Special Articles

Banks must focus on drivers of business outcomes

Dr. Anil Khandelwal

Designation : -   Former Chairman and Managing Director

Organization : -  Bank of Baroda & Dena Bank, Mumbai


Banks must focus on drivers of business outcomes

The theme of your post retirement work is on transforming Indian Banking. Most Bankers Focus on operational stuff like rising NPAs, recapitalisation issues and many other operational issues like interest rates, retail portfolio, but you seem to doggedly pursue a different kind of narrative. Could you elaborate about your take on the Banking industry?

AK You are very right. It is not that I am not concerned about operational issues. I headed two public sector banks and am quite conversant about various issues. The point is that everyone knows about the problems and issues in Banking and daily newspapers are full of them. I believe that reforms and transformation alone can turn around the Banking sector. Instead of focussing too much on business outcomes, we need to focus on drivers of business outcomes. In VUCA (Volatility, uncertainty, complexity and ambiguity) environment, we need to strengthen the  drivers of business which are technology, people, leadership, culture and governance or otherwise Banks will move from one problem to another. Banks will have to play strategic role in reviving the economy post Covid and transformation of Indian Banking is now an un-postponable agenda.

How your present book does address these concerns?

AK As you know, Public sector banks (PSBs) in India continue to face several challenges and in this context, this book has curated through carefully commissioned and researched articles and discussions with practitioners, experts and senior leaders of the banking industry on what should be the new reform agenda look like, how the policy makers should go about implementing it and where the immediate priorities should be.. How these issues will build a resilient and robust banking system to contribute to economic development of India and how they will become sound financial entities. Leading icons with deep understanding of issues have articulated an actionable agenda for reforms. The grounded practitioners insights provides pointers to what needs to change and how? The book provides a ready to implement reform package.

Can you elaborate on what exactly not worked despite recent amalgamation of some banks, recommendations of various committee reports including your committee on HR (Khandelwal Committee)?

AK Most discussions and reform efforts have so far focussed on addressing issues that deal with legacy banking practices, such as governance, financial performance (NPAs, etc), and re-capitalization. While useful, such reform efforts have three main drawbacks :

  • They were piece-meal, ad-hoc and lacked integrated thinking; (Gyan Sangam, Indradhanush, PSB Manthan, BBB)
  • They implicitly assume that externally imposed reforms are effective;
  • They do not address the core issue, which is neglect of intangibles, such as culture, talent, application of sound HR principles to board functions, and leadership.

PSBs have two key reports, Khandelwal Committee report (20100 on HR and Nayak Committee report (2014) on Governance. If only policy makers look at these reports and take some bold and integrated set of actions to make PSBs market driven in real sense and not constrained by bureaucratic micro-managing, PSBs can be restored to compete with private sector Banks. The good part is that there is no shortage of passion in PSB staff. Let us trust them.

The combined force of above three drawbacks have made banks ill-quipped for the future of banking, which is going to be based more on technologies and talent. The existing HR policies framework, mind-set and practices, as Khandelwal committee, pointed out more than 10 years back are the biggest risk.

The need for an integrated transformation, particularly in areas of culture, talent, and HR area is long over-due. Coincidently, such a transformation will not only alleviate many of the legacy challenges, but will also prepare PSBs towards the emerging future of banking, which is likely to be based on technologies (digitalization) and talent. Culture and HR are the common interventions, whether our focus is on legacy or emerging challenges.

The emphasis on culture is not a HR rhetoric. Over past few years, leading international bodies and regulators have started focussing on culture as a pathway to build better, resilient and safer banks. There is a growing recognition that approaches, which rely totally on externally driven regulation, compliance, rules and control do not go far enough, and may even be counter-productive.

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