have gained in strength.
In the past fiscal, PSBs have seen a net reduction (after factoring in exits and new joinees) of 9,965 employees. Private banks, on the other hand, added 100,918 employees in FY24.
Taking a five-year view, PSBs' headcount has shrunk by over 60,000 between FY19 and FY24, while private sector banks have added 370,140 employees over the same period.
Interestingly, private banks are also hiring more women. While women employees at PSBs shrank by 800 in FY24, private banks added more than 35,000 women.
More people for the rural push
Experts said the expansion of private sector banks into rural areas has led to more hiring in these banks. With customers in the hinterland more inclined to visit branches or seek help for digital banking, banks have increasingly added people in rural semi-urban centres, even more than in urban areas.
“The private sector banks in the last year decided to focus on “Bharat" and, therefore, went beyond tier-II cities with retail and micro finance banking, which needed a large number of people," said Monica Agrawal, managing director (financial services), Asia Pacific and India lead, board & CEO services at search firm Korn Ferry. “They had already adopted the digital banking method over the last two years and now had to reach out into the hinterland, which led to a spike in recruitments."
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Private banks added 23,821 employees in rural and semi-urban areas in FY24; that count was marginally less at 23,582 for urban areas.
To be sure, the majority of people joined in metros where private lenders added 53,515 employees. (RBI classifies areas as rural, semi-urban, urban and metropolitan.)
Meanwhile, while they are still hiring, some private banks have moderated the pace of adding employees. As per data shared on analysts calls, ICICI Bank added 12,000 employees in FY24, compared to 23,200 in FY23.
The attrition angle
That said, attrition at public sector banks is a fraction of what private sector banks face. For instance, SBI’s attrition was 3% in FY23, whereas leading private banks had more than 30% attrition in the same period.
“The PSU banks had not advertised some of their profiles and that their attrition is lower than private banks. However, private firms with reduced hierarchy, quicker promotion opportunities are now able to attract more talent among the younger job seeking candidates; the profiles in IT, digital, data science and specialist roles like economists are gaining traction," said Upasana Agarwal, partner, professional and financial services, ABC Consultants, an executive search and talent advisory firm.
Others said that the composition of employees is different in private and public sector banks.
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According to Anil Gupta, senior vice-president and co-group head of financial sector ratings at ICRA Ltd, the market share of public banks in advances and deposits is much higher at 59% and 64%, respectively. However, private banks will also have significant cross-sell staff when compared to public banks.
“Hence, the composition of the employees and employee costs may not be directly comparable," said Gupta. He added that nonetheless, despite the share of assets being much larger for PSU banks, the employee expenses for public banks stood at 1.25% of their average assets in FY24, compared to 0.94% for private banks. That, Gupta said, reflects the better pay structure for employees of PSU banks.
