India’s banking sector is growing at a fast pace. It has become one of the most preferred banking destinations in the world. Indian banks are investing heavily in the technologies such as telebanking, mobile banking, net banking, automated teller machine (ATMs), credit cards, debit cards, smart cards, call centers, CRM, data warehousing etc. Productivity and efficiency are considered as leading indicators for evolving strengths or weaknesses of banking system across the world. Increasing productivity has become vital in banking today. When we increase our productivity levels, we can increase our client base or product sales.
Productivity and profitability are interrelated. Though productivity is not the sole factor, it is an important factor influencing profitability. The key to increase profitability is increased productivity. Public sector banks have not been as profitable as the other banks primarily because of two reasons–Low Productivity and High Burden ratio.
The key to success in the competitive environment is increased productivity and profitability. Indian banks especially the public sector banks and the old private sector banks are lagging far behind their competitors in terms of both productivity and profitability.
Productivity efficiency in vibrant banking environment relate to how well a bank employs its resources, how a bank simultaneously minimizes cost and maximizes revenue, based on an existing level of production technology.
Profitability can be improved only by improving productivity. It is very clear that there is great scope for increasing productivity. Manpower being face of banking, its productivity is largely depends on employees’ morale and quality of service being offered by them. Employee productivity can be improved only by winning the commitment of employees. Employee productivity is an important part of total productivity which comprise of per employee productivity means units of production by an individual in terms of deposits, credits, business, total income, total expenditure, establishment expenditure and spread. It is worth mentioning that due to progressive use of technology, employees’ strength has departed but their job has become so important that if not performed well, it is dangerous as well trim down the performance rather to enhance. There is no ceiling up to which productivity has to be improved. Since productivity in banks is very low, we should put in very serious efforts at improving productivity. Improvement in productivity should constitute an important parameter in the performance budgets of banks.
(This is the first part of the article and the remaining portion will continue tomorrow)
(The views expressed by the author in the article are his/her own.)