PERFORMANCE OF PUBLIC SECTOR BANKS: A FUNCTION OF HUMAN RESOURCES DEPLOYMENT ANDEXPENDITURE

Abstract

In the growing economics like India, banking sector is reckoned as hub and barometer of the financial system. This sector has been recognized as the major pillar of the Indian economy which plays a predominant role in the sustainable economic development of country. Hence, there is a need to utilize HR expenditure as strategic investment. Thus, balanced HR expenditure and HR deployment at optimum level is vital for overall performance of banking organization. Human Resource Deployment planning is an integral approach for managing such dynamic and fast changing situations. Since man is one of the primary sources of wealth creation, proper deployment of human potential will have an immense pay off for any organization. The effective deployment of the HR of an organization is the main aspect of HR planning. HR deployment under the HR planning is now one of the effective means for accomplishing the business of the organization. The HR utilization refers to phenomenon in which available HR is deployed effectively for the maximum achievement of organizational or national goals and objectives by the individuals or by collective efforts. Human capital can he rcgwded as business need to invest in the asset to ensure its survival and growth. The major employee expenditure comes from direct indirect forms of compensation, usually wages and fringe benefits. The focus on HR expenditure with a rich history of data based research, including staffing, training, workplace health, employee attitudes, and employee turnover, which also represent some of the most important strategic HR function. Efficiency is the central terms used in assessing and measuring the performance of organizations. Performance, in both profit and non-profit organizations, can be defined as an appropriate combination of efficiency and effectiveness. The data is gathered from 26 to 28 'I' PSBs existed in India during the F.Y. 2003-04 to F.Y. 2011-12. The input and output variables of PSBs are available in the form of secondary data. In this study we have selected Data Envelopment Analysis (DEA) for measuring the efficiency of banks because DEA is best suited analysis tool for measuring the banking efficiency all over the world. DEA is a relatively new "data oriented" approach for evaluating the performance of a set of peer entities called Decision Making Units (DMUs) which convert 91 multiple inputs into multiple outputs. DEA, which is a non-parametric, multi-factor, productivity analysis tool, considers multiple input and output measurements in evaluation of relative efficiencies of DMUs suc.h as banks. In this study DEA frontier software is being used, which is the latest software. The DEA frontier used Excel solver and it does not set any limit on the number of DMUs. DEA frontier has been designed to run as many as DEA models as possible to overcome the limitations set by standard Excel solver. DEA frontier has a version "DEA Frontier Open Solver Xlam" that is designed for use with the open source COIN- or CBC optimization engine via open solver. This version of DEA frontier can solve large signed DEA problems. Through the above mentioned software, the efficiency of DMUs can be measured by its different models like multiplier models, envelopment models, returns to scale models, super efficiency models. However in this study only those models are selected for which different DEA analysis literatures on banking are available. The main difficulty in any application of DEA is •1 in the selection of inputs and outputs. The criticality in making selection of these inputs and outputs is quite subjective. The study presents the details of the analyses carried out to examine the rehionslups of the variables represented in the theoretical models. This study has been carried on two models. The first model of this study examines the relation between HR deployment and performance of PSBs with number of employees and fixed assets as the independent variables and investment, loan / advances and non-interest income as dependent variables. The second model of this study examines the relationship between HR expenditure and performance of PSBs with expenditure on wages as independent variables and with deposit and non-interest income as dependent variables. Banking sector occupies a crucial place in undertaking the development efforts and acts as a vehicle for socio-economic transformation as well as catalyst to economic growth. The banks are backbone of any financial system and after independence there has been tremendous change in baking practices. If the assessment of staff deployment is carried out on the basis of activity analysis and productivity criteria, it could be possible to attain higher business volume with minimum staff thus HR expenditure can be substantially reduced and bank profitability improved. Results show these models establish a link between HR expenditure and performance of PBs. The results under the return-to-scale show that maximum PSBs are on DRS. So for bringing them at CRS or optimum level it is necessary to ascertain quality of inputs i.e. proper iv HR deployment. The slack analysis also suggests regarding the improvement in HR deployment and control on expenditure on HR towards attaining the efficiency. The super efficiency model also suggests where the requirements of adjustment of inputs lies like 4 number of employees and expenditure on wages for getting more efficiency. In this way this study not only established empirical relation between HR deployment and HR expenditure with the performance of PSBs but also suggests the diagnosis for improvement and accordingly management of PSBs can take decision.