Finance Minister Calls for Local Language Proficiency in PSBs
Union Finance Minister Nirmala Sitharaman has urged public sector banks (PSBs) to revise their human resource policies to ensure that staff posted at branches are proficient in the local language. Speaking at a recent State Bank of India (SBI) event, Sitharaman emphasized that a strong connection with customers is critical for the growth and success of banks, especially in diverse linguistic regions.
“Recruit in a way that ensures every staff member posted at a branch understands and speaks the local language,” Sitharaman said. “Even if top management isn’t fluent, it’s essential that the branch-level staff can communicate effectively with local customers.”
Performance Appraisals Based on Language Skills
The finance minister also suggested that PSBs consider local language proficiency as a criterion in employee performance evaluations. She stated that greater weight should be given to staff members who can effectively interact with customers in their native tongue, as this helps to build trust and customer loyalty.
“I would strongly push towards performance appraisal on the basis of his or her efficiency in the local language,” she said, highlighting the importance of communication in financial services.
Decline in Customer Connection a Growing Concern
Sitharaman expressed concern about the declining personal connection between bank staff and customers. She noted that this disconnect has resulted in banks increasingly relying on external credit information companies (CICs) to assess loan applicants. However, these agencies often take time to update borrower data, leading to eligible customers being denied credit.
“The only criticism I find hard to defend is the policy of posting individuals without regard to language compatibility,” said the minister. “When bank staff can’t communicate with customers, it undermines the institution’s ability to serve them effectively.”
She also recalled how earlier private sector banks, prior to nationalization, maintained strong relationships with local clients, a model that contributed to their success. Sitharaman urged banks to blend modern technology with a personal touch to improve service delivery.
Impact of Technology vs. Traditional Methods
The finance minister acknowledged the role of technology in banking but warned against losing the human element. She emphasized that earlier, bank officials used to know their customers personally and had a clear understanding of their financial reliability. Now, that role has been replaced by automated systems and third-party agencies, which can miss out on contextual insights.
“There was a time when a branch official could vouch for a customer’s creditworthiness based on personal knowledge,” she said. “That’s no longer the case, and it’s affecting access to credit.”
She cited recent cases where customers had to approach informal moneylenders due to delays or denials from formal banking channels. “You cannot keep pushing borrowers to submit endless documents. It’s time for banks to be more responsive and accessible,” she added.
Political Backlash Over Language Barriers
Sitharaman’s comments come in the wake of several incidents where bank officials faced backlash from political groups and local communities for not being able to communicate in the regional language. These situations have drawn attention to the lack of cultural and linguistic representation in public-facing roles at bank branches.
Addressing the issue, the finance minister said that understanding the customer’s language is not just about convenience—it’s a business necessity. “A local customer is essential for a bank’s growth. Without effective communication, that relationship cannot thrive,” she noted.
Call for HR Policy Reform
To address these challenges, Sitharaman recommended a comprehensive overhaul of HR practices in PSBs. She proposed that recruitment processes give priority to candidates fluent in the regional language and that such skills be considered during promotions and appraisals.
“Banks need to rethink how they hire and promote people. Language skills should be a key part of that strategy,” she said. “This will not only benefit customers but also enhance the credibility and efficiency of the banks themselves.”
She concluded by urging financial institutions to take these recommendations seriously, warning that failing to do so could diminish the public’s trust in formal banking systems.
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