Union Bank is on a restructuring drive to become the country’s top nationalised bank.
In the third week of January, the Union Bank of India brass and trade union leaders will pack their bags and converge at a resort to draw the blueprint for Nav Nirman II, the second phase of the state-owned bank’s reconstruction. The group had held a similar meeting in November 2006 at Amby Valley near Mumbai, which had paved the way for Nav Nirman, the first attempt at revamping the bank’s operations. The aspiration drawn at that meet was to become the third-largest public sector bank in the country by 2012, up from the seventh.
Midway to 2012, Union Bank of India is on the sixth spot in the sweepstakes. “It was the group’s aspiration but that was not a goal we set for ourselves,” says Chairman and Managing Director MV Nair. “We wanted to be among the top three banks in terms of customer preference and we have done quite well so far. Now, we want to plan how Union Bank can be number one on customer satisfaction so that the foundation for it to be the third-largest bank is created.”
De-clogging branches
When the bank sought feedback from the top management, trade union representatives and employees in 2006, human resources and information technology came up as two areas that needed special focus. Over the last three years, the bank has addressed a lot of IT-related issues by networking its offices and offering new tools such as internet banking to its customers. With the rollout of the core banking solution, the bank has centralised a lot of processes. Verticals have been set up which focus on retail loans, large corporations, personal banking, small and medium enterprises, and agriculture. “The idea was to de-clog the branches so that they could focus on sales and service,” says General Manager (human resources) S Raman.
So, when a customer visits a bank branch to enquire about a home loan, the case is referred to one of the 45 Union Loan Points, which contacts the prospective borrower and processes the application. With the new system in place, the bank is promising home loan approvals within five working days, while education loan proposals will take a maximum 48 hours for clearance.
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Similarly, the bank is setting up 15 Saral centres to deal with SMEs, which will be connected with 175 business banking branches. Large companies across the country are now dealt with through nine branches with a general manager at the head office responsible for this business. “The system allows the zonal office to process an application filed with a branch online. The central office also clears it online. Everything from monitoring to restructuring works in a centralised manner now,” says Raman.
While service delivery was being revamped, the bank also realised that a lot of products and services were missing from its portfolio. “We were focused on traditional banking; but today you need to be a financial supermarket,” says Nair. So, in came wholesale and transaction banking, wealth management and a three-way life insurance joint venture with Bank of India and Dai-ichi. While new product offerings are still at the entry stage, the bank has sought regulatory approval for an asset management joint venture with Belgian fund house KBC. A general insurance outfit, a brokerage joint venture and merchant banking services too are in the pipeline.
Overseas plans
To make a strong pitch to companies, Union Bank has also drawn up plans to go abroad. Nair wants the recently-opened Hong Kong branch to cater to the needs of those Indian companies which trade or operate in China. In addition, he intends to acquire a bank in Indonesia, which will serve the 400,000 Indians in Australia as well as companies which go to this region in search of coal. Branches in Dubai and South Africa are also planned along with a presence in London and New York.
As a result, the bank’s business mix will alter over the next three years. The overseas pie is expected to be 3 per cent of the business in March 2010 and around 15 per cent by 2019. The share of retail banking is expected to rise from 11 per cent now to 20 per cent by 2012. “I do not want either retail, SME or agriculture to account for more than 20 per cent (each),” says Nair.
While IT and new products and services have been taken care of, human resources development remains work in progress and it is going to be the biggest focus area in Nav Nirman II. It is partly because the bank has had to tweak the workforce and its skill sets in recent years. The bank’s human resources department has already been roped in to overhaul practices ranging from recruitment and retention to talent management and performance appraisal.
The new focus of Union Bank has brought in huge training needs. So, 800 officers have been trained for loan appraisal alone. Similarly, 5,000 employees in the 1,000 personal banking branches responsible for selling insurance, mutual funds and increasing current and savings account deposits have to undergo extensive training.
“Most of the people at the branch level had no experience in calling up customers to sell products. So, when we assigned them new roles, some of them wanted to know what should they say when they call a customer. Training them in soft skills has been a major focus area,” says Raman.
In addition, there is an in-house MBA programme in partnership with the Indian Institute of Management, Bangalore through which 30 employees will be trained every year. Nair is also drawing upon the experience of Union Bank’s parent, Corporation Bank, and a human resources consultant is being appointed to streamline the whole process.
Fast-track promotions
For instance, to deal with the system of large-scale retirement at the level of chief manager and above over the next three years, the bank has decided to fast-track promotions for the high performers. So, 25 per cent of the vacancies will be filled by high performers who clear the examinations. “This will also mean that the performers are rewarded and they stay with us,” says Nair.
In addition, campus hiring has helped the bank recruit a few MBAs for cross-selling products and services as well as personal banking. Last year, Union Bank was the top recruiter at IIM Ahmedabad and those executives are now being used for specialised functions such as derivatives and risk management.
These steps have helped the bank lower the average age of employees from 47.7 years in 2006-07 to 45 years at the end of March 2009. The target is to reduce it further to 40 years by 2012.
The steps, says Nair, have begun to show results. He says that the bank’s assets are growing faster than they were three years ago. It is opening more branches (575 between 2007 and 2009, compared with 108 during 2003 to 2006) and is generating more low-cost resources and earning higher fee income. There is more customer inflow from new branches. Having already got 30 per cent of the transactions to move to non-branch channels such as net banking, the bank is on course to meet the 35 per cent target for the current financial year. “This was a key focus area since we wanted the bank to cater to the young customers too,” he says.
Customer first
While Nair may be trying to reinvent the bank, his competitors say that the strategy — starting with the 2006 brainstorming to the second phase of restructuring — is very similar to what State Bank of India Chairman OP Bhatt is doing. So, why will a new customer go to Union Bank’s 2,700 branches when SBI’s 15,000 branches offer the same products and, at times, at a better cost? Nair is unfazed. “In financial services, all the products are the same; the only differentiator is the people and the quality of service. That’s why we are focusing on being number one on customer satisfaction,” says he.
Even on talent acquisition, SBI is giving Union Bank a tough time. While the original target was to hire 5,000 employees this year, the bank has managed to recruit only around 2,000, thanks to SBI which is in the market to hire for its branches. “Given its huge spread, SBI is able to appoint people closer to their place of choice. So, that is proving to be a problem,” says a Union Bank executive. A branch manager says that technology has changed things at the operational level but there is still enormous workload given that for several years not many people were hired. “Banking remains the same. It is repackaging,” he says.
Like all public sector entities, Union Bank also faces the prospect of the entire strategy being turned around once a new chairman takes over in 2012. But Nair says that the leadership is only a part of the story. “Public sector banks are not driven by chairmen. Look at SBI, it’s driven by systems. I am preparing the organisation for long-term performance. If the systems are strong, the new chairman will build on it,” he says.