Earlier this month, the Maharashtra state government signed a Memorandum of Understanding with Bajaj Finserv, one of the largest non-banking financing companies (NBFC) in the country. This set the foundation stone of a new campus in Mundhwa at Pune, with an envisaged investment of Rs 5,000 crore. But the real juice was in the impact it would have on the job market. This investment is expected to create as many as 40,000 new jobs over the medium term! And this is just one company we are referring to.
Such mega hiring plans were hitherto reserved for mega industrial or manufacturing plants or in the mining world in the old days, and for large software companies during the last decade or so. As the job market turned a corner in the last year and a half, with the Great Attrition swiftly leading to the Great Layoff, the technology sector—which has been the flagbearer of the gold rush for jobs over the last several years—virtually hit the pause button. It started with a rerating of the technology sector in the eyes of investors, coupled with the war in Europe between Russia and Ukraine that led to a spike in oil prices and resulted in unprecedented inflation.
Central bankers went on to tighten their belts with their monetary policies to fight the spectre of runaway inflation. This had a domino effect on most industries as consumers lowered their spending and signalled what many experts are expecting to lead to a recession or decline in economic activities in the developed world.
Interestingly, while economies have slowed down and some, like Germany have declared they are in a recession—a term used for two consecutive quarters of decline in economic activity—there is a theory that the economic slowdown globally won’t be as severe as previously anticipated.
This is even more so for a country like India, which is still expected to grow at a fast clip this year and thereafter.
This bodes well for the local job market, too. While the tech majors are taking a cautious stance as much of their business is driven by clients in the West and a slowdown there has an immediate impact on new software service contracts, the financial services sector has emerged as a neutraliser to counterbalance the broader sentiment in the job market in India.
Indeed, the Indian central bank, the Reserve Bank of India (RBI), kept its policy rates unchanged for the second consecutive time in the first week of June. Experts expect the RBI to continue its pause on policy rates in the next meeting, too, as it evaluates the inflation trajectory that has been within its comfort zone. Some expect the RBI to initiate rate cuts in January-March 2024.
That could boost demand for borrowings and create more jobs in the banking, financial services and insurance, or the BFSI, industry.
BFSI space remains robust
Financial services at large make up the backbone of the Indian economy. So, if the economy has been resilient despite global problems, so has the demand for such services. Consider the banking credit growth, which had languished in the low single digits through the initial year of the Covid-19 pandemic.
Credit growth took off in the second half of 2021-22 and crossed over to the double-digit growth level in the three months ended March 2022. Since then, it has been pegged at 15-16% year-on-year growth levels.
“Gross bank credit offtake rose by a robust 15% year on year (y-o-y) in March 2023 due to strong growth across all the sectors, especially in the non-banking financial companies (NBFCs), vehicle, and unsecured personal loans segments,” according to rating and research agency CARE.
Growth in lending to NBFCs partly represents a substitution of the source of money for the shadow banks but also denotes higher demand for borrowing.
For FY24, Fitch affiliate Ind-Ra expects the credit growth to be moderate but remain respectable at 13.5% despite the continuing global economic challenges, concerns about inflation in the domestic market, and a moderation in the margin profile of corporates.
If we look at other sub-sectors, for FY23, the top line of life insurers has been healthy. The new tax regime has had an impact in the short term during April 2023, but it is expected to continue its trajectory after companies tweak their policy mix to drive growth.
Meanwhile, the non-life insurance space has been on a tear. In April 2023, the non-life insurance industry reported a premium of Rs 25,640.7 crore, growing by 20.5% over the same month last year, driven by health (especially the group segment), and motor insurance.
According to CARE, the Indian non-life insurance market would grow by approximately 13-15% over the medium term with the health insurance segment on track to breach the Rs 1 lakh crore mark, while motor insurance premiums are expected to cross Rs 85,000 crore mark in FY24.
Peek at recent hiring activity in BFSI
All this has had a positive spinoff on job creation in the BFSI space. The activities of the top banks and NBFCs in the first three months of 2023 also support the trend.
HDFC Bank, the largest private lender, added over 6,000 employees to its rolls in the January-March quarter. Axis Bank and Yes Bank added 4,000 and 1,000 people, respectively.
In the NBFC space, while the top four NBFCs jointly created around 28,000 additional jobs in the previous four years (FY18-FY22), Bajaj Finance, Cholamandalam Investment & Finance, Muthoot Finance, Shriram Finance and Mahindra Finance, put together, added a little over 10,000 to their headcount in the first three months of 2023. This translates into around five new jobs every hour or one new job every 12 minutes!
Moving to the insurance sector, ICICI Lombard General Insurance added close to 1,800 employees to its rolls last financial year.
To be sure, not all jobs are on the rolls. SBI Life’s overall network added around 20,000 people in the first three months of 2023 to 275,374 trained insurance professionals including agents despite the addition of just two new offices in the same period. ICICI Prudential Life recruited 33,833 advisors during FY2023.
This was also reflected in the Naukri Jobspeak Index March 2023 which showed a sharp rise in job creation in the BFSI sector with banking taking the lead. The BFSI sector, in fact, created the maximum number of jobs in March.
“March 2023 witnessed an unprecedented high Index value of 4555, marking a staggering 45% YoY growth. The insurance sector saw a remarkable upswing, with new job opportunities doubling, primarily fueled by roles related to insurance product sales. Amidst the rapidly growing Indian economy, the BFSI sector stands strong and has a promising future, in terms of generating job opportunities. With its solid foundation, we can expect BFSI to become a primary source of white-collar jobs in the country – Pawan Goyal, Chief Business Officer, Naukri.com.
The latest Naukri Jobspeak has also shown that job conditions remain robust. While overall hiring growth may seem relatively stagnant, the hiring landscape for banking was a driving factor in the nation’s white-collar job market. The banking sector sported a growth rate of 14%, for the month of May.
Interestingly, while the startup world is full of news about layoffs, at least one segment—the fintech domain—is bucking the trend. Fintech lending companies defied layoff trends and increased their total number of employees from 10,779 in FY21-22 to 15,326 in FY22-23, an increase of 42%, according to the latest report by the Fintech Association for Consumer Empowerment (FACE), a fintech/digital lending companies association in the country.
New players are also cropping up. This week, consumer finance fintech Pepper Money, which has a presence across Australia, the UK, Europe, South Korea, Japan, and Southeast Asia, said it plans to invest $150 million over the next four years to introduce personal finance products to a sizeable and fast-growing market of young aspirational consumers in tier 2 and 3 cities in India. As part of the plan, it would be building a team of over 200 employees. The group has $21 billion in assets under management (AUM) of self-generated loans via its Pepper Money brand, and a further $55 billion in AUM of third-party loans under credit management via its Pepper Advantage brand.
The end note
So, what does all this come down to? Is the financial services sector poised to absorb all the new crop of entrants in the job market? Is it the new magnet for job seekers?
To be fair, the huge block of jobs created by the technology sector in the past and its propensity to do so again in the future means it would continue to be a factor negatively impacting the job market in the near future.
On the plus side, the BFSI sector is simultaneously creating thousands of jobs given the solid foundation and the need for financial services to support India’s large and growing economy. All this bodes well for making BFSI the new driver for white-collar jobs in the country.