PSBs must start taking risks to compete with commercial banks: Kewal Handa

Kewal Handa
Kewal Handa, Chairman, Union Bank of India

Public Sector Banks (PSBs) across the country must believe in innovations and start taking risks diligently in a bid to compete with the commercial banks, said Kewal Handa, Chairman, Union Bank of India, at the recently concluded Elets BFSI Gamechanger Summit, Goa.

The two-day conference was organised by Elets Technomedia on 11-12 May, in association with The Banking & Finance Post magazine.

While addressing the C-Suite officers from across the Banking, Financial Services and Insurance (BFSI) sector, Handa gave a detailed overview of challenges faced by PSBs in India and the way forward in a presentation titled, “What Ails Public Sector Banks”.

In an account of his years of experience in the banking sector and his conversations with PSBs employees, Handa spoke about the challenges and the catalyst working in multiplying the menace of the problem

Key challenges confronting PSBs

Too much Accountability on the employees

“Employees working in the Public Sector Banks have to face too of much of vigilance. Anything that has been done or was in the past has been seen from lenses to analyze whether there were any losses due to the initiative taken. Is there any fraud that is associated with it or is any employee involved in the fraud? This kind of accountability makes you stifle at your job,” he said.

On the other hand, there is a different kind of accountability. There are staffs who do not take decisions and they are not accountable for anything. And, these are the guys who get promoted. This is very unfortunate, said Handa, while explaining the lack of decision making and risk taking zeal mushrooming within the PSB employees.

Explaining the problem with an example, Handa said, for instance, one of the criteria for selection of an army general is that he should not get injured in a battle.  He should be designing strategies sitting on his armchair at the head office. Can you select generals like that? And this is what we are doing. We are selecting generals (read PSB leaders) who have not gone into the depth of an organisation’s operations and never taken decisions.

It is not necessary that every decision taken should be right. I can tell you that 70 percent of the decisions that I have taken were proved wrong. But that stop me from making decisions or that doesn’t mean that the organisation I work with will look at me with suspicion and judge me on why am I taking such decisions, he added.

30 percent of the decisions that I have taken correctly is taking my organisation to a different level. This is more Important for an organisation rather than not taking decisions. This is one of the biggest challenges being faced by PSBs and something should be done immediately to addressing this issue. If the PSBs need to compete at the commercial space, they will have to start taking risks, stated Handa.

Lack of holistic strategic plans with clear priorities & accountability

He said, “While I joined the bank, I asked the colleagues about the strategies and initiatives that are planned. They replied that strategies and initiatives are just ad-hoc and the primary amount of time goes away in completing the targets. It is a matter of irony that one branch manager I met recently, is made responsible for 15 business units.”

Where are the business units? Where are the business unit heads who are supposed to make plans?

Inadequate bench strength for a robust succession pipeline

Citing the problem at the recruitment level, he said, “For over a decade now, banks are prohibited from making campus recruitments. If you don’t hire from the campus, you don’t become competitive with the commercial banks. You then don’t have staffs or employees who are capable of taking higher positions. As we are proceeding, we are realizing that the crop (employees) that are escalated in the banks are not even capable of becoming a General Manager forget about taking a leadership role of Managing Director or Executive Director. This challenge is going to inflate and become intense in future.”

Incentives lacking to drive employee performance

“The level of incentives and benefits given to the employees working with PSBs is very low and they don’t get any benefits for performing better. After analysing the PMS being used commonly, I was told that 50-60 percent of weightage is qualitative and 40-50 percent is objective unless you achieve 80-90 percent weightage, you won’t qualify for the promotion. In my view, at least 70-80 percent of the weightage should be the key parameters and it should be objective in nature so that it can be measures

Promotions should not be given to 80-90 percent weightage, it should rather be given on relative scoring. That’s the way the organisation will move forward. And, if you keep doing it only the basis of weightage, the entire concept of PMS will fall flat. Amongst all other PSBs in the country, only the State Bank of India and Bank of Baroda has a robust PMS system. All other PSBs do not have a robust PMS and due to this challenges pertaining to staff strength, succession, the problem of attracting relevant talent (Skilled), retaining and development of talents,” explained Handa,

Risk management needs higher attention

It is observed that the risks witnessed by the banks are very high. There are risks pertaining to the loan, treasurer, guarantor and many more. Given the quantum of the portfolio of the bank, risk management plays a vital role in today’s era. The question which arises is do we have a cable workforce within the bank to combat the emerging risks?

“To overcome the above-mentioned challenges, there are certain strategies that can be done by some level of internal restructuring. Believe in your internal strength and make yourself competent enough to face any challenge. Depend less of external sources for any assistance,” stated Handa.

He suggested the following strategies:

Strategy to transform PSBs into high performing, growing, competitive, profitable entities


  • Role of non-executive chairman
  • Board Empowerment
  • Board Governance
  • Board Composition
  • Board Effectiveness

Human Resource


  • Leadership development
  • Performance Management
  • Org Structure
  • Compensation


  • Focus on risk-adjusted returns
  • Dynamic review of credit
  • Credit capabilities
  • Strengthen Credit processes


  • Technology skill sets
  • Cybersecurity
  • Platforms

Action plan to be followed to overcome the challenges

  • Management appointments to be done in consultation with the chairman
  • NRC (Nomination Committee) should be empowered to recruit board members that complement existing boards with specialist skills such as Credit, Digital, Risk, etc.
  • Empower board for lateral and campus recruitment
  • Rigorous, objective, scorecard driven performance management across all levels. The board should set management KRAs and review performance periodically
  • Need to organise by verticals to sharpen focus on both business/ functions, and build a high-performance culture with clear accountabilities
  • Enhancing the capabilities of credit risk professionals and ensuring job continuity to build deeps specialist cadre in credit
  • De-emphasis on consortium lending, and enhanced focus on the rigorous in-house assessment of credit proposals
  • Focus on customer feedback, TATs, query resolution, quality of branches, customer branch experience, branch optimisation and new branch formats to better serve customers
  • Need to create an innovative organisational structure that is nimble and that facilitates technology, digital and analytics absorption through the organisation
  • Automation of risk management processes is essential. IT and Risk Management need to work hand-in-hand to develop robust processes

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