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Impact of Employee
Training on the Performance of Indian Commercial Banks |
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| Paper Id :
19348 Submission Date :
2024-10-13 Acceptance Date :
2024-10-23 Publication Date :
2024-10-25
This is an open-access research paper/article distributed under the terms of the Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. DOI:10.5281/zenodo.14376473 For verification of this paper, please visit on
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| Abstract |
Purpose: A company's most important asset is its human capital. It ensures the company's existence, keeps
it running, and enables it to compete in the fast-paced financial world. The top management of any organization recognizes the crucial importance
of employee training on the overall performance of the business in terms of revenues,
along with personnel
growth and satisfaction of the staffers, by diligently
allocating funds to personnel skill development and training, among others. To accurately assess the effect of
employee training on bank performance, this review research largely focuses on evidence-based studies found in the literature. Research Methodology : The current review study is based on a thorough and insightful examination of published materials that are relevant to the operations of commercial banks, with a specific emphasis on the training and development programs for staffers, and how well they function for Indian banks. Findings: A one-size-fits-all approach may not be the ideal way to assess the performance of banks located in a certain geographic area, like India, according to literature evaluations. The current study underlines the necessity of rigorously scrutinizing important real-world performance indicators, such as key performance indicators and financial matrices, for monitoring bank performance. Limitations: The long duration of the evaluation, which may be further constrained by the trained employee's turnover rate at a given company, poses one of the main challenges in determining the influence of training on bank performance. Industry implications: The bank will function much better and become a much more profitable business with trained personnel. Social implications: Increased performance, lower turnover and employee retention, simpler on boarding, risk minimization, and improved social capital are all results of training. Originality: To the best of our knowledge, the article offers a distinctive perspective on how to critically assess the effect of training on bank performance. |
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| Keywords | Banks, India, Training, Development, KPI, Financial Metrics, Business Analytics. | ||||||
| Introduction | Any organization's human resource is its most valuable asset. It serves as the company's lifeblood and ensures its continued presence, and to be competitive in the rapidly involving financial world. A company's ability to succeed or fail mainly depends on its workforce. The senior management of any company acknowledges the acute need of personnel training on the overall performance of the organization in terms of revenues, together with personnel growth and satisfaction of the staffers, by actively spending resource on employee skill development, among others. Thus, providing employees with cutting-edge new knowledge on basics of financial delicacies, and essence in terms of financial regulation, along with operational skills in bringing more public engagement, to meet with financial goals, provide the organization much-needed critical competitive edge over its rivals in the banking sector. More, specifically, training also allows bank to stay abreast of changing regulations and industry trends, assisting them to stay healthy and relevant, and remain compliant with regulations. Additionally, a full-proof training program makes sure that an employee understands his/her abilities and realize the corporate missions and vision, and timeline to meet with the financial goals. When this happens, a worker effectively aligns with objectives with those of the organization, which further facilitates in accomplishing organizational goals through strong performance at work in terms of actual productivity as an individual and/or team. The influence of employee training on bank performance could be multitude. Firstly, banks with trained employees are more likely to deliver improved customer service regarding identifying and resolving customer grievances, causing noticeable customer satisfaction. Also, trained employees are better able to identify fraudulent activities, and arrest money laundering, making the bank more secure and keeping its reputation. Secondly, trained staffers are more likely to understand regulations, which in turn, assisting the bank remain compliant with critical laws and regulations. Thirdly, a bank with trained staffers can assist bank to generate much-improved strategies and actionable plans, which can make the bank to remain profitable over a long period of time. That being said, it is important to figure out and assess the essential financial metrics and key performance indicators (KPI) of a bank, to establish a connection between employees' performance and bank performance. The influence of staff training on the performance of
financial institutions including credit unions
has been studied over the years in many countries around the world.
However, the data are sporadic, and
also not very comprehensive in regard to assessing all the critical parameters
that correctly measure the true success
of a financial institution. Additionally, the country-specific nature of the data limits its usefulness to precisely
measure the success of banks in a specific country, based on the generalized performance indicators and specific
training the staffers have received. Thus, a general approach may not be ideal in assessing the
performance of banks located in a specific geographical settings such as India. As a result, the goal of the current
review study is to critically understand how staff
training affects the performance of Indian commercial banks by closely evaluating important real-world
performance indicators like KPI and financial metrics, which are well-recognized tools
for addressing bank performance. |
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| Objective of study |
The objective of this study is the explore the evidenced-based studies to establish an unique framework, and not a general solution that fits all countries across the world in formulating a robust employee training module that specifically suits Indian Banks in regard to improving the overall performance of Indian banks. |
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| Review of Literature |
To the best of our knowledge, we have included many critical evidence-based studies in this work. However, to include all relevant studies in a single manuscript is beyond the scope of this specific discourse. We aim to provide a more exhaustive narrative explanation in future studies. |
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| Methodology | The current review
study is based on a thorough and in-depth
examination of published materials that are relevant to the operations of
commercial banks, with a particular emphasis on the training and development programs for staff and how
well they perform for Indian banks. The data for this narrative study was acquired from a variety
of sources, including the Internet,
scholarly journals, business periodicals, and bank annual
reports. |
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| Analysis |
The statistical package for social science
(SPSS) was used by the authors of several of these cited research publications included in this review article, to critically analyze
the data |
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| Result and Discussion |
KPI and Financial Metrics are Useful Tools for Performance of Banks Tracking Metrics are quantitative measurements that are used to monitor the effectiveness of particular business operations at the tactical and operational levels. Unlike KPI, they are not essential to the achievement of key business goals, but they do help showcase their performance in context. Although some of them may be closely tied to objectives, metrics are not the most critical indications for keeping track of strategic actions. That said, they continue to be important for informing businesses about the status of their various activities. Metrics like the Lead-to-Conversion-Ratio, Return Rate, and Acquisition Expenses are a few examples. In plain language, metrics just have the ability to monitor the performance of particular business actions or processes as opposed to KPI, which must be completely related to targets or goals in order to exist. Metrics include but not limited to: (1) Net interest margin (NIM)-a measurement of the differential between interest received and interest paid that has been adjusted for the entire quantity of interest-producing assets owned by the bank; (2) Efficiency ratio-the ratio of revenue divided by non-interest expenses, which demonstrates how effectively the bank's managers manage their back office (or overhead) costs; (3) Loans/Deposit ratio- LDR, which is expressed as a percentage, is used to evaluate a bank's liquidity by contrasting the total amount of loans to the total amount of deposits for the same time period. The bank may not have adequate liquidity to meet any unforeseen funding needs if the ratio is too high; (4) Liquidity Ratio-The ability to pay off current liabilities with assets on hand is measured by the liquidity ratio. The difference between total liabilities and conditional reserves is subtracted from total assets to get the overall liquidity ratio; (5) Core Deposits/total deposits: Core deposits are typically less susceptible to changes in short-term interest rates than term-deposits or money market accounts. The higher the ratio the better for most banking institutions; (6) Equity and assets- A method of analyzing a balance sheet that boils it down to one question: What proportion of assets do investors own? On the contrary, KPI include: (1) Earning asset yield is a well-known measure of financial soundness that contrasts interest income with earning assets. By examining how much revenue an asset generates, yield on earning assets reveals how well the asset is doing; (2) Cost of funds is a term used to describe the interest rate paid on the money utilized for business purposes. One of the primary sources of profit for many banks is the discrepancy between the cost of funding and the interest rate offered to borrowers; (3) Return on Average Assets (ROAA) is a metric used by banks and other financial organizations to measure financial performance. It measures the profitability of a company's assets; (4) Return on average equity is a financial ratio that evaluates performance using the average amount of outstanding equity held by shareholders. KPI are Essential Components of Bank Employee Training Programs KPI are indeed important when it comes to training bank employees. They provide metrics on performance that can be used to measure and evaluate an individual's or team's progress. KPI provide an avenue to assess the effectiveness of training and whether employees are learning the skills and knowledge they need to succeed. They also help to ensure that everyone is held accountable for their performance. Additionally, KPI provide real-time feedback to both the trainer and the trainee, allowing for better management and tracking of progress. This helps ensure that all employees are performing to the highest standards and that everyone is meeting their goals. KPI can be used to identify areas where improvement is needed, allowing for targeted/personalized training and development to take place. Moreover, KPI are also a great way to encourage employees to take responsibility for their own performance and development. This essentially means that employees are empowered to take ownership of their own training and development goals, and to push themselves to reach them. This also allows employees to set their own goals and objectives, which can be tracked and monitored over time. Overall, KPI are an essential
tool in any bank employee training program. They provide the metrics needed to measure and evaluate progress,
help to ensure that all employees are held accountable for their performance, and provide a way to
track the effectiveness of the training program. Finally, they encourage employees to take responsibility
for their own professional development, allowing them to set their own goals and
objectives, in tune with company's goals, missions, and vision. Case Studies Linking Employee Training to Improved Bank Performance A study was undertaken to determine the impacts of employee training on the performance of commercial banks in Jordan. The study seems to suggest that effective training results in superior performance by employees of the bank. Importantly, the study reveals the underlying mechanisms of bank's improved performance as a result of employee training. The paper conducts a review of the relevant books, journals, and research reports in the field. The research looks into the precise definition of training in this context as well as its applicability. Analyzing the links between employee training and performance is the study's other goal. The study results suggest that the bank must implement additional training initiatives, to support staff members' varied interests, and stay abreast of swiftly advancing technical developments. Employee motivation will rise when the training alternatives are expanded. Another key duty of the human resources division in the banking sector is the development of personnel through effective training programs. By creating capacity, these programs are responsible for establishing standards for the bank's workforce's performance; the study seems to suggest this, as well. Another study was undertaken in Karachi, Pakistan to evaluate the effects of employee training on bank performance. Based on the data collected from Banks of Karachi, the research tends to indicate the positive impacts of training on employees' performance. The researcher uses a random sampling technique to collect questionnaire responses from 100 employees. Regression and correlation techniques are used for analysis. The major findings of this study suggest that stress levels and motivation, technical knowledge, training program design, knowledge and employee performance, and employee motivation have positive correlation with employee performance. It further demonstrates that the bank is using a talent management program to meet its immediate and long-term needs, which enables them to compete in a workplace that is rapidly evolving. Also, a strong leadership style is a crucial component of a bank's ability to expand, since good leadership style gives rise to a productive environment for staffers. The effect of training on employee performance in the banking industry is measured by additional research. There are 14 private banks from Thanjavur, India, included in this study. Using simple random sampling, 120 middle-level management workers are selected. The data acquired are examined by descriptive statistics and linear regression analysis. Importantly, the research assesses the relationship between employee job performance and training. The outcome seems to suggest a moderate relationship between training and work performance. This could be in part due to the unwillingness of the employees to make good use of newly found knowledge, to be able to produce greater work performance, which in turn, might have affected the performance of the banks. The individual should try to apply what they learned in training to improve their performance, is the key takeaway in this study. Overall, the large-scale studies over a longer period of time suggest a likely connection between employee training and bank performance in many countries. However, more exhaustive studies are urgently needed in India, considering its heterogeneity, to accurately decipher and understand a link between employee training and bank's overall performance, in terms of fulfilling financial metrics and KPI. |
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| Conclusion |
Based on the large-scale evidence found in the literature, financial organization must priorities training bank employees to improve bank performance. This attempt, however, is fraught with hurdles. The cost of providing the necessary critical training to the employees is one of the hardest obstacles. Training can be expensive to deliver, especially when it is highly specialized and requires specialized high-demanding instructors. The duration of time it takes to train new hires can also be an excessive burden on the resources of the organization. Another key obstacle is ensuring that the training is beneficial to both employees and the bank as a whole. It is important to make sure that the training provided is relevant to the roles and responsibilities of the new hires and that it has a direct impact on the performance of the organization. Importantly, the efficacy of the training must be evaluated periodically to ensure that it is fulfilling the initial objectives set for it. Additional challenge is motivating staffers to complete the entire training. Employees may not be motivated to complete the training due to a lack of understanding of its purpose or the amount of effort required. Moreover, employees may be hesitant to take part in the training if they do not feel it is necessary. Finally, the training should be designed to address the specific needs of the bank and its employees. Different departments and roles require differed specific types of training, and the training should be customized to satisfy the specific requirements of each area. Moreover, it is important to provide ongoing support and feedback to ensure that the training is having the desired impact. Nevertheless, the future of employee training in the banking industry is of utmost importance that deserves careful consideration. As banks become increasingly sophisticated and complex, new hires must be trained in ways that go beyond merely preparing them for the job. Training and development must concentrate on providing employees with the desired skills to help the bank excel and increase its performance. Assisting personnel with the necessary training to interact with consumers is one of the primary areas where banks can improve. It is equally critical to train staffers on how to satisfy customer needs and deliver state-of-the-art customer care. The objective of training should be to equip employees with the knowledge and skills needed to identify client issues and provide workable solutions. The banking industry is also rapidly incorporating new technologies, from artificial intelligence and machine learning to cloud computing and block chain. As a result, banks must ensure that their employees are properly trained in these technologies, so they can use and implement them effectively. Banks should also spend in training that educates staffers how to recognize and manage cyber dangers and keep up with the most recent security protocols. Another important area of training is the use of data. Banks should invest in training programs that focus on teaching employees how to collect, analyze, and use data to inform their decision-making. This way, banks can better identify areas of opportunity and assess customer needs. Finally, banks should also invest in soft skills training. Soft skills, such as communication and problem-solving, are critical for the success of any financial institution. Banks should focus on training employees how to collaborate effectively, how to negotiate, and how to withstand difficult situations. Overall, banks must ensure that their employees are equipped with the necessary skills and knowledge to help the bank succeed. By investing in proper training programs, banks can better equip their employees to help improve their performance and increase customer satisfaction. Efforts should be further boosted in bringing key solutions based on the massive technological development in recent years, which includes Internet of Things (IoT) and artificial intelligence (AI), etc., that might revolutionize the financial institutions in India, in terms of performance of the employees, and customer satisfaction. For instance, the Internet of Things (IoT) can greatly improve the performance of banks. IoT is a network of connected devices, sensors, and computing systems that allow data to be shared and acted upon in real-time. Banks have begun to take advantage of this technology in a variety of ways, from improving customer service to improving operational efficiency. One way that banks can use IoT to improve performance is by leveraging the data generated by connected devices. Another way that banks can use IoT to improve performance is by using connected devices to deliver better customer service. For example, banks can use sensors to track customer activity and provide personalized services, such as tailored offers or recommendations. Banks can also use connected devices to monitor customers’ accounts in real-time and quickly address any fraudulent activity. Additionally, banks can use IoT to improve operational efficiency. Connected devices can be used to automate mundane tasks and reduce manual labor. This can free up employees’ time and help them focus on tasks that require more expertise and strategic thinking, necessitating its [IoT] inclusion in the employee training program. Also, the use of AI (artificial intelligence) can help bank employees to improve their performance. By leveraging AI-enabled analytics and automating mundane tasks, bank can better prepare the employees with the tools and knowledge to better serve their customers and maximize efficiency. Overall, innovative technology-driven training programs, aligned strategically to company's overall missions, will continue to assist employees to enhance their performance to better serve the financial institutions in the future. Lastly, one of the numerous difficulties
with employee training and development programs is that training should be tailored to the particular requirements
of the bank and its staff. Different departments
and positions require various sorts of training, and the instruction should be tailored to each area's unique
needs. Overall, the banking industry's future of staff training is of the utmost importance, and merits careful study. Employee training must go
beyond merely preparing them for the job as banks become more sophisticated and diversified. |
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| References |
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