A Comparative Analysis of Human Capital Efficiency of Public and Private Banks in India

Abstract

The purpose of the study is to make a comparative analysis of the human capital efficiency (HCE) of the private and public banks in India for the period 2005-06 to 2009-10. The study is based on the secondary data taken from the financial statements of the banks. Value added method has been used to measure the human capital efficiency of the banks. Exponential trend method, ANOVA and GAP Analysis has been used to measure the variation in the human capital efficiency of the private and public sector banks. The main finding of the study is that there is a reduction of 839.32 per cent in gap index of HCE between public and private banks. The Annual Compounded Growth Rate of public banks are more than the private banks which shows that public banks have made great efforts to be competent with private banks; by focusing on Business Process Re-engineering, providing Voluntary Retirement Scheme (VRS)  options to employees, competent compensation, and incurring development expenditures on employees to improve their skills and knowledge etc. But still the public banks need to adopt flexible recruitment policy to retain the talented staff and expansion in decision making powers to terminate the unproductive employees and elimination of overlapping branches. The study also suggests that there is a need of accounting standard for measuring, reporting and disclosing of the intellectual capital of the banks in the financial statements.

Keywords: Human capital efficiency, Value added, Business Process Re-engineering, Compensation and GAP Analysis.