RBI data shows diverging workforce trends: Private banks focus on automation and efficiency, PSBs expand for branch coverage and compliance roles

MUMBAI (Economy India): India’s private sector banks witnessed a decline in total employment in FY25, even as public sector banks (PSBs) marginally expanded their workforce. The shift reflects two contrasting strategic priorities — digital automation and cost optimisation in private banks versus branch expansion and customer outreach in public banks.

According to data released by the Reserve Bank of India (RBI), overall banking system employment rose slightly, driven primarily by small finance banks adding personnel despite pressures in other segments.

Private Banks Record First Workforce Contraction in 3 Years

Private bank headcount fell from 8,45,407 in FY24 to 8,38,150 in FY25, marking a net reduction of over 7,200 employees. The drop is understood to be led by ICICI Bank and some mid-sized institutions recalibrating hiring amid operational restructuring.

Key Trends Behind the Decline

• Increased reliance on digital onboarding and AI-driven customer service
• Rationalisation of physical branches in metro markets
• Moderation in unsecured loan portfolio growth requiring fewer sales positions
• Focus on profitability metrics amid funding cost pressures

A senior HR strategist at a private sector bank remarked:

“Customer acquisition now requires fewer feet-on-street due to digital funnels. Structurally, private banks are entering an efficiency-driven phase rather than a scale-driven one.”

PSUs Add Jobs to Support Branch Expansion and Regulatory Priorities

Contrary to private banks, employment at PSUs rose to 7,57,641 from 7,56,015 employees — a modest but directionally significant increase. The uptick reflects:

• Higher demand for rural banking and Jan Dhan servicing
• Financial inclusion mandates and direct-benefit transfer administration
• Growing compliance functions due to global reporting standards
• Recovery and restructuring units for NPAs still requiring workforce presence

Bank unions say the expansion is essential for public touchpoints:

“Public banks remain the backbone of India’s financial inclusion model. A full digital shift will take time, so hiring cannot slow down,” a union representative told Economy India.

Breakdown: Employment Change Across Segments

Bank Category	FY24 Employees	FY25 Employees	Trend
Public Sector Banks	7,56,015	7,57,641	▲ Small Increase
Private Sector Banks	8,45,407	8,38,150	▼ Decrease
Small Finance Banks	Growing	Growing	▲ Driving Net Additions
Entire Banking System	Slightly Higher	—	▲ System-Level Stability

Why ICICI-Led Reduction Matters

Market observers say ICICI Bank, being among the largest private lenders, influences aggregate numbers. The reduction signals:

• Efficiency cycle in major private banks
• Shift from physical branches to hybrid digital formats
• Lower incremental hiring for customer-facing roles

Most banks are expected to hire selectively in FY26 for risk analytics, cyber-security, compliance, and embedded finance rather than traditional branch staffing.

Digital Delivery vs Human Distribution: Sectoral Divergence

The contrasting employment path highlights a structural reality:

• Private banks → digital-first, automation, cost efficiency
• Public banks → customer outreach, financial inclusion, compliance-heavy operations

Analysts believe the shift will continue for 2–4 years as technological adoption accelerates.

Economy India Assessment

Structural Outcome	Impact
Private bank hiring slowdown	Short-term employment pressure, long-term productivity gains
PSU hiring stability	Supports social-banking mission and rural outreach
Small finance bank expansion	Becoming a “third pillar” of India’s workforce in banking
Digital transformation	Jobs shifting from sales to data & compliance roles

The broader question for FY26 will be whether private banks resume hiring or double down on automation-led optimisation.

(Economy India)