Pay gap, work culture cloud over lateral hiring on PSU banks

Recently Union Finance Minister Nirmala Sitharaman said that Public Sector Banks or PSBs cannot compromise on hiring competent personnel at the highest level, including those from private sector banks, to expand their business.

This remark comes amidst resignation by top talent at some PSBs which have hired laterally from other banks. In fact, it has now questioned the relevane of lateral hiring in public sector banks. So why are the digital heads and CTOs of PSBs resigning? What’s making life cumbersome for these highly qualified executives to work in these banks?

Before we go the crux of the issue, let us first understand what lateral hiring is. In simple words lateral hiring or recruitment means to employ somebody to a position from another organisation where the person is holding similar position.

For example if a person is working as Product Head in Company A, then Company B would be looking to hiring that same person for a similar or equivalent role in their organisation. This of course depends on the specific skill set and the overall experience that the individual posses which can be used to judge whether he or she can fit the bill for that role.

Large PSBs have also used this strategy to poach talent from private sector, but apparently things have backfired. According to news reports, the total cost-to-company (CTC) for the existing digital heads is around 70-75 lakh rupees per annum, inclusive of all the allowances and perks. While the digital heads at private sector banks are offered up to 1 crore rupees for the same position. This wide pay gap sort of creates a friction between the existing senior executive official at the PSB and the new executive hired from the private bank, where the former is objecting the latter’s pay scale.

Issues like toxic work culture, non-cooperation of senior officials, high expectations and slow decision making process have been cited as the reasons why top execs quit in droves.

Most importantly majority of these PSBs are not yet tech savvy yet. Last year in October, RBI had barred Bank of Baroda (BoB) to onboard new customers on its BoB World mobile app after internal audit reports showed that the bank had linked unauthorised mobile numbers of bank agents to customer accounts. This resulted in agents swindling crores of rupees from the customer’s account.

Post this mishap, BoB, Chief Digital Officer (CDO), Akhil Handa silently exited the company which was widely publicised. Later it was revealed by the Bank MD, CEO Debadatta Chand said that Handa’s contract was terminated for the mismanagement of the BoB World App. This is not just the case with BoB. Even SBI’s YONO app hit a technical glitch on a frequent basis.

At a time when there has been a meltdown with fintechs like Paytm, PSBs had the best chance to fill the void by offering seamless digital experience to customers by getting the most out of the best talent. Instead they have resorted to petty politics and have sort squandered this great opportunity.