Has the headcount of public sector banks been going down in recent  years ? 

Public Sector Bank Headcount

Public Sector Bank Headcount (PSBs) in India has been going down in recent years, despite an increase in their branch networks.

Here’s a breakdown of the key trends and reasons:

• Overall Decline: Data from various sources, including reports from Business Standard and Angel One, indicate a steady fall in staff count across most public sector banks from FY23
• Recent Data on PSB Employee Strength

• March 2017: ~8.5 lakh employees
• March 2023: ~7.5 lakh employees (approx. 1 lakh reduction)
• Further Decline Expected: Due to continued automation and mergers

•  to FY25.
• Bank-Specific Trends:
  • Many PSBs like Bank of India, Canara Bank, Bank of Baroda, and UCO Bank have seen a consistent decline in their employee numbers.
  • State Bank of India (SBI), the largest PSB, showed a slight recovery in FY25 after an initial drop.
  • Punjab National Bank (PNB) has maintained a relatively stable staffing level.
• Reasons for the Decline:
  • Bank Mergers: A significant factor has been the consolidation of public sector banks, leading to fewer entities and redundant roles, thus reducing the need for new hiring.
  • Digital Revolution and Fintech Expansion: Increased digitization in banking operations, the rise of fintech firms, and digital payments have enhanced operational efficiency and reduced the need for human intervention in many processes, particularly in clerical positions.
  • Shift in Employment Preferences: Private sector banks and fintech companies often offer more attractive compensation packages and career growth opportunities, drawing talent away from PSBs.
  • Recruitment Slowdown: PSBs have significantly reduced annual recruitment, often focusing only on replacing attrition rather than expanding the workforce.
• Concerns and Protests:
  • Bank unions have voiced strong objections to the declining staff strength, highlighting concerns about increased pressure on existing employees and a potential deterioration in customer service.
  • There have been reports of branches operating with very few employees, leading to protests by bank employees.
  • The finance ministry has had to issue directives to ensure safe and uninterrupted services due to incidents of threats and abuse against understaffed bank personnel.
• Contrast with Private Banks: In contrast to PSBs, private sector banks have seen a significant increase in their employee strength over the past decade, even surpassing the total  headcount of private sector banks in India has been increasing in recent years, in contrast to the declining trend in public sector banks (PSBs).

Key Reasons for Growth in Private Bank Headcount:

1. Aggressive Expansion – Private banks (e.g., HDFC, ICICI, Axis, Kotak) are expanding branches, digital services, and retail banking operations.
2. Higher Hiring in Sales & Tech – Private banks recruit more for:
   • Sales & Relationship Managers (wealth management, retail loans)
   • Digital Banking & Fintech Roles (AI, cybersecurity, data analytics)
3. Lower Dependence on VRS/Attrition – Unlike PSBs, private banks do not have large-scale retirements or VRS schemes.
4. Customer Service & Digital Push – More employees needed for customer support, fintech innovations, and backend tech teams.

Recent Trends in Private Bank Hiring (2017-2023)

• HDFC Bank: Increased from ~84,000 (2017) to ~1.77 lakh (2023) (post-merger with HDFC Ltd)
• ICICI Bank: Increased from ~74,000 (2017) to ~1.4 lakh (2023)
• Axis Bank: Increased from ~55,000 (2017) to ~1.1 lakh (2023)

.  In essence, while public sector banks are expanding their physical presence, their workforce is shrinking due to a combination of strategic consolidation, technological advancements, and shifts in the employment market. This trend is a subject of ongoing discussion and concern within the banking sector.

Have public sector banks taken any action to improve the situation? 

Public sector banks (PSBs) and the government have taken several actions to address the situation of declining headcount and its associated challenges, though the problem persists due to various underlying factors. Here’s a summary of their efforts:

1. Focus on Recruitment):

• Replacing Attrition: While large-scale, mass recruitment of clerical staff has significantly reduced compared to previous decades, PSBs do recruit to fill vacancies arising from retirements and attrition. This often targets specialized roles (e.g., IT officers, MSME relationship managers, risk management) rather than generalist positions, reflecting the evolving needs of the banking sector.
• Government Push: The Finance Ministry has, at times, urged PSBs to come up with monthly recruitment plans and improve their hiring processes, especially to address the shortage of front-desk staff with local language knowledge.
• Targeted Recruitment Drives: Some PSBs, like Punjab & Sind Bank, actively advertise for specialist officer roles and contractual positions for retired bank officials to meet specific needs.

2. Enhancing Employee Welfare and Work Environment:

• Addressing Union Concerns:  UFBU (United Forum of Bank Unions  )  , an umbrella organization of  bank officers  associations and  bank employees unions, has been very vocal about staffing shortages, increased workload, and deteriorating working conditions. Their protests and demands for more hiring and a 5-day work week have brought the issue to the forefront.
• Improving Transfer Policies: The government has directed PSBs to overhaul their employee transfer policies to prioritize transparency, automation, and employee well-being. This includes considering factors like family, safety, and linguistic regions, and creating online platforms for transfer requests. This aims to reduce grievances and improve employee satisfaction.
• Welfare Measures: PSBs have welfare schemes in place, including health check-ups, canteen subsidies, holiday homes, and medical insurance premium reimbursement. While the allocation for these might be considered insufficient by some, the intent is to provide support to employees.
• Safety Measures: In response to incidents of verbal and physical abuse against understaffed bank personnel, the finance ministry has urged state and union territory officials to ensure the safety and uninterrupted service in bank branches.

• EASE Reforms (Enhanced Access and Service Excellence): These comprehensive reforms, implemented across various phases (EASE 1.0 to EASE 7.0), aim to improve overall PSB performance, including aspects that indirectly impact employees:
  
  • Technology-enabled Capability Building: By leveraging technology and automation, the goal is to streamline processes and reduce manual workload, potentially easing the burden on existing staff.
  • HR Operations Improvement: EASE reforms have a focus on improving HR processes, which includes aspects of employee development, performance management, and gender diversity.
  • Developing Employees for Emerging Banking Priorities: EASE 7.0 specifically emphasizes enhancing employee productivity, strengthening connections with performance management, and cultivating talent through tailored learning programs. This indicates a recognition of the need to upskill the existing workforce to meet new demands.

3. Digital Transformation and Skill Development:

• Focus on Digital and Specialized Roles: PSBs are increasingly focusing on hiring for digital and specialized roles, recognizing the shift towards digital banking. This means while overall headcount might decline, the composition of the workforce is changing to be more technology-oriented.
• Training and Reskilling: With increased automation, there’s a growing need to reskill existing employees to handle new technologies and digital platforms. While not always explicitly highlighted as a direct “solution to declining headcount,” it’s a critical component in ensuring the existing workforce can adapt to the changing banking landscape.

Challenges Remain:

Despite these actions, the core challenge of declining headcount in PSBs persists. Bank mergers have undeniably led to the rationalization of staff, and the rapid pace of digital transformation continues to reduce the need for traditional clerical roles. The attractiveness of private sector banks and fintechs also continues to draw talent. The effectiveness of these measures in completely reversing the trend or fully alleviating the workload on existing staff is an ongoing concern for bank unions and employees.

Note : The article is based  on  answers we got from  AI apps  on  the issue of reduction of PSB Staff strength   and have been  edited by us . 

Source: Finance Ministry report

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