Reality cheque
Retaining skilled manpower is a real challenge for banks, says a new report

The Indian banking sector is faced with the dual challenge of retaining talent and achieving enhanced risk management practices, which need to be tackled urgently, a McKinsey report said in Mumbai recently.

“Risk management by Indian banks largely focuses on regulatory compliance. Although Indian banks recognise the need for sophisticated risk management practices, they are unable to devise such practices in the absence of customised limit structures suited to their balance sheets,” the report said.

Also, bringing in new leaders who can inspire employees and revamp the process in the organisation is another challenge, as banks find it difficult to attract and retain high-quality talent, the global consultant said.

Besides, banks have to ensure an innovative combination of sales and distribution channels to augment customer acquisition, it said, adding that the lenders must also re-engineer fundamental business process to increase efficiency while implementing core banking programmes.

The survey, conducted on 14 banks, including seven public sector and three foreign ones, says the sector has performed well over the past few years, contributing over 5 per cent to the GDP by creating millions of jobs and improved capital allocation.

The banks have also been successful in attaining a lower Non-Performing Asset (NPA) levels, the report said. The sector should give attention to the intermediation costs and financial inclusion, it suggested.

The profitability of newer banks and public sector ones stood at 15 per cent and 14 per cent, respectively, the latter earn a Return On Assets (ROE) at 33 per cent as compared to an average 16 per cent by the former. — PTI