Business Standard
7 December 2006

EMPLOYMENT: The bulk of the action is in smaller cities, where consumers are becoming increasingly affluent.

India’s next jobs boom will be in its banking, financial services and insurance (BFSI) sector. And the bulk of the action is likely to happen away from the country’s metros, in Tier 2 and Tier 3 cities. In fact, the trend has already begun and is expected to last for another year or more.

Says Deep Mukherjee, executive vice-president at Bangalore-based TeamLease Services Pvt Ltd, “BFSI is the fastest growing employment segment in India.” E Balaji, chief operating officer at Chennai-based Ma Foi Management Consultants Ltd, agrees: “There’s a lot of action in BFSI, which is our number one vertical.”

Mukherjee sees 150,000 jobs being created in the BFSI space in the private sector in the next 12 months. TeamLease, he says, has placed 56,000 employees in its six-year existence, and aims to add another 45,000 by the end of March 2007. “Between 25,000 and 30,000 of them will be in the BFSI segment,” he predicts.

Balaji adds that the latest Ma Foi Employment Tracker Survey (METS) reveals that 140,000 new jobs will be created in the BFSI segment in 2007, 18 per cent more than in 2006.

“All organisations in this space are talking in terms of hundreds, so all our mandates are large. We have one mandate from a bank to hire 800 people in just one state,” he says.

Much of this is in the smaller cities. With demand in the metros approaching saturation, explains Balaji, most companies are talking of entering cities with a population of less than 100,000, where consumers are becoming more affluent.

Ma Foi started setting up offices in Tier 2 and 3 cities three years ago, and now has 40. “We are hiring 4,000 people a month across sectors, of which more than 60 per cent are in Tier 2 and Tier 3 cities.”

Little of this hiring is at the senior level. Companies do need sales managers and business development managers, as well as zonal heads in the state Capitals; but what is really needed, Balaji says, is ‘feet on the street’— sales reps to sell mutual funds, personal loans, credit cards, insurance and fixed deposits.

Mukherjee explains that competition is so fierce that each BFSI organisation wants to set up ‘touch points’ with consumers in the Tier 2 and 3 cities, and this will involve covering some 400 cities in the space of just one year. TeamLease, he says, has had to set up offices in 19 cities and has placed candidates in about 450 locations.

A study by the Confederation of Indian Industry (CII) for the Planning Commission points out that the increasing deregulation and globalisation of the banking industry has transformed the intermediation role of banks, and technology has speeded up the pace of change.

Competitive pressures and changing customer demands have triggered a rapid increase in product innovations and changes in business strategies.

Banks have positioned themselves as one-stop shops selling deposit products, loans, credit cards, debit cards, depository (custody services), investment advice, bill payments and various transactional services, apart from third-party products such as mutual funds and insurance to retail customers.

Data from the Indian Banks Association suggests that the rate of growth in the Indian banking industry’s turnover will increase from 7.5 per cent in 2007-08 to 9 per cent in 2013-14. After reforms were initiated in the early 1990s, the financial performance of banks, especially of public sector banks (PSBs), has improved markedly, the CII report says.

Several balance sheet and profitability indicators suggest that the Indian banking sector now compares well with global benchmarks.

Voluntary retirement schemes saw the employee strength of PSBs decline from 873,569 in March-end 2000 to 752,627 in March-end 2004.

Employee numbers in the private and foreign banks rose 35.9 per cent, from 71,024 in March 2000 to 96,552 in March 2004, as these banks strengthened their business networks across the country.

Industry estimates suggest that the rate of growth of new job creation in the BFSI space will increase from 10 per cent in 2007-08 to 12 per cent in 2010-11 and further to 15 per cent in 2013-14.

The hiring boom in the BFSI space is well and truly on, but there are downsides as well. Says Mukherjee: “There is a massive shortage of skills. Identifying quality staff uniformly across locations is difficult, and facilities to train them are lacking.”

Balaji, pointing to the burgeoning growth in retail lending, warns, “If the market overheats, the trend will reverse.”