The recent exits of senior officials from public sector banks (PSBs) who were hired from the private sector have sparked a debate about the relevance of lateral hiring from private banks in the banking sector. These exits have occurred at a time when Union Finance Minister Nirmala Sitharaman has emphasized the need for high-quality professionals, including those from the private sector, to help PSBs grow their business.
Lateral hiring refers to the practice of recruiting experienced professionals from outside the organization or industry to fill senior positions. In the case of PSBs, this involves hiring executives from private banks to bring in their expertise and innovative practices to improve the functioning of PSBs.
Examples of Recent Exits
Several notable exits have taken place in recent months, raising concerns about the effectiveness of lateral hiring from private banks in PSBs. For instance, Rajnish Khare, the Chief Digital Officer (CDO) of Union Bank of India, resigned from his position after just 15 months, despite having a five-year contract with the bank. Similarly, Yusuf Roopawalla, the CDO of Bank of India, resigned in January 2024.
Contrary to these silent exits, the exit of Akhil Handa, the CDO of Bank of Baroda (BoB), in November 2023 received wide publicity due to the BoB World app mishap. Handa claimed to have resigned, while the management of BoB stated that his contract was terminated along with several other staffers involved in the app mishap.
These exits, along with the reported exits of other senior officials hired from the private sector, have raised concerns about the reasons behind these departures and the challenges faced by officials hired from private banks in PSBs.
“I tried changing things but it was simply not worth it. I had to quit,” says a senior banker who was hired from the private sector by a large PSB recently.
According to sources, Roopawalla wanted to lead the digital banking operations of the bank entirely, but as he had to report to the chief general manager, he tendered his resignation citing personal reasons. Roopawalla has now returned to the private sector, serving as CIO of Unity Small Finance Bank since February 2024.
Reasons for Exits and Challenges Faced
According to sources, some of the officials who left their positions cited reasons such as the resistance faced from existing officials, the wide pay gap between private banks and PSBs, and the slow decision-making process in PSBs.
One of the challenges faced by officials hired from private banks is the wide pay gap between private banks and PSBs. The total cost-to-company for existing digital officers in PSBs, with the rank of chief general manager, is around Rs 70-75 lakh per annum, while candidates from private banks are offered upwards of Rs 1 crore for the same position. This significant pay gap can create dissatisfaction among officials hired from the private sector and may impact their motivation and commitment to the organization.
Additionally, officials from private banks may face resistance from existing officials in PSBs. Some officials believe that the resistance stems from a desire to show that private sector lateral hirings in PSBs do not work, which goes against the government’s agenda of bringing the best talent into the public sector. This resistance can hinder the smooth integration of officials from private banks into the existing organizational structure and impede the implementation of necessary changes.
Expectations and Decision-Making Process
There are high expectations for officials hired from private banks to deliver results quickly in the digital banking vertical, as PSBs are lagging behind private banks in this area. However, the decision-making process in PSBs is often slower due to the scrutiny of higher officials, while private banks provide more freedom for officials to make decisions. This disparity in decision-making processes can create frustration for officials accustomed to a faster-paced environment in private banks.
