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INTERNATIONAL JOURNAL
OF CURRENT RESEARCH
International Journal of Current Research
Vol. 6, Issue, 11, pp.9856-9860, November, 2014

ISSN: 0975-833X REVIEW ARTICLE

EMPLOYEE RETENTION: A CHALLANGE FACED BY INDIAN BANKING INDUSTRY - A STUDY
1Minaxi
*,1 Setia and 2Dalbir Singh
1Reaserch Scholar, PTU, Jallandhar, India
Scholar
2Senior Manager, PNB, India
ARTICLE INFO ABSTRACT

Article History: In today’s scenario Banking sector have emerged as most employment generating industry and
Received 17th August, 2014 contributing a large portion in Indian economy. This article enlightened the banking activity which
Received in revised form thrives on the strength of human power. The success of an organiz
organization depends upon several factors
22nd September, 2014 but the most essential factor that affects the organization performance is its employee. Human
Accepted 09th October, 2014 resources play a vital role in achieving an innovative and high-quality
high quality product/ service and to fulfil
Published online 18th November, 2014 the Vision and mission of that organization. The present study is an attempt to examine and analyse
the impact of human resource management practices on job satisfaction of bank employees. Besides
Key words: the fact, that Banks are emerging as the highest job generating agency, the bankin
banking sector is also
Human Resource Management Practices, facing employee retention problem. As retention is directly related to job satisfaction, which is to be
Job Satisfaction, monitored by the HR department. This study identified that the HRM practices like Workforce
Training, planning, Recruitment, Promotion, Transfers,
Transfers, Training and development, Performance Appraisal,
Retention, Team Work and Compensation has significant impact on job satisfaction.
Employee Participation.

Copyright © 2014 Minaxi Setia and Dalbir Singh. This is an open access article distributed under the Creative Commons Attribution License, which permits
unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

INTRODUCTION individual goals are satisfied. Nowadays, the role of human

Employee Retention resource manager is not restricted but it is shifting from
protector and screener to the role of a planner and change
Employee Retention involves taking measures to encourage negotiator. Human resource management practices are a
employees to remain in the organization for the maximum potentially powerful and dominant lever for shaping the culture
period of time. Hiring knowledgeable people for the job is of the organization and they are strong predictors of Employee
essential for an employer. But retention is even more important Engagement, on-thethe Job Behaviour, Job Satisfac
Satisfaction and
than hiring. There iss no dearth of opportunities for a talented Organizational Commitment Levels of managerial employees.
person. There are many organizations which are looking for In India Banking sector is emerging as an Employment
such employees. If a person is not satisfied by the job he’s generating agency. There are, at present 26 Public Sector
doing, he may switch over to some other more suitable job. In Banks and 24 Private Sector Banks. There are various steps
today’s environment it becomes very important for followed by Banks HR R department to attract and retain talent in
organizations to retain their employees. Employees today are the institution:
different. They are not the ones who don’t have good
opportunities in hand. As soon as they feel dissatisfied with the Workforce planning
current employer or the job, they switch over to the next
nex job. It
is the responsibility of the employer to retain their best Banks plan for the number of officers/clerks etc. required at the
employees. If they don’t, they would be left with no good beginning of the financial year, depending on the business plan
employees. A good employer should know how to attract and of expansion (new branches/offices to be opened), number of
retain its Employees. Retention term involves: Compensation, employees likely to retire during the year, etc.
Growth, Systemic
stemic succession planning and career management,
Empower senior and middle managers,, Reward system, system Recruitment
Conducive work environment, etc.
Based on the number of vacancy decide, Banks recruit in
Human Resource Management
different Scales/Grades through IBPS (Institute for Banking
Human resource management is a process of bringing people Professional Selection). IBPS conducts written test, interview
and organizations together so that both
oth organizational and etc. for the new recruits on behalf of the PSBs (except SBI) in a
very transparent manner and allots the new recruits to various
*Corresponding author: Minaxi Setia, banks based on merit and the candidate’s choice.
Reaserch Scholar, PTU, Jallandhar, India.
9857 Minaxi Setia and Dalbir Singh, Employee retention: a challange faced by indian banking industry - a study

Promotion sustaining high employee performance. The most familiar HR

Practices are recruitment, selection, training and development,
Internal vacancies are filled up through promotions to the compensation, rewards and recognition (Yeganeh, 2008). Six
higher grade, normally based on the last 3 years annual HR practices including- hiring, compensation policy, rewards,
appraisal, written test/GD/Interview as applicable. The recognition, training and development and information sharing
promotion is fairly done on merit basis. have been studied with relation to employee job satisfaction
(Dessler, 2007).
Training and Performance Support
S. Kesavan and P. Fathimanancy Dyana (June, 2013)
Banks provide training to the new recruits/existing employees “Disclosure of Human Resource Accounting (HRA) in
in the Banks’ own training colleges (called Staff Training Selected Indian Companies- An Empirical Analysis” The study
Colleges) or through external training by nominating reveals that to ensure growth and development of any
employees to various training institutes like NIBSCOM, Noida, institution, the efficiency of people must be accounted in the
NIBM, Pune, IDRBT, Hyderabad, Banker’s Training College, right perspective. Usually the expenses for procurement,
Mumbai. Banks also nominate employees for various development and maintenance of human resources are treated
Seminar/Workshops/Trainings conducted abroad. Banks also as revenue expenditure. In the current scenario some of the
publish all their circulars, manuals, job cards, policy Indian companies have realized the real value of human
documents, banking news etc in the bank’s Intranet site which resource and these expenses are incurred for the future benefit
helps in keeping employees up-to-date. In order to promote and should be capitalized. Hence an attempt Is made to analyze
business knowledge, Banks also encourage their employees to the Human Resource accounting disclosure In Selected Indian
do courses like JAIIB and CAIIB (from Indian Institute of companies 20 companies were selected for the study, only 6
Banking and Finance, Mumbai) and grant additional companies (3each from Public and Private sector companies)
increments on passing these examinations. Banks also were following Human Resource Accounting and Independent
reimburse the examination fees and offer one time honorarium ’t' test was used to find the divergence in the disclosure of
(a fixed amount) to the employees for passing various diploma human resource variables in selected Indian companies.
and certificate examinations in banking (from IIBF, Mumbai).
Raunak Narayan (2010) “Human resource accounting: A new
Compensation and Benefits paradigm in the era of globalization” . In this paper the author
has elaborately discussed about the objectives and process of
Banks offer competitive pay packages to attract the best talents.
HRA in the Indian context. The basic intent of the paper is to
The pay scale is fixed for various grades/scales. Apart from
study the Human Resources Accounting practices, to identify
Salary, the employees are also paid for leased accommodation
the issues and challenges, to study these issues and challenges
(or HRA), Leave Fare Concession (LFC) every 2 years,
and to give suggestions based on the findings. Sharma and
Conveyance, telephone at residence, furniture at residence,
Pooja Purang (2000) in their study Value Institutionalization
pension (now new pension scheme), newspaper, medical
and HRD Climate: A Case Study of a Navratna public sector
expenses, etc.
organisation, found a positive association between value
HRM in Banks institutionalization and HRD climate in a large public sector
organisation, sense thereby that a better and more ethical
The HRM practices in banks are progressively forging ahead. environment of the organization shall lead to a better HRD
A majority of the banks have set up separate HRD Departments climate for the organisation. Hussain and Rehman (2013)
(HRDDs) within a decade of functioning; HRDDS in some examined the relationship between the HRM practices
banks have gained certain commendable achievements. There implemented by the organization on employee’s purpose to
are also cases of banks where the HRDD performs personnel stay and work efficiently for the organization. The result of the
administrative functions of recruitment, placement, transfer, study explored that HRM practices: person-organization fit,
promotion and training. The functioning of the HRDD in employment security, communication and training and
certain other banks shows a changeover towards HRD development are contributing effectively in developing the
functions. In these banks, along with training, certain other employees’ intentions to stay with organization. Further, strong
activities like manpower planning and performance appraisal positive inter-relationships were found between HRM practices
have been introduced yet, a few other banks have made quick and employees’ retention and such practices enhances
changes as far as the introduction of new HRM activities such employees’ retain capability of organizations. Lamba and
as systematic induction, quality circles, staff meetings are Choudhary (2013) revealed that how HRM practices provide
concerned besides introducing these systems, some banks have an edge to employee’s dedication towards an organization goal
also taken substantial efforts in perfecting certain system like in the global competitive market. The study concluded that
training and performance appraisal, Nevertheless, there is a HRM practices such as training & development, compensation
widespread feeling in the banking industry that there are no and welfare activities has major effect on organizational
sufficient linkage between HRD systems. commitment and are associated with superior organizational
performance, which help in retention of knowledgeable and
Literature review skilled employees.

HR Practices are correlated with the management of human Awang et al. (2010) examined the impact of job satisfaction of
resources, activities required for staffing the organization and university lecturers on their commitment towards academic
9858 International Journal of Current Research, Vol. 6, Issue, 11, pp.9856-9860, November, 2014

activities. Besides that, it also investigated particularly factors 4. According to banking HR circles, the rate of attrition in
contributing to job satisfaction, specifically promotional public sector banks varies between 10% to 15% annually.
opportunities, remuneration, working environment, workload, . So, there is a need to invent ways to prevent them from
relationship with colleagues, and management style. The study leaving the bank too soon," a top executive with a PSB
found that promotional opportunities, workload and said .Some PSBs including Bank of Baroda, Canara
relationship with colleagues drastically affect job satisfaction Bank, Punjab National Bank and Union Bank of India,
of lecturers. Many researchers have pointed out that HRM have recently introduced a practice of signing service
practices impact on the outcomes such as employee bonds with their new human resources joining at the
satisfaction, commitment, retention, employee presence, social officer level. Allahabad Bank and Dena Bank, in turn,
climate between workers and management, employee propose to introduce it in their next round of recruitment.
involvement, trust, loyalty, organizational fairness (Edger & Senior executives of these banks have moved out on
Geare, 2005; Paauwe and Richardson, 1997 and Storey, 1989). record that this is their way of recovering investments that
Some of the authors have indicated that these outcomes and go into training these new incumbents, especially if they
HRM practices can lead to firm performance such as profits, leave within two-three years of joining. The move is also
market value of the company, market share, increase in sales, seen as a way to discourage new entrants from hopping
yield, product service quality, customer satisfaction, growth of jobs early in their careers.
products/services and future investments. 5. PNB chairman and managing director KR Kamath said:
"In case of new recruits at the officers level, we spend a
Some statements showing attrition rate lot of money on training and developing them. But when
these officers leave the bank too early without even
1. Management consulting firm BCG (Boston Consulting serving a minimum period and look for greener pastures,
Group) is a global management consulting firm with 78 the entire cost of training goes in vain. The service bond
offices in 43 countries. Has found that, on an average, 12 system is a way to partly recover the sum."
per cent of the new employees hired by public sector 6. Other bank chiefs like Canara Bank's AC Mahajan and
banks quit within the year. This compares positively with Allahabad Bank's JP Dua too support Mr Kamath's views.
the corresponding figures of 22 per cent and 20 per cent Canara Bank, for instance, takes an upfront payment from
for new and old private sector banks, respectively. PSBs new officers as a security deposit. "We offer a provision
may not be facing attrition today because relative to pay in instalments.
reimbursement at junior levels in good. However, the firm 7. Senior officials at Union Bank confirmed that its service
cautioned that as the new hires reach middle management bonds for up to three years are valued at Rs 2 lakh for
levels, the risk of losing the best people will be very high general officers and Rs 2.5 lakh for specialised officers.
due to compensation mismatches. BoB executive director RK Bakshi mentioned that the
2. Banks put out remarkable recruitment figures in their bank inks bonds worth Rs. 1 lakh for two years only with
annual reports. But have you ever thought about the fresher’s who join directly from the campuses. A top
attrition rate in these banks? Shocking but true, in some executive at Dena Bank said the bank management was
cases, almost half of those who joined had resigned within planning to follow such a practice for IT officers to start
a year. The clerical cadre has been witnessing high with as attrition rates for these cadres are among the
attrition, especially in banks with a regional focus. Bank highest.
unions say the attrition rate is almost 30 per cent in both
the officer and clerical cadres. D.N. Prakash, President of Purpose of the study
Corporation Bank Officers’ said that the attrition level in
the clerical cadre was as high as 45 per cent in a bank at a The economic slowdown is making job opportunities in public
point of time. sector banks look attractive again. In today’s scenario Banking
3. P. R. Karanth, Joint Secretary of AIBEA (All India Bank sector have emerged as most employment generating agency
Employees Association), mentioned that someone who and contributing a large portion in Indian economy. Highly
joins bank ‘A’ in the clerical cadre usually gets a good qualified persons are willing to join banks; evidence justified
offer from bank ‘B’ in the officer cadre after two-three that PG qualified persons are ready to join initially at clerical
years. Even if the banks entail any bond during their carder.
appointment, they are ready to pay and leave. To address
this, K.S. Bhat, Secretary of the Syndicate Bank Staff But after entering in the system and after realizing the ground
Association, said that weight preference should be given reality of the banking industry they feel trapped and willing to
to those who work in bank ‘A’ while filling vacancies in switch to another sector whenever they get appropriate
the officer cadre. He said a person from clerical cadre had opportunity. There are various reasons for that (mainly in
cleared IBPS with 167 marks in his bank. But the cut-off public sector banks):
for officers’ cadre was 168 marks. But he got an officers
job in bank ‘B’, where he matched the cut-off marks. 1. Posting policies are not comfortable. With enough
Some relaxation for the existing staff would have helped options for career, today an employee leaves a particular
his bank to preserve him. “In this process, we lost a public sector bank just because some other bank offers
clerical staffer and a person with two years’ experience,” him/her posting near his/her home town or a private bank
he said. offers a better pay package.
9859 Minaxi Setia and Dalbir Singh, Employee retention: a challange faced by indian banking industry - a study

2. Succession planning is not communicated properly. 1. Every Banks should establish a high power HRM
Statistics reveal that the attrition rate in Public Sector banks Committee at the corporate level. Alternatives, the
in recent years is quite alarming. Public Sector Banks need Training Advisory Committee should meet at least
to understand the prevailing dynamics & align their quarterly. HRM task force at various levels may also be
policies to include faster promotion, transfers as per set up to implement various HRM methods as are initiated
Employees’ choice, better incentives & recognition for and approved by the HRM Committee.
good work in order to attract the new talents to their banks 2. The compensation system should be so attractive that one
as well as to retain the talents. should seek to go higher in the ladder of the career and
3. No defined working hours for Bank employees. In Indian continue his / her commitment and conviction to give the
Banks, working hours are defined only for Clerical cadre best to the institution.
and should be defined for officer cadre also. 3. All efforts must be continuously made by banks to build
4. Professional qualification pay: At present the up an overall HRM culture and climate. It is very
Professional Qualification Pay is paid only in respect of important that line managers and other functionaries take
CAIIB. However, with the passage of time radical changes appraisals of employees as an important part of their
have taken place in the matter of banking business. The portfolio.
diversification, which we have witnessed, calls for 4. The HRM surveys should be carried out in the banks
specialization in different academic areas. We therefore every 3 years and findings of these surveys should be
are of the opinion that the officers should be compensated interpreted and appropriate HRM interventions should be
for the various professional qualifications they possess made.
during their career in the bank apart from the existing 5. Scope of employee suggestion schemes needs to be
CAIIB qualifications. expanded to make it more participative and effective,
5. Lacking work life balance practices. Some employees realistic and useful suggestions should be encouraged.
even after putting their service for 15-20 years in a public 6. Visiting faculty (with some behavioural science
sector bank may switch to academic profession or join a background) should be made to visit all the branches over
consulting firm for better opportunities. a period of time, inviting questions and suggestions about
6. Incentives for working in rural centers and other the day-to-day problems. These could be discussed in a
sensitive far flung areas: It is needed to provide incentives brainstorming session at the branches. This should be
to all those officers who are posted to serve in the rural followed up suitable communication from controllers.
areas/most sensitive and difficult areas with security 7. Tasks/assignments/paper presentation to
problems/ areas of weather aberrations in different parts of individuals/group of participants should be as a normal
the country. feature, experience sharing with participants to make
7. General environment- Ambience etc.: It is the possible meaningful interaction should be provided for.
responsibility of the banks to provide an appropriate To the extent practical, structured and unstructured role
environment, ambience and above all the HR systems at all plays in training sessions should be introduced.
branches. The officers’ fraternity should also be provided 8. Welfare measures particularly related to hospitalization
with all facilities such as supply of refreshment, beverages scheme, canteen facilities at branches, staff holiday homes
etc., inside the branch premises in view of the pressure of and whenever feasible, these and other such welfare
work, long stay in the office etc. measures may be suitably customized for the benefit of
8. 5 days week: Five Day week is already available in the staff.
international banking system. It also exists in our country 9. More important HR policies like transfer and promotion
in RBI, Central and State Governments and in Public are to be viewed periodically; transfer placement policy
Sector Undertakings. Hence, it should be introduced in the should be implemented in fairness and undue favouritism
whole banking sector. The working hours should not from either side. This will introduce confidence amongst
exceed 36.5 hours in a week. all.
9. Recruitment / Retirement: The Banking industry is in 10. The guidelines of reward and punishment should be made
doldrums due to insufficiency of the workforce. The clear and transparent while there should be an
asymmetrical policies and the conventional approach of the institutionalized system for calling regular information,
Government and the Managements and have created a big good work done by staff for quick appreciations of their
gap in the average age of the various groups of employees deeds and punishment and suitable to serve as an example
in the banks. There were no recruitments virtually for more for others.
than 2 decades and as a result, the age difference between 11. A thorough and scientific screening of the participants
the old employee and the new employee is so large that the should be done before selecting employees for training so
average age of the workforce is adversely affected. that the right personnel are selected for the right type of
training.
Suggestions 12. The appraisal data should not only be used for promotion
decisions but also for the detection of staff training needs,
Based on findings emerged from the analysis of the data and job placements, job enrichment and enlargement, talent
figures given by the management officials of the public sector spotting and career planning.
banks, the following suggestions are offered to improve the 13. Bank managers should be prepared to manage the people
HRM as widespread in banks. so that exact data can be used in the computer on time.
Commitment of employees to computerization should be
9860 International Journal of Current Research, Vol. 6, Issue, 11, pp.9856-9860, November, 2014

evolved to cover various sections of employees. The Paauwe, J. and Richardson, R. 1997, ‘Introduction to special
executives and administrators must utilize the Computer issue: Strategic human resource management and
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Raunak Narayan, 2010. “Human resource accounting: A new
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