Why do banks suddenly have more officers than clerks?
Back in 2003, a bank clerk in Gujarat’s Rajkot lost his job for calling his bank manager a ‘hoodlum’. The clerk, a cashier called Harshad Dave, moved a labor court, maintaining that the charges against him were ‘frivolous’ and that he had a spotless service record. There was an inquiry, and the case was dismissed in 2011.
A year later, he moved the High Court, questioning the inquiry, which was rejected. He then challenged this order before a division bench. Roughly 20 years later, the Court has upheld his termination on the grounds of this minor lapse of propriety.
Why do I tell this story? Because it may be just a slightly upsetting indictment of one mighty institution, the judicial system. But, it is significant for another - banking.
There is a growing sense of dispensability towards banking staff, especially lower-level, clerical workers.
This is not to say that the workforce of India’s scheduled commercial banks has dwindled over the last few years. RBI data shows that it’s quite the contrary.
Banking’s unnamed thousands
In the eight years from FY 2006 to FY 2013, the average number of bank employees of all levels across PSBs, private banks, foreign banks, regional rural banks and small finance banks was 9,85,063.
This number rose to 13,91,182 for the years from FY 2014 to FY 2021.
This increase in the total number of bank staffers is commensurate with the pace of banks’ business growth. It’s simple - as banks expand to serve more customers, open up new branches, grow their deposits, increase credit disbursement and more, they require more hands on deck.
However, the story gets complicated. Trends in employment in this sector are beginning to change.
Around one-fourth of the staff in private banks will become redundant in the next three years due to increased digital adoption.
There is a decline in hiring in public sector banks because of mergers, cost cutting initiatives and rise in digital channels.
The interest in a bank job is on the decline because of long working hours and better opportunities in corporate and IT sectors.
Banks are opening fewer and fewer branches each year, closing up opportunities for bank jobs. I wrote about this in an earlier edition of this newsletter.
Officers : Clerks
A closer look at RBI’s data shows that while the number of officer-level bank employees has sharply risen, clerk-level jobs are steadily declining. This indicates that bank organization is transitioning from bottom-heavy to top-heavy, with more and more staff members being accommodated in senior positions.
Between 1992 and 2006, there were 1.64 clerks for each officer in Indian banks. In the period 2007-2021, this number has inverted, with 1.73 officers for each clerk.
Interestingly, the Khandelwal Committee drew attention towards the diminishing gap between the role of officer and clerk as early as 2010. In its report, it warned that in the post- core banking system (CBS) environment, the need for clerical jobs will warrant closer examination.
This leaves us with two questions -
Why are banks doing away with clerical positions?
What accounts for the bizarre increase in officer positions?
The answer to the first question is easy.
Banks are automating their legacy systems. This has reduced the dependency on clerical functions like telling, maintaining financial records, back-end tasks like KYC and data entry, cash management, and assisting customers with various bank products.
In fact, PSBs have been slower to do away with their clerks than private banks. This is proportionate to their speed of adapting to digitization. Between 2006 and 2021, the ratio between officers and clerks in government banks was just 1.04:1. Meanwhile, over this time period, 87% of total staff members were officers in private banks.
Moreover, banks have halted opening of new bank branches, significantly bringing down the need for employees to man them. In FY 2020, 58.3% PSBs and 38% private banks opened fewer than five branches combined. In the subsequent year, 52% private and 42% public sector banks opened around six bank branches.
An examination of the skewed ratio between bank officers and clerks, however, throws up some interesting facts. There hasn’t been a decline in the overall number of employees in India’s banks. It seems as if more and more employees are being given officer-level positions in place of clerk positions. Here’s why:
Better labor relations: In the period 2006-2021, clerks comprised only 13% of banking employees with the remaining 87% positions being held by officers. The disparity between these positions is especially high because HR decisions like granting ‘officer’ status to employees would ensure they stay away from unions and aren’t embroiled in frequent strikes.
Technically, bank officers are allowed to unionize, but their right to participate in union activities is questionable. Private banks have often relied on a 1992 letter issued by GoI stating that strikes on part of top-level employees amount to dereliction of duty and are against the bank’s interests. The consequences include wage cuts and damning entries in their confidential reports. The Indian Banks Association reiterated this advice in a letter in 2009.
By awarding a large chunk of the workforce the ‘officer’ title, banks can protect themselves from routine strikes and build better industry-labor relations.
Better operation efficiency: Frequent run-ins with trade union interests can be avoided and banks can ensure better operational efficiency. Their union contract obligations like overtime are reduced significantly. However, there is some debate as to the efficacy of this move and the spike in operational costs arising from it.
Shift to administrative work: Given the rapid digitisation in the industry, a need to bulk up executive-level positions has arisen. There is an exodus to administrative offices from modest bank branches as customer-facing jobs are slowly replaced with technology solutions.
We’re inching closer to the Promised Land, albeit slowly
A lot remains to be accomplished. All numbers indicate that banking is still a human resource-intensive sector. Growing senior positions will be a burden on operational expenses.
And even though great strides have been made in digitizing banking for customers, bankers remain saddled with analogue-era organization.
Moreover, the social, and effectively, digital divisions in India remain sorely deep. The class and geographical divide remains yet to be conquered by digital banking. The presence of tellers and cashiers in areas, classes and societies outside the purview of digitization will remain a mainstay of banking for the foreseeable future.
However, change is on its way.
Banks have long been warned of the consequences of failing to adapt for the digital age. They have been threatened by contenders and challengers like FinTech. Now, there is evidence of some glacial, but measurable changes in the banking sector.
One major promise of digitisation – putting human resources to more value-additive use – is being realized. Digital tools have helped increase employee productivity by 30% to 40% in banking and significantly reduced room for human error. Most obviously, digital skills in employees have enabled banks to weather the global pandemic and work remotely.
Blue-collar jobs in banking may, after all, be overtaken by white-collar careers.