Too much at the bottom, too little at the top

Pointing out the difficulties facing public sector banks in attracting top-flight talent, Reserve Bank of India Governor Raghuram Rajan on Tuesday observed they tend to overpay at the bottom and underpay at the top. Tongue firmly in cheek, Rajan also added that he himself is being “under-paid”.

All public sector entities across the world tend to pay more than the private sector to lower-level employees, and less than the private sector to higher level staff. This makes it hard for them (public sector banks) to attract top talent, but makes it easier to attract good people at lower levels, said the Governor at the FICCI-IBA Annual Global Banking Summit.

“One of the problems, of course, is that as with all public sector entities, you overpay at the bottom and underpay at the top... Yes, you feel that you are doing the job for the broader public, but you just make it harder to attract top talent, specially a lateral entry,” said Rajan.

According to reports, the Governor draws total monthly emoluments of ₹1,98,700. State Bank of India Chairman Arundhati Bhattacharya got a total remuneration of ₹31.10 lakh in FY2016. In sharp contrast, HDFC Bank chief Aditya Puri and ICICI Bank chief Chanda Kochhar drew a gross salary of ₹9.32 crore and ₹4.79 crore, respectively.

Rather than seeing the depletion of middle-management ranks in public sector banks due to retirements, lack of expertise in specific areas such as project evaluation and risk management and low compensation at the top as difficulties, the Governor felt that perhaps they can be opportunities.

“In the RBI, we find that our compensation packages enable us to attract very highly qualified applicants at the Class III level.

“Perhaps part of the solution is to enable such new hires, with technology and training, to do far more responsible work than they were given in the past, and give them a brighter prospect of movement up the officer ranks,” he said.

Rajan suggested that banks can also use the opportunity offered by retirements to reorient hiring towards the skills they need, and to offer attractive rapid career progression supported by strong training programmes for new hires; with thinning middle-management, the mix of experience and capabilities should shift towards capability.

To get talent in specialised areas such as project evaluation, risk management, and IT, the Governor said that banks may have to hire laterally in small doses. While contractual hires are currently permitted, better personnel can be attracted only by a strong prospect of career progression internally. Banks will have to think about how to enable this.

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