Bank branches seem to be everywhere, at least in our cities. With digital the new mantra, many have started doubting the need for brick and mortar branches. Digital is great for customers as well as for banks. All transactions have more or less migrated online. Digital also has potential for retail sales too. But just like the mom and pop shops continuing to prosper in the times of Amazon and Flipkart, physical branches have a lot of headspace to keep growing. While our country has 14.6 branches per lakh population, USA for comparison is at 30.5 and Japan at 33.9. Given our low penetration across all the retail financial products, branch network will continue to expand and remain a core part of the retail bank’s overall strategy. Most private sector banks have huge expansion plans as visible from their action on the ground as well as their public statements. 

Besides the all-important raw material for banks (i.e. CASA), branches serve many other key purpose for the banks, including cross-sell of the enormous range of retail financial products, ranging from savings to investments to loans and other services like lockers, insurance, broking etc. 

Branches are mostly about people. Combined with real estate costs and branch infrastructure, they are the costliest channel for banks. So, the challenge for banks is to make it more profitable. Banks definitely need a well thought out strategy, product range, technology, pricing and location. But the most important differentiator will remain the people in these branches. This people part has not got the right attention though, save for the occasional lip service on how ‘people are their most critical asset’. And the regular rush to hire more and more, to meet the almost never-ending appetite for young sales and relationship managers, which is what all branch banking professionals today are. 

Prior to the turn of this century, most bankers were branch-bankers. They also spent much of their time inside the branch premises, handling the enormous operational workload in handling customer queries, cash withdrawals, passbook-updation and many such jobs. Going out of the physical branch for business calls was restricted to the few career-minded Branch Managers and the even fewer Field Officers. The so-called Field Officers had exclusive focus on loan customers, be it SME, corporates, agri or other priority sector loans. High deposit rates and very limited options for majority of Indians to save or invest elsewhere, most of the skills required in branch bankers were in areas of credit management, banking law and branch operations. And that remained the focus of the various certificate exams conducted under the aegis of Indian Institute of Bankers. 

With the advent of private sector banks, much of these simpler transactions moved to ATMs and later to internet and now mobile banking. Over the last couple of decades, even the public sector banks started moving massively into computerisation. So, ledgers and registers were replaced with computers but the sum and substance of the work remained the same. Over the last few years however, digitalisation has scaled into a different level where much of this transactional work has moved from bank clerks to customers themselves. Customers input their requirements into the bank’s systems on a self-service mode. Besides the operational work itself, another big change is how the risk has also been transferred from bankers to customers while inputting and approving these transactions. 

So, what do the present-day bank employees do today? Sales and relationship banking is now the core of branch banking. Sourcing more customers, helping them to migrate to digital channels through demos, bundling of various financial products, understanding customer needs, cross-sell and up-sell and relationship management of the most profitable of these customers is today the basic job of branch bankers. The job requires both better understanding of the product range and how they fit into the needs of their customers. But invariably this job at banks is handled by their entry level employees, with limited training and almost no experience. The market opportunity is too large to be missed. So even with limited skill levels, these employees are able to produce just about enough results to keep the bank managements and stock markets happy. What is missing though is a medium to long term plan to address this pressing quality challenge. Though it may sound surprising, in the digital age with technology being near universal, the big differentiator will be once again people and the banks who realise this faster will have so much more to gain. 

One can guess the educational background of a doctor or even a nurse or a software engineer or even a teacher or a lawyer. Try guessing for neighbourhood banker. One would find an unlikely mix of civil engineers, bachelors of business administration, masters in physics, bachelors in commerce or masters of arts in history or masters of business administration in HR and every other variant that you can imagine. Bankers just need to be graduates. When banking moved on from being government owned to now primarily market driven, this is one thing that has not changed. It is a matter of conjecture whether this is a conscious choice or a commentary on the relevance of whatever is taught to our college students. Graduation is today just another basic filter for reducing the universe of potential candidates that a bank can potentially interview.  

Banks are innovating with recruitment models to manage this situation. They are working with Hire-Train-Deploy as well as Train-Hire-Deploy models. Since early-stage banking skills are fairly standard across banks, it is costly for the banks to spend more on their basic training, especially given the high early attrition rate. If software companies expect their interview candidates to be skilled in coding, why shouldn’t banks demand that their candidates also have basic job-readiness? Not just in terms of the often-quoted soft skills, but also in terms of the hard skills needed for the job. The industry is very much headed in that direction. This is still early stage but. With our higher educational institutions continuing to be disconnected with market realities, intermediaries like BygC are stepping in with people from within the industry taking responsibility of training and identifying candidates.

Banks have also not kept pace with other competing industries for talent. The salary levels for entry-level employees in most private sector banks do not help them acquire either the right quality of candidates or even the quantity. While variable pay is offered to performers, significantly lower percentage of these new employees are able to earn these incentives because of the complexity of handling financial products. 

Without the right salary structure, the best is likely to stay away. In the pre-2000 India, the best did not have much options other than government and PSUs. But with massive strides in the technology and startup space, banking no longer attracts those in the first 2 quartiles. With nearly 30 lakh graduates and post graduates getting added to the job-seekers list every year, this by itself is not an insurmountable problem. What is required is appropriate skilling solutions where industry must join with other stake holders to address this talent shortage. Otherwise, poorly skilled graduates find the job-demands too difficult to handle leading to high attrition in just the first few months. Higher attrition leads to greater pressure on the remaining and the newly joined, leading to even more attrition. Non-availability of adequately skilled resources in the market delays hiring, adding to the business pressure on the remaining.

The other big medium-term challenge is to migrate the sizable non-sales-oriented employees in banks to customer handling and sales and relationship roles. While the top banks have the knowledge and people who can handle this challenge, often the best business performers are not interested in a training career leading to paucity of trainers who can claim to have been there, done that. The problem may be bigger for many of the smaller banks. The industry will benefit from intermediaries who can address this skill gap at scale and in a cost-effective manner.

With our higher educational institutions not producing graduates with employable skills and with syllabus far removed from what they need to know to get their career started. The most telling comment on our education system is that BFSI as a sector has complete disregard of the educational background of their candidates or employees. One could be an engineer or a BCom or BSc or a BA or even BPharm - one just needs to be a full-time graduate of any stream. It does not make any difference to your prospects or capabilities on the job. Some banks ask for MBAs or post-graduation of some kind but they are more used as filters to search for their right employee from a manageable pool. Like in all such truisms, there are exceptions to these rules.

Relationship banking is an even bigger need for branch bankers where they handle customer relationships of varying potential at different levels. Increasingly there is a large need for remote RMs who manage the engagement with their set of customers primarily on the phone. Anyone who has done both phone-based and face-to-face sales will tell you that remote selling is by far the more difficult one to manage.