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HRD in Emerging Economies- Research Perspectives in
Indian Banking
Prachi Bhatt
Limited research restricts com- Introduction
prehensive understanding of
challenges that hit various as- Indian banking systems has under-
pects of Indian banking. There gone rapid changes in the decade of the
has been a dearth of studies that 90s. Changing banking sector in India of-
address the impact of changing fers huge opportunities and with the op-
environment on Human Resource portunities come the challenges. In the
Department (HRD) paradigm. In wake of greater financial deregulation and
the changing times, it is pertinent global financial integration, the challenges
to verify the relevance of HR in to survive and develop in this global eco-
business priorities, its compat- nomic scenario, banks could not afford to
ibility and efficiency in Indian ignore the HRD facets. However, it is
Banks. This paper ascertains change, and especially the rate at which
various challenges that Indian change occurs that largely influences the
banking industry is facing and HRD hybrid that any organisation adopts.
the subsequent requirement of Techno-sophistication has facilitated the
change in HRD paradigm. The speed of change in banking. The wisdom
article forms the foundation for about the important role that HRD plays
further diligent research in the for organisational success has been de-
area and identifies the missing veloped over the years and finds its rel-
links in researches which are cru- evance even more today. The changing
cial to pave way to the future of dynamics have sketched a new role for
HRD and performance of Indian HRD in the organisations. Trends in man-
banking. aging people in this dynamic industry re-
flects emergence of the most critical is-
sues in lieu of the enormous opportunities
spun off by the market. As the entire In-
dian banking industry is witnessing a para-
Prachi Bhatt is Assistant Professor (HRM & OB),
digm shift in systems, processes, strate-
FORE School of Management, Qutab Institutional
Area, New Delhi 110016. Email: dr.prachibhatt gies, it would warrant creation of new
@gmail.com competencies and capabilities on an on-
The Indian Journal of Industrial Relations, Vol. 47, No. 4, April 2012 665Prachi Bhatt
going basis, thus, demanding in-depth would be in serious trouble unless qual-
studies. Researches enhancing the un- ity HR is retained. HR needs special fo-
derstanding of paradigm shift in Indian cus in terms of attracting, retaining and
banking sector especially those directed motivating human resources. Quality of
towards change are very limited. It is im- human resources should be commensu-
portant to realise emerging patterns in rate with the ability of banks to deliver
Indian banking and HRD in Indian bank- value to customers. Banks should empha-
ing systems. size on the need to streamline human re-
source development strategies with busi-
Emerging Scenario in Indian ness strategy (Kamesam 2004). It is the
Banking & HRD impact of change, technology and chal-
lenges of enhancing the quality of exist-
Relationship between importance of ing manpower and explaining importance
HRD and its effect on the organisational of changing HRM in the Indian banks
performance have been established much (Leeladhar 2005) which is set to face
earlier. HR efforts like training and de- more challenges (Nair 2006).
velopment for new breed of bankers is
crucial while managing human factor for Banks in the country need a para-
banks. According to Asian Development digm shift in their human re-
Bank (1999), India needs to accelerate sources (HR) practices.
structural reforms directed towards its
financial and capital markets, concentrate
on infrastructure and public finance con- Dynamism in Indian banking can be
solidation and strengthening support for attributed to the challenges like upward
human resource development to ensure direction of interest rates, demanding
sustainability of reform process in bank- customers, financial inclusion, technologi-
ing sector that have impacted the sector cal advancements, competition for human
extensively (Reddy 2005). There is need talent and efficient utilisation of a bank’s
to focus on developing human resources resources (Financial Express 2010).
to cope with the rapidly changing sce- Other challenges before Indian banking
nario. In transforming Indian banking into sector, according to Kamath et al. (2003)
a vibrant system, initiatives would not are changing needs of customers, cop-
work unless quality human resources are ing with regulatory reforms, thinning
available (Jalan 2001a, 2002b). HRD is spread, maintaining high quality assets,
the key to the success of any organisation management of impaired assets, keeping
and that success lies in how efficiently pace with technology upgradation,
the organisation manages its human re- healthy bottom lines and increasing
sources and adapts to change, matches shareholder value. The drivers of dy-
with the global standards, evaluates on namic changes offer challenges, which
an ongoing basis continual up-gradation need to be addressed to unleash the com-
in the organisation (Gupta 2003). Banks petitive advantage offered by the Indian
require quality human resources and that banking sector and thus contribute to in-
666 The Indian Journal of Industrial Relations, Vol. 47, No. 4,April 2012HRD in Emerging Economies- Research Perspectives in Indian Banking
vigorate banking sector’s growth. This new human resource policies that would
calls for the effective management of the permit lateral entry at senior positions so
mobilizers of all other resources i.e. hu- that some fresh winds blow down banks’
man resources, leading to another chal- corridors. These issues have been
lenge of streamlining HR (BCG, FICCI around for decades but never as relevant
and IBA 2010), i.e. banks in the country as they are in the current context. Finan-
need a paradigm shift in their human re- cial Express (2010) emphasized the need
sources (HR) practices. to invest in human capital development.
Along with knowledge and professional-
In lieu of the confronting challenges, ism being areas of improvement,
HRD in Indian banking demands a McKinsey (2010) in their report men-
makeover. HRM has since many years tioned the need for human capital devel-
been misunderstood of its capability to opment and concerted efforts required
produce results. A wrongly perceived towards enabling labour reforms, focus-
importance of HRs consequently affects ing on enriching, human capital, to help
HRD approaches and finally the finan- public sector and old private banks be-
cial performance losses of the banks come competitive. According to
(Ramu 2008). There are various business Deolalkar (2010) management of young
strategies, but equally important is the generation workforce and its implications
strategy woven around people and their for HR practices are recruitment, career
capabilities to perform and deliver. In development, strong staff management,
service organisations like banking human matching resources with new responsi-
capital can be the difference between bilities, and managing the spread of IT
success and failure. Various new HRD culture, etc. Also, focus is required on
interventions that banking sector needs creating core competencies along with
are regarding image makeovers, brand staff morale, organisational culture and
building, performance accountability, pro- training, retraining essentials that high-
motion, posting and discipline; and more light the importance of managing people
such practices. Subbarao (2009) dis- for productivity excellence (Bhasin
cussed the advanced approaches that 2011). To evolve is a mandate. Obsolete
banks are likely to face and the need to practices cannot prove to be relevant and
be multi-faceted, like, assessment of skill effective for performance of any evolved
requirements, identifying and bridging the organisation. There are changes and chal-
gaps, identifying talents, putting the avail- lenges in the next generation banking in
able talents to optimum use, attracting India. It is important to review the cur-
fresh talents, retention of talents, and rent challenges thrown by the changing
change management. According to him environment upon the Indian banking in-
banks needed to pay special attention dustry and its consequent implications on
along with the other critical issues inclu- HRD. As mentioned above, HR prac-
sive of the human resources. Regarding tices like recruitment, talent acquisition
recruitment and selection he discussed approaches, career management, and the
Reserve Bank of India considerations on cultural factors have effect on banks’
The Indian Journal of Industrial Relations, Vol. 47, No. 4, April 2012 667Prachi Bhatt
performance. Thus, it becomes impera- (1988) discussed the impact of environ-
tive to identify the best practices in the mental changes on human resources in
banking sector and come up with inno- banks. He emphasized on promotion, re-
vative practices to meet the challenges cruitment, placement, performance ap-
in the light of concerted researches in the praisal, training, and social welfare in
area. banks. Raman (1989) explained through
his experience, the practices and tech-
HRD Research Perspectives in niques of HRD in SBI. Although exten-
Indian Banks sive, these researches attempted only at
the conceptual framework rather than
The relationship between HR efforts highlighting issues related to banking in-
and performance has received research dustry and suffer from the limitation of
support in various studies. HRM has un- narrow scope. And most importantly they
dergone continuous changes over time no longer seem to be relevant in today’s
and reshaped itself to address the con- context, thus call for new and system-
temporary state of affairs. There are atic studies. Role of management at dif-
convincing researches projecting the re- ferent levels was studied through spe-
lationship between the management of cific case studies regarding HRD in a
people and the performance of compa- particular bank like Bank of Baroda
nies (Moynihan, Gardner, and Wright (Verma 1988), Canara Bank (Prabhu
2003). Studies on HRM climate, prac- 1988).
tices gave an idea about progressive
HRM (Kopelman, Brief & Guzzo 1990,
Challenge before Indian banks to-
Huselid 1995, Delaney & Huselid 1996,
day is to encourage people and
Ostroff & Bowen 2000, Boxall 2003) af-
help them feel being treated fairly
fecting organisational performance
and to unleash the power of think-
(Bowen & Ostroff 2004, Lawthom et.al
ing and application.
1998). HR investment is also one of the
key elements required to understand the
changing HRM framework (Wood 2006) The profitability of the public sector
and its effectiveness. banks improved in the latter half of the
nineties relative to the performance of
Papers in the last few decades basi- the private and foreign banks (D’Souza
cally have dealt with the theoretical con- 2002). Pattanayak (2003) for example,
cepts of human resources development studied HRM climate as a matter of se-
like, HR practices, climate studies in rious concern in Indian public sector
banks. Studied were the concepts organisations with reference to
(Varsheny1986), framework and func- organisational role stress and quality of
tions (Gupta1983) and significance of work life. Khandelwal (2007) emphasized
HRD in banks (Joshi 1986). Abraham on mobilizing the passion of people to
(1988) studied HRD climate with the help transform organisations and grow. Also,
of a structured questionnaire. Kulkarni cannot be overlooked is one of the most
668 The Indian Journal of Industrial Relations, Vol. 47, No. 4,April 2012HRD in Emerging Economies- Research Perspectives in Indian Banking
important internal customers of HR de- productivity and profitability in the pre
partment i.e. employees. To a large ex- and post e-banking period. They sug-
tent effectiveness of HRD efforts de- gested some measures to tackle the chal-
pends upon how it is being perceived. lenges faced particularly by public sec-
Literature in the area has devoted less tor banks. Right human resources, right
empirical attention to how employee per- HR efforts, at right time in sync with right
ceptions and attitudes influence HR ef- context (change) would help
fectiveness. Although recently, empirical management’s abilities to manage the
researches (Bhatt 2008) have studied the business (Uppal 2011).
perception about various aspects of HRD
effectiveness in public and private sec-
Right human resources, right HR
tor banking units in the changing envi-
efforts, at right time in sync with
ronment but geographically restricted to
right context (change) would help
south-Rajasthan. Challenge before In-
management’s abilities to manage
dian banks today is to encourage people
the business.
and help them feel being treated fairly
and to unleash the power of thinking and
application. A satisfied employee is a pre- Thus, the above literature review
requisite for a satisfied customer. The races the need for studies in the area of
required effectiveness of an organisation upcoming challenges and their implica-
calls for right HR policies and practices. tions on the HRD in Indian banks. Em-
There are various other HRM practices pirical evidences regarding employees’
that influence performance of perception towards change and chal-
organisations, which need to be ad- lenges in front of Indian banking sector
dressed in the studies, i.e. environment and their perception about the effective-
that encourage creativity, transparency, ness of current HRM practices can prove
open communication, good group dynam- beneficial for the banking industry in In-
ics, knowledge of growth opportunities, dia.
management trust in employees, HR phi-
losophies, investment in people, grievance Summary
handling mechanisms, etc. which need to
be addressed and at scale representative There are many facets of HRD in
of Indian banking systems. Al-Hawary Indian banking system, which are still left
and Sharma (2011) have also acknowl- unattended. The studies of HRD para-
edged that banking is under revision and digm in Indian banks especially in the
that employees are required to be handled context of change can be more relevant
and managed appropriately in times of and functional. In the light of growing
change. They studied the multi-dimen- importance of human resources, the
sional transformations, inclusive of HRD present study attempts to raise the un-
taking place almost in all categories of tended need of studies and empirical evi-
the banks and analyzed their effect on dences that can fill the gap. Past re-
performance of major banks in terms of searches reveal narrow learning and lim-
The Indian Journal of Industrial Relations, Vol. 47, No. 4, April 2012 669Prachi Bhatt
ited understanding of the fast-paced sec- human resources in Indian banks, so that
tor. A comprehensive and integrated out- the best information can be made avail-
look based on an empirical study on hu- able to the policy makers and research-
man resource development in banks is the ers from around the world, thus, leading
gap to be filled in the existing literature to constructive improvement in HR prac-
on the subject. There is need to address tices. This cross-pollination of ideas
various dimensions of HRD in Indian would mutually enrich the banking and
banking industry starting from its role, HRD processes.
practices, workforce attributes and atti-
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