Alternatively, they will have to be much more effective in using technology to reduce costs. Finally, as banks adopted differentiated strategies, they should move away from common compensation structures and common promotion schemes across all public sector banks.
While one of the strengths of the public sector sometimes is the absence of pay and promotion that is very sensitive to performance, too little sensitivity can also be a problem as high performers get demotivated, and the slothful are not penalized. An increased emphasis on performance evaluation, including identifying low performers with the intent of helping them improve, may be warranted.