Essay: The Indian Banking System

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  • The Indian Banking System
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In today’s changing world, organizations are going through rapid changes in every sphere. The rate of change has increased to the limits of our endurance. Individual employees all over the world are constantly conformed to new and more complex working environmental forces, demanding new level of knowledge, improved skills and better understanding.
An enterprise success factors depends on many factors and amongst all those manpower i.e. human resources play a pivotal role. For efficient running operation of an organization proper management of human resources should be done and on that part HRM plays an important role.
According to Likert, “Every aspect of human activity is dogged on the basis of competence, motivation and general effectiveness of the organization. Of all the errands of management managing the human resource is the most important task because all depends upon how well it is done.”
In India, though we appear to be rich in human resources, our industries run short of useful human resources. One of the reasons for the company’s success is the highest level of customer satisfaction which has been maintained through providing the consistent performance and quality and that can be maintained only when the employees are highly efficient and skilled.
Training is the corner stone of sound management; it is actively and intimately connected with all the personnel activities. It is an integral part of the whole management programme
There is an ever present need for training because, it enables employees to develop and rise within the organization, and increase their ‘marker value’ earning power and job security. It enables management to resolve sources of friction to bring home to the employees the fact that the management is not divisible. It moulds the employee’s attitudes and helps them to achieve a better co-operation with the company and a greater loyalty to it. The management is benefited in the sense that higher standards of quality are achieved; a satisfactory organizational structure is built up; authority can be delegated and stimulus for progress applied to employees.
Ongoing development is today’s new form of job security. People need to learn continuously. By developing, stretching and continually challenging themselves, employees can build a skill base; reputation and a network of contacts which will make them fit to be always ’employable’
The expedition towards a knowledge economy demands the new additional type of competencies like team spirit, assistance, etc. To arrive at this in high productivity places like banks, the lifelong learning concept should be applied to its personnel. With the kind of reforms and the resulting changes that are currently overawing the Indian banks, the exigency to instill such competencies among the workforce is getting heaped on in the banking sector.
1.11 Introduction:
Banking is as old as our civilization. The structure of banking varies widely from country to country. Often a country’s banking structure is a consequence of the regulatory regime to which it is subjected. The banking system in India works under the constraints that go with social control and public ownership. Nationalization, for instance, was a structural change in the functioning of commercial banks which was considered essential to better serve the needs of development of the economy in conformity with national policy and objectives. Similarly to meet the major objectives of banking sector reforms, government stake was reduced to 51 percent in public sector banks.
The general banking scenario in India has become very dynamic now-a-days. Before preliberalization era, the picture of Indian Banking was completely different as the Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance.
The Reserve Bank of India was nationalized on January 1, 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948. In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) “to regulate, control, and inspect the banks in India.” The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors. By the 1960s, the Indian banking industry had become an important tool to facilitate the speed of development of the Indian economy. The Government of India issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalized banks from 20 to 19.
In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank.
This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from both sectors of banks, namely, private banks and public banks.
1.12 Evolution of Indian Banking:
The Banking industry in India has grown in a specific kind of environment and with some defined objectives.
Figure 1.1: Evolution of Indian Banking
This historicity of this environment and the objectives has a strong bearing on the operations and management of present day. To appreciate any economic dimension of the banking industry in India in a proper perspective, understanding of the path of evolution of the industry is a must. The origin of banking industry may be tacked back to establishment of Bank of Bengal in Calcutta in 1786. Since then the industry has witnessed substantial growth and radical changes. As on March 2011, Indian banking industry consisted of the 234 Commercial Banks.
The first bank in India, though conservative, was established in 1786. From then till today, the journey of Indian banking system can be classified into four distinct phases:
Phase I: The General Bank of India was set up in 1786. Next came the Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called them presidency Banks. These three banks were amalgamated in 1920 and the Imperial Bank of India, which started as private shareholders banks, was established with mostly European shareholders.
In 1865, the Allahbad Bank was established, and, for the first time, exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1923, Banks of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank and Bank of Mysore were set up. The Reserve Bank of India (RBI) was established in 1935.
During the first phase, the growth was very slow and banks also experienced periodic failures between 1923 and 1948. There were approximately 1100 banks, mostly small. As per the Reserve Bank India Act of 1934, the Reserve Bank of India (RBI) was constituted as an apex bank without major government ownership. To streamline the functioning and activities of commercial banks, the Government of India came up with the Banking Companies Act, 1949 which was later changed to Banking Regulation Act, 1949. As per the Banking Regulation (Amendment) Act of 1965 (Act No. 23 of 1965), RBI was vested with extensive powers for the supervision of banking in Indian as the Central Banking Authority. During those days, the public confidence in banks was somewhat low and, so, deposit mobilization was slow. Abreast of it the savings banks facility provided by the postal department was comparatively safer. Moreover, funds were largely given to traders.
Phase II: The government took major steps in the Indian Banking Sector Reforms after independence. In 1955, it nationalized the Imperial Bank of India (the State Bank of India Act) with extensive banking facilities on a large scale, especially in rural and semi-urban areas as the first phase of nationalization. It formed the State Bank of India (SBI) to as the principal agent of RBI and to handle banking transactions of the Union and the State Governments of the Country. In 1969, seven subsidiary banks of the State Bank of India were nationalized as a major process of nationalization due to the effort of then Prime Minister Mrs. Indira Gandhi, Later in 1969, 14 Major Private Commercial Banks in the country were nationalized. The list of 14 banks nationalized in 1969 was;
1) Central Bank of India
2) Bank of Maharashtra
3) Dena Bank
4) Punjab National Bank
5) Syndicate Bank
6) Canara Bank
7) Indian Bank
8) Indian Overseas Bank
9) Bank of Baroda
10) Union Bank
11) Allahabad Bank
12) United Bank of India
13) UCO Bank
14) Bank of India
The second phase of nationalization of Indian banks was carried out in 1980, with seven more banks being nationalized. This step brought 80 percent of the banking segment in India under government ownership The Government of India has taken the following steps to regulate banking institutions in the country:
1949: Enactment of Banking Regulation Act
1955: Nationalization of State Bank of India
1959: Nationalization of SBI subsidiaries
1961: Insurance cover extended to deposits
1969: Nationalization of 14 major banks
1971: Creation of Credit Guarantee Corporation
1975: Creation of regional rural banks
1980: Nationalization of seven more banks with deposits over Rs. 200 crore.
After the nationalization of banks, the branches of the public sector banks in India rose to approximately 800 percent in deposits, and advances took a huge jump by 11,000 percent. Government ownership gave the public implicit faith and immense confidence in the sustainability of public sector banks.
Phase III: The third phase of development of Indian banking introduced many more products and facilities in the banking sector in its reform measures. In 1991, under the chairmanship of Narasimha, a committee was set up under his name, which worked for the liberalization of banking practices. The country flooded with foreign banks and their ATM stations. Efforts are being put in to give a satisfactory service to customers. Phone banking and Net banking have been introduced. The entire system has become more convenient and swift. Today, time is given more importance than money.
The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomic shock as other East Asian countries suffered. This is all due to a flexible exchange rate regime, high foreign reserves, the not yet fully convertible capital account, and limited foreign exchange exposure to banks the their customers.
Phase IV: The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4%) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.
1.13 Indian Banking: The Present Structure
The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949, comprises a large number of commercial and cooperative banks, specialized developmental banks for industry, agriculture, external trade and housing, social security institutions, collective investment institutions, etc. The banking system is at the heart of the financial system.
The Indian banking system has the RBI at the apex. It is the central bank of the country under which there are the commercial banks including public sector and private sector banks, foreign banks and local area banks. It also includes regional rural banks as well as cooperative banks. In India, the most important intermediaries in the banking system today are scheduled commercial banks, co-operative banks, development financial institutions (DFI) and non-bank financial companies. The large state owned and private sector banks that form part of the scheduled commercial banks are the most visible representatives of the banking system. While the scheduled commercial banks hold more that 80% of the banking system’s assets, they represent a minority in term of numbers.
The structure of the Indian banking system is given in figure
Figure 1.3: Structure of Indian Banking System
The industry is currently in a transition phase. On one hand, the Public Sector Banks, which are the mainstay of the Indian Banking system, are in the process of shedding their flab in terms of excessive manpower, excessive Non Performing Assets (NPAs) and excessive governmental equity, while on the other hand the Private Sector Banks are consolidating themselves through mergers and acquisitions.
Public Sector Banks, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs, falling revenues from traditional sources, lack of modern technology and a massive workforce while the Private Sector Banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS) schemes.
The private players however cannot match the PSB’s great reach, great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route. Over the last few years, the industry has witnessed several such instances. For instance, HDFC Bank’s merger with Times Bank, ICICI Bank’s acquisition of ITC Classic, Anagram Finance and Bank of Madura, Centurion Bank, IndusInd Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI bank- Global Trust Bank merger however opened a Pandora’s box and brought about the realization that all was not well in the functioning of many of the Private Sector Banks
Private Sector Banks have pioneered Internet Banking, Phone Banking and Mobile Banking, Debit Cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena, while the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS schemes. Also, following India’s commitment to the WTO agreement in respect of the services sector, foreign banks, including both new and the existing ones, have been permitted to open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation of 8 branches.
1.21 Introduction:
Man is the only creature that not only begins a new generation, but can take the advantage of the knowledge which has accumulated through the centuries.
Human resource management is a process of bringing people and organizations together so that the goals of each are met. It is that part of the management process which is concerned with the management of human resources in an organization. It tries to secure the best from people by winning their whole hearted cooperation. In short, it may be defined, as the art of procuring, developing and maintaining competent workforce to achieve the goals of an organization in an efficient and effective manner.
In other words, it can be said that human resource management is concerned with people at work and their relationships with each other.
1.22 History of Training
History of training is as old as man himself. It is generally thought that human beings began amassing knowledge at the beginning of the Stone Age. As the invented tools, weapons, clothing, shelter and language, the need for training became an essential ingredient in the march of civilization.
Training and Development got a tremendous movement during 1970’s and 1980’ for learning is now changed and it is now called as T&D. Now it is not limited to learning technical skills and knowledge acquiring but its horizons cover the behavioral skills, attitudinal development, value formation, increasing job motivation, etc,.
Training now a day has started becoming professionalized and with it come the systematic body of knowledge, skills, and attitude for development of human beings.
Thus, history of training is as old as man and civilization but it has changed its form according to the need of the hour and society.
1.23 Concept of Training and Development
Training is the base for personnel mgmt. If we expect the performance of high level from our employees we must train them. Changes take place in technology and mgmt every day. Therefore, it becomes necessary that the workers and employees of the enterprise must be trained so that they discharge their duties easily and effectively and may adjust with the changed circumstances.
Training could be compared to this metaphor – if I miss one meal in a day, then I will starve to death. The survival of the organization requires development throughout the ranks in order to survive, while training makes the organization more effective and efficient in its day-to-day operations.
Training involves an expert working with learners to transfer to them certain areas of knowledge or skills to improve in their current jobs. Development is a broad, ongoing multi-faceted set of activities (training activities among them) to bring someone or an organization up to another threshold of performance, often to perform some job or new role in the future.
The analysis of gaps in knowledge and skills identifies what employees will need to learn in order to be fully competent in the jobs they will be doing now and in the future. How these gaps are filled may involve training.
Training is usually considered as “the organized procedure by which people gain knowledge and skill for a definite purpose.” Training is:
a) Act of increasing the knowledge and skills of an employee for a particular job.
b) Process by which the attitudes, skills and abilities of employees to perform specific jobs are increased.
Training and Development can facilitate smooth adjustment to various changes by imparting new knowledge, new skills or by installing new attitudes, values, motives and other personality traits. It is erroneous on the part of the management to assume that only new employees or employees with poor performance only need training. Training is one of the management function which is applicable to all new and old employees, effective or ineffective employees. Thus training bridges the differences between job requirements and employee’s present specifications.
Employee training and development is an attempt to improve current or future performance of an employee to perform through learning, usually by changing the employee’s attitudes or increasing his or her skills and knowledge. In organisational terms, it is intended to equip persons for earning promotion and holding greater responsibility. Training a person for a bigger and higher job is development. And this may well include not only imparting specific skills and knowledge but also inculcating some personality and mental attitudes.
A major purpose of training and development is to remove performance deficiencies, whether current or anticipated inability of an employee to perform at the desired level. Training to improve performance is important to organisations which are rapidly incorporating new technologies to make the current work force more flexible and adaptable.
Many organizations have already shifted their thinking about the training function. They have seen for themselves that training is where skills are developed, attitudes are changed, ideas evolve and the organization is reinvented. In the course of learning the skills that will increase sales, build effective teams, improve qualify, standards or meet a wide range of other objectives, employees create a new organizational culture.
Also the need to look at business beyond the national boundaries and thinking strategically have forced many organizations to accord training and development due attention. For instance, the continued dominance of free market worldwide had forced many organizations to seriously examine international opportunities and face competitions in areas where they had no solid technological base. As a result, organizations have to continue to deal with two urgent challenges. The first is to improve their competitive position by reducing costs and the second is to learn how to manage the impact of technological development. This reality according to Goldstein and Gillian (1990); and Zager (1988), has magnified the importance of successful training and development programs with measurable results. Consequently training and development has become one of the most critical aspects of human resource management effectiveness.
No matter the way one looks at training and development, they help employees to learn how to use the resources in an approved fashion that allows the organization to reach its desired output. Able people may grow to a point where they are ready for responsibilities beyond their initial assignment. When this happens, training and development become imperative. Training and development has grown concerned not only with helping individuals to adequately fill their positions, but also with helping whole organizations and sub departments grow and develop. Training and development, though primarily concerned with people, is also concerned with technology, the precise way an organization does business. That technology might be the way a flight attendant greets a passenger on an airliner, or the way an egg is fried, it might be the recipe that makes one soft drink, distinctly different from all other soft drinks. It might be the design that makes one automobile more attractive or more efficient than its competitors. It might include the procedures for mixing and bottling the drink, or for assembling the automobile. Training is concerned with the meeting between two inputs to organizational effectiveness, that is, people and technology. Since an organization can rarely secure people who are at the time of employment, total masters of their unique requirements, organizations need a good training and development programme. Training changes uninformed employees to informed employee; training changes unskilled or semiskilled workers in to employees who can do their assigned tasks in the way the organization wants them done into workers who do things the right way.
1.24 Difference between Training and Development
Employee training is different from management development or executive development. “While the former refers to training given to employees in the operational, technical and allied areas, the latter refers to developing an employee in the areas of principles, and techniques of management, administration, organization and allied ones.
Training is a process of learning a sequence of programmed behaviour. It is an application of knowledge. It gives people an awareness of the rules and procedures to guide their behaviour. It attempts to improve their performance on the current job or prepare them for an intended job, Development is a related process. It covers not only those activities which improve job performance but also those which bring about growth of the personality; it helps individuals in the progress towards maturity and actualization of their potential capacities so that they become not only good employees but better men and women. In organisational terms, it is intended to equip persons for earning promotion and holding greater responsibility. Training a person for a bigger and higher job is development. And this may well include not only imparting specific skills and knowledge but also inculcating some personality and mental attitudes.
With technology creating more deskilled workers and with industrial workers being replaced by knowledge workers, training and development is at the forefront of HRD. The onus is now on the human development department to take a proactive leadership role in responding to training and business needs.
1.25 Training and Education
Training and education are both different facets of learning. Training is concerned with increasing the technical skills and knowledge and operating skills in doing a particular job. Hence, mostly employers train their employees for a particular job. But the scope of education is broader. It includes acquiring not only technical skills and knowledge, but also behavioral skills and knowledge, genera1 knowledge, social knowledge and the like. Thus, the purpose of education is to develop individuals. It is concerned with the changing environmental, political and social developments. Education is not only through formal instruction in the educational institutes, but also through training, observation, awareness and so on and so forth. “Training normally has got a more immediate and specific purpose whereas education has long run and general utility.”According to Dale Yoder “The use of-the terms training and development in today’s employment setting is far more appropriate than training alone since human resource can exert their full potential only when the learning process goes far beyond simple routine. The difference between training and education is as under:
Table 1.1: Difference between Training and Education
Area Training Education
1. Orientation Application Theoretical, Conceptual
2. Learning On the job and off the job Classroom
3. Scope Specific task General concept
4. Emphasis Technical Technical and general
1.26 Training Policy
A policy is a framework for decision making. It is usually established by tap management to guide the decisions of others. Effective implementation of training strategy requires an efficient top management supported training policy. “Training policy is considered as the training vision of the organization which helps to draw short term and long term training strategy for achieving organizational objectives through training intervention.”
Training policy helps in drawing the training roadmap keeping in view the resources, constraints and dynamics of internal and external organizational factors. “Training policy addresses many key issues like whom to train, when to train, how to train and also the roles and responsibilities of various stakeholders.
Some of the characteristics of a training policy are:
a) Based on careful analysis of organizational needs, best practice and relevant laws
b) Formally written down as a basis for future decisions
c) Communicated to all emp1oyees to guide decision making
d) Supported by operating procedures and
e) Part of an internally consistent framework
Usually a training policy of an organization will have the following elements:
a) The organization’s underlying philosophy/ beliefs about the value of training
b) Who is eligible for training?
c) What is the process for identifying training needs?
d) What types of trainings are available?
e) Who will decide whether a specific training proposal is covered and to what extent?
f) What should be the balance between on-the-job and off-job training and between the use of internal and external resources?
g) What forms of learning / learning outcomes are favored?
h) Whether employees can appeal against decisions affecting their training?
It is important that in a service industry like banking, suitable training policies are developed for the better functioning of the system. Human Resource Development is the most important need for a service industry like banking. The banks continued, until recently, their generalist orientation in the matter of recruitment. But, the best talent especially specialist, could not be attracted. While radical changes in the staff’ structure are not easy, Public Sector Banks can effect improvements in the existing practices of recruitment, training and redeployment. The focus must shift from generalist orientation of the staff to specialist orientation.
“It has been observed that, in most of the banks, either the training policy is not clearly formulated or, even if it is formulated, it has been kept as a historical document which is rarely referred to while implementing training strategy”. Training policy should have a shared vision of all the stakeholders and should be communicated to all concerned.
1.27 Training Objectives
The success of any organization inevitably depends very largely on the staff it employs. It is necessary to ensure an adequate supply of staff that is technically and socially competent and capable of career advancement in to specialist departments or management positions. There is, therefore a continuous need for the process of staff development and training fulfils an important part of this process.
The purpose of training is to improve knowledge, skills and attitude. It can increase confidence, motivation and job satisfaction. It can provide recognition. enhance responsibility, and possibility of increased pay and promotion. It can give a feeling of personal achievement and broaden opportunities for career progression.
Training helps to improve the quality of human assets at the disposal of the organizations. Training is therefore a key element of improved organizational performance.
1.28 Benefits of Training
The benefits of training can be summed up as:
a) Improves morale of employees- Training helps the employee to get job security and job satisfaction. The more satisfied the employee is and the greater is his morale, the more he will contribute to organizational success and the lesser will be employee absenteeism and turnover.
b) Less supervision- A well trained employee will be well acquainted with the job and will need less of supervision. Thus, there will be less wastage of time and efforts.
c) Fewer accidents- Errors are likely to occur if the employees lack knowledge and skills required for doing a particular job. The more trained an employee is, the less are the chances of committing accidents in job and the more proficient the employee becomes.
d) Chances of promotion- Employees acquire skills and efficiency during training. They become more eligible for promotion. They become an asset for the organization.
e) Increased productivity- Training improves efficiency and productivity of employees. Well trained employees show both quantity and quality performance. There is less wastage of time, money and resources if employees are properly trained.
1.31 Need: Needs are simply the differences between the current achievements and the desired accomplishments Thus, needs most commonly represent discrepancies—often deficits—between our ambitions and the results of our current performance.
Figure 1.4: Relating Needs to Discrepancies between What Is (Current Results) and What Should Be (Desired Results)
(Source: Based on Kaufman, Oakley-Brown, Watkins, and Leigh (2003) and Watkins (2007).
In the same way, needs signify an over abundance of success when our current achievements surpass our desired accomplishments, thereby possibly suggesting an excess of resources going toward the results.
1.32 Need Assessment
A needs assessment is simply a tool for making better decisions. From choosing a new car or finding a house to call home, or determining when training will build institutional capacity, needs assessments are used to make informed personal and professional decisions.
Roger Kaufman, professor emeritus at Florida State University, defines a needs assessment in terms of gaps in results (Kaufman, Oakley-Brown, Watkins, and Leigh 2003). From a performance perspective, this definition offers two useful formulas for assessing needs. In the first formula, needs are gaps between current results and desired results. The size and importance of the gaps can then be compared to inform the decisions.
Kaufman’s definition also provides a second formula for prioritizing needs. According to the definition, needs are prioritized through the comparison of (a) costs associated with addressing the needs (or closing the gap)and (b) costs associated with not addressing the needs (or leaving the gap). This comparison is the foundation for moving beyond merely identifying problems or opportunities, thereby offering an approach for using information about the needs so as to make decisions about what to do next.
The ultimate aim of the need analysis is to establish:
a) What needs actually exist
b) Whether they are important
c) How the need become apparent
d) How they were defined
e) How they may best be addressed and
f) What the priorities are.
If there is a variance between the desired and actual levels, a needs assessment explores the causes responsible for the gap and methods for closing the gap.
1.33 Training Need Assessment
Meeting the many requirements of clients, fellow associates and society has become a requirement for organizational success (Popcorn, 1991; Kaufman, 1998). In response of this increasing demand of both internal and external clients “need assessments” have become a mainstay in organizational management of recent years. A Needs Assessment is a systematic exploration of the way things are and the way they should be. These “things” are usually associated with organizational and/or individual performance (Stout, 1995).
The assessment begins with a “need” which can be identified in several ways but is generally described as a gap between what is currently in place and what is needed now and in the future (Miller et al, 2002). A training need exists when there is a gap between what is required of a person to perform competently and what he actual knows. A “training needs assessment”, or “training needs analysis”, is the method of determining if a training need exists and if it does, what training is required to fill the gap. The expectation of knowledge, skills and abilities of officials at different levels is different so there training needs are also different. The purpose of a training needs assessment is to identify performance requirements or needs within an organization in order to help direct resources to the areas of greatest need, those that closely relate to fulfilling the organizational goals and objectives, improving productivity and providing quality products and services.
Training needs identification is the diagnostic part of the whole training process. Failure to conduct a sound analysis may result in wastage of efforts and training may not achieve its objectives. “The difference in the actual performance and desired performance [discrepancy] identifies the immediate and / or long range training needs. However, all performance issues are not training issues. Thus, if the problem or issues concern people’s behavior such as, knowledge, skill, attitude, technique and judgment, it is almost certain to be a training matter.
1.34 Why Conduct a Training Needs Assessment?
A training need exists when there is a gap between what is required of a person to perform competently and what he actually knows. A “training needs assessment”, or “Training Needs Analysis”, is the method of determining if a training need exists and if it does, what training is required to fill the gap. The expectation of knowledge, skills and abilities of officials at different levels is different so their training needs are also different. Training Needs Assessment has therefore to be for different target groups for exactly knowing what training is required for each group.
A Training Needs Assessment often reveals the need for well-targeted training (McArdle, 1998). Conducting an effective assessment ensures that training is the appropriate solution to a performance deficiency.
Training Need Assessment is to identify the gap between the model situation and the actual situation and the way in which it can be bridged. As the gaps are identified, they are evaluated to determine the manner in which the gaps can be bridged. Some situations will indicate training needs. Some may need non—training solutions (e.g., financial aspects, institutional strengthening, providing the right tools etc.). The results of training needs analysis will highlight the subject wise need to bridge the gap, to help in the preparation of training modules and facilitate in the development of Bank Employees.
1.35 Steps in Training Needs Assessment
Good training needs assessment needs to be based upon a consistent and effective model that can be repeated and allowing the analyst, the freedom to produce solution focused on the business need. The following eight steps are suggested for effective training needs assessment by Tom Holden,
a) Questioning the Business Case and Need,
b) Deriving the Training Need,
c) Meeting the Client.
d) Planning the Training Needs Assessment [TNA],
e) Gathering Data,
f) Turning Data into Information,
g) Presenting Your Solution and
h) Completing Training Needs Assessment [TNA].
1.36 Training Need Assessment Methods
A key to any successful needs assessment project is the gathering of complete and accurate data and information regarding your target audience. There are seven basic assessment methods that can be used to gather data and information.
a) Observation: A Needs Assessment can be an informal assessment based on observations. Observation means exactly what it sounds. It is a method of data collection based on watching a process or skill and systematically recording the events. For example, observing how clients use a workstation in the Information Center and keeping track of their requests for assistance with the product can be the first step to understanding what training would make the product easier to use.
Patterns observed with particular user groups or when retrieving certain types of information can also point out training needs.
b) Questionnaire: A questionnaire is a research instrument consisting of a series of questions and other prompts for the purpose of gathering information from respondents. Questionnaires are a survey instrument through which individuals respond to printed questions.
c) Interviews: Interviews means one or more series of active interchanges between two or more people. They can be conducted either face to face or via technology. The main task in interviewing is to understand the meaning of what the interviewees say. (Kvale,1996)
d) Peer Evaluation: Peer Evaluation is a process in which staff members use their own direct knowledge and experience to examine and judge the merit and value of another member in the organization.
e) Job Analysis: Job analysis is the formal process of identifying the content of a job in terms activities involved and attributes needed to perform the work and identifies major job requirements.

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