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Public sector banks are a drag on productivity - Views on News from Equitymaster
 
 
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  • Oct 4, 1999

    Public sector banks are a drag on productivity

    According to a study, undertaken by Federation of Indian Chambers of Commerce and Industry (FICCI), of 21 nationalised banks, at least 22.3% of the staff in these banks is redundant. The study includes the State Bank of India, India's largest bank. For the purpose of calculating the extent of over-staffing, FICCI assumed a benchmark or Rs 12.5 m Business per employee (BpE).

    The problem of overstaffing in banks has long been recognised by the concerned authorities. However due to the political connotations no concrete steps have as yet been initiated, although there has been some talk, to rid the public sector banks of this burgeoning problem.

    With increasing competition and the demand for more efficient and cost effective banking services, it is essential that the public sector banks be restructured. This will go a long way in increasing the vibrancy in the public sector banking sector.


    Source: www.equitymaster.com

    According to our database, it is clear that the private sector banks, with their leaner and more efficient resources, have already gained a significant lead over their public sector counterparts. One of the main reasons for this could be that the private sector banks operate mainly with a profit motive, while public sector banks often have to support the programs of the government, like setting up of branches in non remunerative rural areas. However, the motive of public sector banks must change if they are to successfully compete with their peers.

     

     

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