Gone are the days when Public Sector Banks (PSBs) used to be considered less efficient and their employees were often derided as slow performers. The Reserve Bank of India (RBI) has come out with data that shows a remarkable turnaround, with employees of Public Sector Banks (PSU Banks) now generating higher profits per capita than their private sector counterparts. Data released by the Reserve Bank of India on December 29 provides concrete evidence of this emerging trend in employee productivity.
The average profit per employee at PSU Banks in FY25 was recorded as ₹19.6 lakh, which is significantly higher than the ₹14.5 lakh earned by private bank employees.
This shows a huge difference compared to FY24 figures, when the figure was ₹15.2 lakh for PSU employees and ₹14 lakh for private banks. This increase in profit per employee indicates that PSU banks are achieving significant operational efficiencies.
Profit per employee is a key measure of employee productivity, which is now clearly showing an upward trend for public sector banks. This has happened largely due to banking consolidation. The merger of 10 PSU banks into four in 2019 may also have contributed to the creation of larger and stronger institutions.
According to industry experts, a key reason has been the consistently low hiring by public lenders over the past decade. Employees are leaving jobs at a rate higher than retirement rates, leading to a reduction in headcount. This reduction in headcount means that existing employees have to handle increased business volumes, which naturally leads to higher per-employee metrics.
Besides, the government has also been making concerted efforts to improve work culture and boost productivity with a focus on sales and revenue generation. To complement it, banks have made a strategic shift in it approach and are reportedly hiring senior executives from private banks on contract to drive changes in technology, customer experience, and customer retention.
In addition to it, as an expert points out, there is now an increased focus on performance-based evaluation, unlike in the past.
Improved management practices, increased technology adoption, and a stronger focus on profitable business lines have contributed to this upward trend.
Further, these impressive profit-per-employee figures could be the result of severe understaffing, as a noticeable reduction in headcount could put pressure on service quality and lead to employee burnout in the long run.
The case with private banks is different. With larger teams, they are likely investing more in long-term growth and specialized services that this metric alone doesn’t capture.
There is no denying that profit per employee is a useful measure, but it is incomplete, as it does not fully reflect asset quality, the effectiveness of risk management, or the cost of capital.
But caution is needed, as what also needs to be kept in mind is that although productivity has increased, the true health of PSU banks still depends on managing non-performing assets (NPAs) and implementing strategic lending policies. This data is a positive sign, but broader financial health indicators require further investigation.
It should also not be forgotten that the recent modest increase in PSU bank headcount in FY25 has come after six consecutive years of decline.
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