For the first time in 53 years, the number of employees working in state-owned banks is less than those working in private sector banks in India.
When the central government nationalized the banking sector in 1969, these government banks accounted for about 85% of all deposits. The re-entry of private banks in the mid-1990s, coupled with state-run banks burdened by large bad loans in the last eight years, have resulted in a steep decline in the market share of public sector banks. The lending share of private banks has jumped from 17.5% to 37.3%. Their deposit share has risen from 17.7% as of March 2010 to 31.4% as of September 2022.
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Employee Shifts
Between March 2013 and March 2022, the employee base of public sector banks decreased 13%, while that of private banks increased 2.4 times. As a result, the employee share of public sector banks in the sector shrank from 73% to 49%.
This situation will change further as the sector evolves and draws new participants. For example, small finance banks, a relatively new category, has tripled its employee base in less than five years.
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Technology
With technology reducing the need for branch visits by customers, public sector banks, amid this decline in overall employee numbers, are also changing their staff composition. Between March 2013 and March 2022, officers in their ranks grew 21%, while clerks and sub-staff declined 17% and 30%, respectively.
The last two categories still account for 48% of the employee base of public sector banks. Private banks, in contrast, have designated a majority of their employees as officers.
Asset Quality
The decline in employee count of public sector banks has taken place against the backdrop of a spurt in bad loans. As of March 2018, ₹14.6 of every ₹100 in loans given by public sector banks were declared bad. This has improved to ₹9.1 as of March 2021. But it is below the good mark.