PSBs’ employee costs double in 10 years despite no increase in headcount

New Delhi: In the past 10 years, the headcount in the public sector banks (PSBs) has remained almost the same but their employee costs have more than doubled as middle management is getting bulkier, posing a challenge in the growth of the government-run lenders, an industry report showed.

“Middle management has become bulkier, clerical staff has shrunk. This will have serious implications for future growth capacity," a report prepared by Boston Consulting Group (BCG) in association with industry body FICCI and Indian Banks' Association, said.

The report noted that the Indian banks have seen very limited employee productivity gains over the last decade.

However, private sector banks have done well to maintain cost increases below inflation. The headcount of private sector banks has increased by over 10 per cent on an annual basis in the past 10 years while their employee costs rose by just 3.8 per cent.

The report noted that a significantly large number of employees by the private sector banks are maintained off-roll. It said that over the past decade, the banking industry’s cost-to-income ratio has consistently increased despite technology investments and digital revolution. “However, the productivity gains are yet to be seen,” it said.

The report titled ‘Banking for a Viksit Bharat’ noted that India's ambition to achieve a $30 trillion GDP by 2047 would require a 20 times growth in the financial services sector, with banks playing a pivotal role.

India, being a predominantly bank-led economy, will require the banking sector to play an anchor role while the other financial asset classes continue to grow much faster, it said. This will require $4 trillion of capital base in banks, one-third of which will have to be fresh capital deployment.