“A Study of Leadership Styles in Banking Sector”

1 INTRODUCTION

1.1 INTRODUCTION TO INDIAN BANKING SYSTEM

The Indian banking sector stands as a dynamic and integral component of the country's
financial landscape, with a rich history dating back centuries. Rooted in the colonial era, Indian
banking has undergone significant transformations, evolving from a predominantly agrarian
economy to one of the world's fastest-growing economies today. At its inception, the banking
sector was largely characterized by the presence of traditional moneylenders and indigenous
banking practices, serving the needs of local communities and traders.
However, the modern Indian banking system began to take shape with the establishment of the
Reserve Bank of India (RBI) in 1935, which served as the central regulatory authority
overseeing monetary policy and banking operations. Post-independence, the government
played a pivotal role in nationalizing major banks in the 1960s and 1980s, thereby laying the
foundation for a robust public sector banking network. This move aimed to democratize access
to banking services and foster economic development, particularly in rural and underprivileged
areas.
Over the years, the Indian banking sector has witnessed significant expansion and
diversification, propelled by economic liberalization reforms initiated in the early 1990s. These
reforms aimed to modernize and liberalize the economy, opening doors to private and foreign
investment in the banking sector. Consequently, private sector banks emerged as formidable
players, introducing innovation, competition, and customer-centric approaches to the market.
This period also saw the entry of foreign banks, bringing in global best practices, technology,
and expertise, further enriching the banking landscape.
Today, the Indian banking sector is a vibrant ecosystem comprising various types of banks,
including public sector banks (PSBs), private sector banks, foreign banks, and cooperative
banks. These banks cater to the diverse financial needs of a rapidly growing economy, spanning
sectors such as agriculture, manufacturing, services, and trade. Moreover, technological
advancements have ushered in a new era of digital banking, revolutionizing the way banking
services are accessed and delivered. Mobile banking, internet banking, digital wallets, and
fintech innovations have become ubiquitous, driving financial inclusion and expanding the
reach of banking services to previously underserved segments of society.
As India continues on its path of economic growth and development, the banking sector
remains at the forefront, playing a pivotal role in channelling resources, fostering
entrepreneurship, and supporting inclusive development initiatives. However, amidst the
opportunities presented by a burgeoning economy, the sector also faces numerous challenges,
including regulatory compliance, asset quality concerns, and cybersecurity risks. Addressing
these challenges while harnessing the potential of technological innovations will be crucial in
steering the Indian banking sector towards a sustainable and inclusive future.

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 “A Study of Leadership Styles in Banking Sector”

1.2 MEANING AND DEFINITION

According to Section 5 of Banking Regulation Act 1949 banking means the accepting for the
purpose of lending of investing of deposits of money from the public repayable on demand or
otherwise and withdrawal by cheque, draft, order or otherwise.
Banking company means any company which transact the business of banking in India. No
company can carry on the business of banking in India unless it uses as part of its name at least
one other word bank, banker or banking.
Schedule Bank in India refer to those banks which have been included in the Second schedule
of Reserve Bank of India Act 1934. RBI in turns includes only those banks in this Schedule
which satisfy the criteria laid down vide section 42(a) of the said act.
Banking is defined as the business activity of accepting and safeguarding money owned by
other individuals and entitles, and then lending out this money in order to conduct economic
activities such as making profit or simply covering operating expenses.

DEFINITION:

The word of “Bank” is said to be of Germanic origin, cognate with the French word “Banque”
and the Italian word “Banca”, both meaning “Bench”.
Walter Leaf defines the bank, “A bank is a person or corporation which holds itself out to
receive from the public, deposits payable in demand by cheque”.
According to Horace white, “as a manufacture of credit and a machine for facilitating
exchange,”

1.3 HISTORY OF BANK

The banking sector development can be divided into three phases:

Phase I: The Early Phase which lasted from 1770 to 1969
Phase II: The Nationalisation Phase which lasted from 1969 to 1991
Phase III: The Liberalisation or the Banking Sector Reforms Phase which began in 1991 and
continues to flourish till date

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 “A Study of Leadership Styles in Banking Sector”

1. Pre-Independence Period (1786-1947)

The first bank of India was the “Bank of Hindustan”, established in 1770 and located in the
then Indian capital, Calcutta. However, this bank failed to work and ceased operations in 1832.
During the Pre Independence period over 600 banks had been registered in the country, but
only a few managed to survive.
Following the path of Bank of Hindustan, various other banks were established in India. They
were:
• The General Bank of India (1786-1791)
• Oudh Commercial Bank (1881-1958)
• Bank of Bengal (1809)
• Bank of Bombay (1840)
• Bank of Madras (1843)
During the British rule in India, The East India Company had established three banks: Bank of
Bengal, Bank of Bombay and Bank of Madras and called them the Presidential Banks. These
three banks were later merged into one single bank in 1921, which was called the “Imperial
Bank of India.”
The Imperial Bank of India was later nationalised in 1955 and was named The State Bank of
India, which is currently the largest Public Sector Bank.
Given below is a list of other banks which were established during the Pre-Independence
period:

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 “A Study of Leadership Styles in Banking Sector”

If we talk of the reasons as to why many major banks failed to survive during the pre-
independence period, the following conclusions can be drawn:
• Indian account holders had become fraud-prone
• Lack of machines and technology
• Human errors & time-consuming
• Fewer facilities
• Lack of proper management skills

2. Post Independence Period (1947-1991)

At the time when India got independence, all the major banks of the country were led privately
which was a cause of concern as the people belonging to rural areas were still dependent on
money lenders for financial assistance.
With an aim to solve this problem, the then Government decided to nationalise the Banks.
These banks were nationalised under the Banking Regulation Act, 1949. Whereas, the Reserve
Bank of India was nationalised in 1949.
Following it was the formation of State Bank of India in 1955 and the other 14 banks were
nationalised between the time duration of 1969 to 1991. These were the banks whose national
deposits were more than 50 crores.
Given below is the list of these 14 Banks nationalised in 1969:
1. Allahabad Bank
2. Bank of India

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 “A Study of Leadership Styles in Banking Sector”

3. Bank of Baroda
4. Bank of Maharashtra
5. Central Bank of India
6. Canara Bank
7. Dena Bank
8. Indian Overseas Bank
9. Indian Bank
10. Punjab National Bank
11. Syndicate Bank
12. Union Bank of India
13. United Bank
14. UCO Bank
In the year 1980, another 6 banks were nationalised, taking the number to 20 banks. These
banks included:
1. Andhra Bank
2. Corporation Bank
3. New Bank of India
4. Oriental Bank of Comm.
5. Punjab & Sind Bank
6. Vijaya Bank
Apart from the above mentioned 20 banks, there were seven subsidiaries of SBI which were
nationalised in 1959:
1. State Bank of Patiala
2. State Bank of Hyderabad
3. State Bank of Bikaner & Jaipur
4. State Bank of Mysore
5. State Bank of Travancore
6. State Bank of Saurashtra
7. State Bank of Indore
All these banks were later merged with the State Bank of India in 2017, except for the State
Bank of Saurashtra, which merged in 2008 and State Bank of Indore, which merged in 2010.

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 “A Study of Leadership Styles in Banking Sector”

3. Liberalisation Period (1991-Till Date)

Once the banks were established in the country, regular monitoring and regulations need to be
followed to continue the profits provided by the banking sector. The last phase or the ongoing
phase of the banking sector development plays a hugely significant role.
To provide stability and profitability to the Nationalised Public sector Banks, the Government
decided to set up a committee under the leadership of Shri. M Narasimha to manage the various
reforms in the Indian banking industry.
The biggest development was the introduction of Private sector banks in India. RBI gave
license to 10 Private sector banks to establish themselves in the country. These banks included:
1. Global Trust Bank
2. ICICI Bank
3. HDFC Bank
4. Axis Bank
5. Bank of Punjab
6. IndusInd Bank
7. Centurion Bank
8. IDBI Bank
9. Times Bank
10. Development Credit Bank
The other measures taken include:
• Setting up of branches of the various Foreign Banks in India
• No more nationalisation of Banks could be done
• The committee announced that RBI and Government would treat both public and
private sector banks equally
• Any Foreign Bank could start joint ventures with Indian Banks
• Payments banks were introduced with the development in the field of banking and
technology
• Small Finance Banks were allowed to set their branches across India
• A major part of Indian banking moved online with internet banking and apps available
for fund transfer
Thus, the history of banking in India shows that with time and the needs of people, major
developments have been brought about in the banking sector with an aim to prosper it.

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 “A Study of Leadership Styles in Banking Sector”

1.4 STRUCTURE OF BANKING:

1. Reserve Bank of India (RBI):

• The central bank of India, responsible for formulating and implementing monetary
policies.
• Regulates and supervises the banking sector to ensure stability and financial inclusion.
• Acts as a banker to the government and lender of last resort to banks.
• Conducts foreign exchange management and issues currency.
2. Scheduled Commercial Banks (SCBs):
• Includes public sector banks, private sector banks, and foreign banks operating in India.
• Offer a wide range of banking services to individuals, businesses, and government
entities.
• Regulated by the RBI and governed by various banking laws and regulations.
3. Public Sector Banks (PSBs):
• Majority-owned by the government of India.
• Play a crucial role in providing banking services across the country, especially in rural
and semi-urban areas.

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 “A Study of Leadership Styles in Banking Sector”

• Examples include State Bank of India (SBI), Punjab National Bank (PNB), and Bank
of Baroda (BOB).
4. Private Sector Banks:
• Owned and operated by private individuals or corporations.
• Known for their efficiency, innovation, and customer-centric approach.
• Examples include ICICI Bank, HDFC Bank, and Axis Bank.
5. Foreign Banks:
• Banks headquartered outside India but operate branches or subsidiaries in the country.
• Provide banking services to corporate clients, high-net-worth individuals, and
multinational corporations.
• Examples include Citibank, Standard Chartered Bank, and HSBC.
6. Regional Rural Banks (RRBs):
• Established to provide banking services in rural and remote areas.
• Sponsored by a scheduled commercial bank, the state government, and the central
government.
• Focus on agricultural and rural development activities.
• Examples include Kerala Gramin Bank, Baroda Uttar Pradesh Gramin Bank, etc.
7. Cooperative Banks:
• Operate on a cooperative basis, with members typically belonging to a particular
community, profession, or locality.
• Primarily serve the financial needs of their members, including savings, credit, and
other banking services.
• Regulated by the RBI and also by state governments.
• Examples include Urban Cooperative Banks (UCBs) and Primary Agricultural Credit

8. Unscheduled Banks:
• Unscheduled banks are those banks that are not listed in the Second Schedule of the
Reserve Bank of India Act, 1934.
• Typically, unscheduled banks are smaller or newer banks that may not yet meet the
criteria for being included in the Second Schedule.
• They do not enjoy the privileges granted to scheduled banks, such as access to central
bank facilities or participation in government business.

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 “A Study of Leadership Styles in Banking Sector”

1.5 INTRODUCTION OF LEADERSHIP

“The action of leading a group of people or an organization.”

That’s how the Oxford Dictionary defines leadership. In simple words, leadership is about
taking risks and challenging the status quo. Leaders motivate others to achieve something new
and better. Interestingly, leaders do what they do to pursue innovation, not as an obligation.
They measure success by looking at the team’s achievements and learning.
Leadership is a timeless concept that has shaped human societies, organizations, and endeavors
since the dawn of civilization. From ancient tribal leaders to modern corporate executives,
leadership has been instrumental in guiding groups of individuals toward common goals,
overcoming challenges, and realizing collective aspirations. In today's dynamic and
interconnected world, the importance of effective leadership has only grown, as it plays a
critical role in navigating complexity, inspiring innovation, and driving positive change.
Effective leadership transcends mere authority or positional power; it encompasses a blend of
vision, communication, empathy, and action. Leaders inspire confidence and trust in their
followers, fostering collaboration, innovation, and growth. They navigate through challenges,
make tough decisions, and cultivate an environment where individuals can thrive and
contribute their best efforts.
Leadership manifests in various forms and contexts, from the boardroom to the community,
from business enterprises to political movements. Whether leading a team, a company, or a
nation, the fundamental principles of leadership remain constant: integrity, vision, empathy,
resilience, and adaptability.
In today's dynamic and interconnected world, the demand for effective leadership has never
been greater. Leaders must navigate through complex challenges such as technological
disruption, global competition, environmental sustainability, social inequality, and public
health crises. They must steer their organizations with clarity, purpose, and ethical
responsibility, while also fostering diversity, inclusion, and social impact. Moreover,
leadership is not confined to a select few; it can emerge at all levels of society and within every
individual. Leadership development involves nurturing and honing the skills, qualities, and
mindset needed to inspire positive change and make a meaningful impact on the world.

1.6 MEANING:
Leadership is the ability of an individual or a group of individuals to influence and guide
followers or other members of an organizations. It is all about harnessing people power for the
attainment of a desired goal and thus the concept of leadership cannot be restricted to the
organizational context. It pervades through all realms of society, whether it be in politics,
religion or the corporate world.

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 “A Study of Leadership Styles in Banking Sector”

Leadership is a multifaceted concept that plays a pivotal role in guiding individuals, teams,
organizations, and societies toward shared goals and aspirations. At its core, leadership
involves the ability to influence and inspire others to achieve common objectives, often by
providing direction, support, and motivation.
Leadership is the art of inspiring and guiding individuals towards a shared objective. It involves
influencing others positively, harnessing their collective efforts, and setting a clear direction.
It is all about developing people and helping others reach their full potential. It's all about
equipping others with the right tools and strategies not only to maximize the success of an
organization but also the lives of individuals.
Effective Leaders possess vision, communication skills, empathy, integrity, and adaptability.
They inspire and motivate others, create an environment of trust and collaboration, and make
informed decisions.

1.7 DEFINITION

“The activity of influencing people to strive willingly for group objectives”

George R. Terry.

“It is interpersonal influence exercised in a situation and directed through the communication
process towards the attainment of specialized goals.”
Robert Tannenbaum.

“Leadership is influencing people to follow in the achievement of a common goal”

Koontz O’Donnell.

• “Leadership is the process whereby one individual influence other group member towards the
attainment of defined group or organizational goals.”
Baron & Greenber

1.8 FEATURES OF A LEADER

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 “A Study of Leadership Styles in Banking Sector”

Leadership encompasses a variety of features that collectively contribute to its effectiveness

and impact. These features are essential components of leadership that enable individuals to
inspire, guide, and influence others towards achieving common goals. Some key features of
leadership include:
1. Vision: A clear and compelling vision provides a sense of purpose and direction for the
leader and their followers. Leaders articulate a vision for the future that inspires and
motivates others to work towards shared objectives.
2. Communication: Effective communication is crucial for leaders to convey their vision,
goals, and expectations clearly and persuasively. Leaders must be able to listen actively,
express ideas articulately, and engage in open dialogue with team members and
stakeholders.
3. Integrity: Leaders demonstrate honesty, transparency, and ethical behaviour in their
actions and decisions. They uphold principles of fairness, integrity, and accountability,
earning the respect and trust of their followers.
4. Empowerment: Leaders empower their team members by delegating authority,
providing support and resources, and creating opportunities for growth and
development. Empowered individuals are more engaged, motivated, and committed to
achieving shared goals.
5. Adaptability: Successful leaders are adaptable and resilient in the face of change and
uncertainty. They embrace new ideas, anticipate challenges, and adjust strategies as
needed to navigate complex and dynamic environments.
6. Influence: Leadership involves the ability to influence and inspire others towards a
desired outcome. Leaders use their influence to build consensus, motivate action, and
drive positive change within their organizations and communities.
7. Collaboration: Leaders foster a culture of collaboration, teamwork, and mutual respect
within their organizations. They value diverse perspectives, encourage open dialogue,
and promote a sense of belonging and inclusivity among team members.
8. Decision-making: Effective leaders make informed decisions based on data, analysis,
and sound judgment. They consider the perspectives of stakeholders, weigh potential
risks and benefits, and take decisive action when necessary.
9. Emotional intelligence: Leaders possess emotional intelligence, which enables them
to understand and manage their own emotions as well as those of others. They are
empathetic, self-aware, and able to navigate interpersonal relationships effectively.
10. Resilience: Leadership often involves facing challenges and setbacks. Resilient leaders
are able to bounce back from adversity, maintain a positive attitude, and inspire
confidence and optimism in their team members.

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 “A Study of Leadership Styles in Banking Sector”

These features of leadership are interconnected and mutually reinforcing. Effective leaders
leverage these features to inspire trust, motivate others, and foster positive change within their
organizations and communities. By embodying these features, leaders can drive innovation,
growth, and success, ultimately making a lasting impact on the individuals and organizations
they lead.

1.9 ORIGIN AND GROWTH

Emergence of Universal banking system: Services provided by banks have expanded

graphically in the last decade. In addition to the traditional “savings and loans”. Banks started
providing a wide gamut of financial services like insurance, asset management, etc. which
increased in the economy.
Economic growth: Over 9 percent GDP growth in the pre global financial crisis period (2009-
10) and over 7 percent in the last two years largely facilitated the growth of this sector.
Globalization: As India is moving towards closer integration with the world economy, India’s
merchandise trade, service exports and remittances are growing at a faster pace in order to serve
these ’new needs; banks have evolved and redeemed themselves in India and abroad.
Policy initiatives: The Banking Laws (Amendment) Act, 2012 at the monetary front, and
largescale infusion of funds into the public sector banks by the government in recent years
fuelled the growth of this sector.
For the government, the banking sector is at the core of governance. Initiatives like Jan Dhan
Yojana and Direct Benefit Transfer are case in point.
Usage of technology: Information and communication technologies including the mobile
phones and internet connectivity are the prime reason for expanding the reach of banking sector
to the youth and rural habitations.
True leaders work hard to understand and evaluate themselves. They seek honest feedback
from their team and are mindful of their weaknesses. This fosters trust, develops relationships
and drives results.
The banking industry is changing at an extremely fast pace. Having the strategic flexibility to
adapt and change mid-course is an extremely attractive trait today. Leaders in the banking
industry need to constantly be monitoring and reviewing products and programs, new
technologies, and their market positioning to make sure their particular bank.
Effective use of informal networks to understand people’s true perceptions can help leaders
of tomorrow. A good understanding of how innovation occurs can help boost performance and
reduce inefficiencies. By developing informal social circles, customer relationships and
networking groups, a core understanding of the industry will be developed.

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 “A Study of Leadership Styles in Banking Sector”

All too often employees fail to communicate the potential of risk due to fear of “rocking the
boat”. It is imperative that risk management is implemented by the leaders of tomorrow, so that
everyone on the team is prepared for any unforeseen crisis. An open and progressive culture
and attitude towards any risk or potential crisis will help prepare the organization for any in the
industry.
The famous fifty-century BC Chinese philosopher Lao-Tzu once wrote, “If you tell me, I will
listed. If show me, I will see. But if you let me experiences, I will learn” (Chinese,2010,1).
The idea of training and development (T&D) is nothing new to the twenty-first century, but
has rather evolved since the earliest stages of human civilization and has been gradually refined
into the sophisticated process that it is today.
The following will present an overview of the different style of T&D that have been implanted
throughout history
Apprenticeships (400s-1400s)
- With its origins rooted in the Code of Hammurabi, the law that governed ancient Egypt (2000
B.C.), apprenticeships were one of the first types of training practices that became widely
used, especially during the Middle Ages. As trades in the area of craftsmanship became more
demanding, most children of the time were sent as apprentices to live with masters of this form
of art who would share with them the knowledge and teach them the skills they needed to
succeed in this line of work.
Vestibule Training (1800s)
- During the Industrial Revolution, intensive training became a necessity for all employees
who were working in factories, but did not have all the required knowledge and skills to be
able to work with the machinery that produced the goods and materials needed by the society.
In this setting, vestibule training, understood as "near-the-job- training," became an activity
that was carried out within the factory, but in a special separated room that was big enough to
store machines with up to ten workers and their trainer (Vestibule Training, 2010,1).

Role Playing (1930s)

- First devised by psychiatrist Dr. Jacob Moreno in the 1910s, role playing became a new
method used for training employees by placing them in the kind of situation they could
encounter in the workplace, but in a controlled environment that did not pose any risks to their
lives. Role playing gave the employee the opportunity to physically interact
and correctly apply the needed skills to the particular situation (Role Playing, 2010).

Job-Instruction-Training (1940s)

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 “A Study of Leadership Styles in Banking Sector”

- Popularized during the years of World War II, job-instruction-training was specifically
designed for "supervisors in defence plants" to obtain the necessary skills to then be able to
train their own workers in various areas (Job Instruction, 2010).

Computer-Based Training (1980s)

- Initially created in 1959 under a system known as PLATO, computer-based training (CBT)
began to receive more attention during the late twentieth century. As technology quickly
advanced and modernized, CBT provided individuals with greater flexibility and interaction as
they acquired more knowledge and newer skills through online channels.

1.10 ADVANTAGES AND DISADVANTAGES

Advantages:
1. Strategic Direction: Effective leadership in banking can provide clear strategic
direction for the organization, guiding it towards its goals and objectives in a
competitive market.
2. Risk Management: Strong leadership can ensure robust risk management practices are
in place, helping the bank navigate through uncertain economic conditions and
regulatory changes.
3. Innovation and Adaptation: Leaders can foster a culture of innovation within the
bank, encouraging the adoption of new technologies and processes to stay ahead of the
curve in a rapidly evolving industry.
4. Employee Engagement and Development: Good leadership can motivate employees,
fostering a positive work environment and encouraging professional development,
which ultimately leads to higher productivity and retention rates.
5. Customer Focus: Leaders who prioritize customer satisfaction can help the bank build
stronger relationships with clients, leading to increased loyalty and retention.

6. Direction and Vision: Effective leaders provide direction and vision for their teams or
organizations, guiding them toward common goals and objectives. This clarity helps to
align efforts and resources efficiently.
7. Motivation and Inspiration: Good leaders inspire and motivate their team members
to perform at their best. They can foster a positive work environment and encourage
individuals to reach their full potential.
8. Problem Solving: Leaders often have the experience and expertise to address complex
problems and make difficult decisions. Their ability to analyse situations and find
solutions is invaluable in driving progress.

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 “A Study of Leadership Styles in Banking Sector”

9. Innovation and Creativity: Strong leaders encourage innovation and creativity within
their teams, fostering an environment where new ideas are welcomed and explored.
This can lead to breakthroughs and advancements.
10. Effective Communication: Leaders excel in communication, both in articulating their
vision and in listening to the concerns and ideas of their team members. Clear
communication builds trust and enhances collaboration.

Disadvantages:
1. Regulatory Compliance: In the heavily regulated banking sector, leadership must
navigate complex regulatory frameworks, which can sometimes stifle innovation and
agility.
2. Risk of Mismanagement: Poor leadership decisions can lead to mismanagement of
funds or improper risk assessment, potentially resulting in financial losses or damage
to the bank's reputation.
3. Resistance to Change: Some leaders may resist adopting new technologies or
processes, hindering the bank's ability to adapt to changing market conditions and
customer preferences.
4. Conflict of Interest: In some cases, leaders may prioritize their own interests over
those of the bank or its stakeholders, leading to ethical dilemmas and conflicts of
interest.
5. Talent Retention Challenges: If leadership fails to provide adequate support or
opportunities for career growth, talented employees may seek opportunities elsewhere,
leading to talent retention challenges within the organization.
6. Burnout and Stress: Leadership positions often come with high levels of responsibility
and pressure, leading to burnout and stress for individuals in these roles.
7. Resistance to Change: Some leaders may resist change, clinging to traditional methods
or processes, which can hinder progress and innovation within the organization.
8. Ego and Hubris: In some cases, leaders may become overly confident or arrogant,
leading to a disregard for others' input or a failure to acknowledge their own limitations.
9. Micromanagement: Poor leadership can manifest as micromanagement, where leaders
excessively control and scrutinize their team members' work, stifling autonomy and
creativity.
10. Risk of Failure: Ultimately, leaders bear the responsibility for the success or failure of
their teams or organizations. The fear of failure can sometimes paralyze decision-
making or lead to overly cautious approaches.

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 “A Study of Leadership Styles in Banking Sector”

11. Power Imbalance: Leadership positions come with authority, which can lead to power
imbalances and potential abuse of power. This can create a hierarchical and sometimes
oppressive work culture.

1.11 KEY CHALLENGES

1. Not making enough money

Despite all of the headlines about banking profitability, banks and financial institutions
still are not making enough return on investment, or the return on equity, that
shareholders require.
2. Consumer expectations.
These days it’s all about the customer experience, and many banks are feeling pressure
because they are not delivering the level of service that consumers are demanding,
especially in regards to technology.
3. Increasing competition from financial technology companies.

Financial technology (FinTech)companies are usually start-up companies based on

using software to provide financial services. The increasing popularity of FinTech
companies is disrupting the way traditional banking has been done. This creates a big
challenge for traditional banks because they are not able to adjust quickly to the changes
not just in technology, but also in operations, culture, and other facets of the industry.

4. Regulatory pressure.
Regulatory requirements continue to increase, and banks need to spend a large part of
their discretionary budget on being compliant, and on building systems and processes
to keep up with the escalating requirements. These challenges continue to
escalate, so traditional banks need to constantly evaluate and improve their operations
in order to keep up with the fast pace of change in the banking industry.
5. Operation and Execution:
Internal banking processes must ensure the right debt to credit ratio and
maximize profitability. Cash and liquidity management, savings and investment
management, financing and treasury management are key back office functions that,
if well run, promote long-term stability. Ensuring confidentiality as well
as ineffective organization wide communications still pose major challenges.
6. Performance Management:
Performance monitoring across departments and locations will take on greater
importance. Financial and managerial accounting, credit, operations, market risk and
internal risk management and regulatory reporting must all build in oversight.

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 “A Study of Leadership Styles in Banking Sector”

7. Product Development:
It is the stage where finance institutions analyse existing product performance
and continuously develop new products. To rapidly launch new products, the entire
organisation including all branches and customer service representative must be fully
knowledgeable about new product features. However, it is challenging for headquarters
to quickly distribute product information due to inconsistent communication
environment and geographic distance. Sales and Service: campaign execution, point-
of-sales management and post sales communication are key activities

1.12 TYPES OF LEADERS:

Autocratic Leadership:
• Autocratic leaders make decisions independently without consulting their team
members.
• They have full control over the decision-making process and often dictate tasks and
directives to their subordinates.

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 “A Study of Leadership Styles in Banking Sector”

• This style can be effective in situations where quick decisions are needed or when the
leader possesses specialized expertise.
• However, it can lead to reduced morale, lack of innovation, and resentment among team
members due to the lack of involvement in decision-making.

Democratic Leadership:
• Democratic leaders involve team members in the decision-making process, soliciting
their input and ideas.
• They encourage collaboration and participation, valuing the perspectives of their team
members.
• This style fosters a sense of ownership and commitment among team members, leading
to increased morale and motivation.
• However, the decision-making process may be slower, and consensus may be
challenging to achieve, particularly in large teams or during times of crisis.

Laissez-Faire Leadership:
• Laissez-faire leaders adopt a hands-off approach, providing minimal guidance or
direction to their team members.
• They trust their team to make decisions and manage their tasks independently.
• This style can be effective in situations where team members are highly skilled and
self-motivated.
• However, it can lead to confusion, lack of accountability, and inefficiency if team
members require more guidance and support.

Transactional Leadership:
• Transactional leaders focus on maintaining order and achieving goals through a system
of rewards and punishments.
• They set clear expectations, establish performance metrics, and reward team members
for meeting targets or outcomes.
• This style emphasizes adherence to established procedures and standards.
• However, it may discourage innovation and creativity, as team members may prioritize
meeting predefined goals over exploring new ideas.

Transformational Leadership:
• Transformational leaders inspire and motivate their team members by articulating a
compelling vision and fostering a culture of innovation and growth.
• They lead by example, challenging the status quo and encouraging creativity and
problem-solving.
• This style empowers team members, fosters collaboration, and cultivates a shared sense
of purpose and identity.

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 “A Study of Leadership Styles in Banking Sector”

• However, it requires strong communication skills and a high level of emotional

intelligence to effectively engage and inspire others.

Servant Leadership:
• Servant leaders prioritize the needs of their team members, focusing on serving and
supporting them to achieve their full potential.
• They listen empathetically, provide guidance and mentorship, and remove barriers to
their team's success.
• This style builds trust, loyalty, and a sense of community among team members.
• However, it may require leaders to balance the needs of individuals with the goals of
the organization and may be perceived as overly passive in certain situations.

Charismatic Leadership:
• Charismatic leaders possess a compelling personality and the ability to inspire and
influence others through their vision, confidence, and communication skills.
• They attract followers through their charm, enthusiasm, and energy, inspiring loyalty
and commitment.
• This style can be highly effective in rallying support for a cause or driving
organizational change.
• However, it may rely heavily on the leader's charisma and personality, potentially
leading to dependency and instability if the leader's influence wanes.

Strategic Leadership:
• Strategic leaders focus on long-term planning and decision-making to guide their
organizations toward their goals.
• They analyze market trends, anticipate challenges, and develop strategies to capitalize
on opportunities and mitigate risks.
• This style requires a deep understanding of the organization's mission, vision, and
values, as well as the external environment in which it operates.
• However, it may be less effective in rapidly changing or unpredictable environments
where flexibility and adaptability are paramount.

Adaptive Leadership:
• They are flexible, resilient, and able to inspire confidence and trust in their team
members.
• This style requires leaders to embrace uncertainty, encourage experimentation, and
promote learning and innovation.
• However, it may be challenging to maintain stability and cohesion during periods of
transition or upheaval.

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 “A Study of Leadership Styles in Banking Sector”

Authentic Leadership:
• Authentic leaders lead with integrity, transparency, and honesty, staying true to
themselves and their values.
• They build trust and credibility with their team members by demonstrating consistency
between their words and actions.
• This style fosters open communication, collaboration, and mutual respect.
• However, it may require leaders to be vulnerable and self-aware, confronting their own
limitations and biases.

Apart from them some different types of leaders are follow:

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 “A Study of Leadership Styles in Banking Sector”

2 LITERATURE REVIEW

Introduction:
Leadership style plays a critical role in shaping organizational culture, employee motivation,
and financial outcomes in commercial banks. An extensive body of research has examined how
different leadership styles influence key performance indicators in the banking sector. This
review summarizes key findings from empirical studies on the relationship between leadership
style and financial performance in commercial banks.

The present research is a literature review of the leadership styles and its effectiveness within
the organization team-building. Specifically, this paper tries to review the literature in the
sphere of job performance focusing on the leadership styles. Both leadership types and styles
had been reviewed in relation to the productivity in the organization along with the role
stressors and role ambiguity. Leaders are claimed to have a positive impact on the efficiency
of the organization by influencing the team members' job performance. Additionally, literature
review explores the concepts of role stressors such as role ambiguity and role conflict, which
are often found as the most important source of job dissatisfaction and poor job performance
Understanding the nature of role stressors and potential sources which may cause them to will
help organizations to take control of managing role stressors. Also, it was found that the
relationship between job performance and job cooperation was somewhat controversial in the
literature. Therefore, it is important to understand the nature of different leadership styles and
assess their impact on resolving different organizational problems.

Leadership is a process by which an executive can direct, guide and influence the behavior and
work of others towards accomplishment of specific goals in a given situation. Leadership is the
ability of a manager to induce the subordinates to work with confidence and zeal.

Leadership is one of the major research topics in the corporate and academic sector and has
made tremendous progress in uncovering some of the enduring mysteries associated with
leadership. In the corning decades, the research on leadership will be most existing in the
history of mankind. Over leadership is an adaptable developmental process and with constant
the years, researchers and practitioners have developed a belief that development in the area of
research it has seldom disagreed which was derived before it. These include whether leaders
are born or made? How have followers impacted the successful leaders? Can charismatic
leaders be the game changers by building and destroying societies and what will be them

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Title of Research - Effect of leadership styles on work performance in bank

Name of Researcher - Pal Ram Kumari
Date of research - March 2002

Leadership style impacts the organization by affecting employee morale, productivity,

decision-making speed, and metrics. Successful leaders carefully analyze problems, assess the
skill level of subordinates, consider alternatives, and make an informed choice. By choosing
the most appropriate leadership style for the situation, an effective leader provides a lasting
impact. Using the commanding leadership style, leaders establish a clear distinction between
subordinates and superiors. Autocratic leaders commonly make decisions without input from
workers. This typically leads to low employee morale. It also tends to result in increased
employee absenteeism and decreased employee retention. While leaders succeed when using
this style in a crisis, such as a natural disaster, use of this leadership generally results in poor
long -term results. When leaders use a coaching style instead, subordinates feel safer and
encouraged to focus on their own development, which ultimately helps the company for the
long term by increasing employee morale, retention and satisfaction.

Using the participative leadership style, a leader engages with employees to figure out the best
way to accomplish the company's strategic goals. This type of leader recognizes that those
working closest to problems usually have the best insight for recommending process
improvements that lead to productivity gains. This includes decreased errors, minimized waste,
and increased customer satisfaction. Participative leaders run team-building exercises to
promote cultural awareness and diversity, which can improve productivity by allowing the
team to recognize each other's strengths and value.

When leaders use the democratic leadership style, they accept input from their subordinates to
make key decisions. They encourage feedback and suggestions from everyone, at every level
of the company. This process takes a while, so even though employees feel more empowered,
decisions can take a considerable length of time.

Title of Research - Leadership Development to Sustain Business Growth and People

Stability
Name of Researcher - Soumya RS
Date of research - December 2017

Top organizations put a high premium on leadership development. In fact, 80% of respondents
in Deloitte's Global Human Capital Trends survey rated leadership as a high priority for their

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organizations, even when less than half think they have what it takes to meet their leadership
requirements. The same scenario emerges in a separate McKinsey study: nine in 10 CEOs
believe that leadership development is the most important issue in the human capital aspect of
their business.
Workplaces evolve as business realities change, requiring new breeds of leaders with relevant
skills and the right mindset. Given its impact on competitiveness and profitability, leadership
development has become an existential necessity for companies looking to future-proof their
business. Stability is necessary for people to do their best work. During times of change or
uncertainty, stability is often shaken and can disrupt your employees' ability to focus, adapt,
and thrive.
For example, if your organization is going through a merger, your employees may feel
unsettled and uncertain about what that means for the future of the company and their jobs.
This uncertainty can make it difficult for individuals and teams to stay engaged and can impact
their performance
Whatever the cause of disruption, managers and leaders must build stability if they want their
organization to succeed.
There are two main elements of stability: physical and psychological.
Physical stability means you are physically safe and have the tools and resources you need to
do your work safely and effectively
Psychological security impacts your sense of wellbeing, your trust in leaders and in the
organization's future, and your overall optimism and resilience.
These traits are called psychological capital.

Title of Research - Leaders for the Banking Industry: An Investigation on

Effective Leadership
Name of Researcher - Thamara Gunasekare
Date of Research - March 2021
Leadership is critical in achieving performance and yet not exhausted, keeping scholars to
uncover more findings on effective leadership styles. This study expected to identify the
effective leadership style for enhanced employee performance in the banking industry in Sri
Lanka. The banking industry has a unique work environment that stresses performance targets,
long working hours, and error-free transactions while making the customers happy. Thus,
leadership is a critical stimulus that this study focused on. The findings illustrate that
transformational leadership style is the most present style among the bankers in Sri Lanka, and
employee performance is above average with transformational leaders. Overall, scores in the
transformational leadership style were found to be strongly correlated with employee
performance. The results suggest that supervisors in the banking sector need to use a lot of
transformational leadership behaviors or rather embrace a transactional leadership style. The

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implications of the study are significant in HR practices like recruiting and training managers
as leaders in the banking sector.

Title of Research – The relationship between leadership style and financial performance
in commercial banks
Name of Researcher – Walter Jaoko
Date of Research – January 2006

The relationship between leadership style and financial performance in commercial banks has
been extensively studied. In one such study conducted in Kenya, it was found that democratic
and transformational leadership styles had a positive impact on financial performance.
Democratic leadership involves leaders encouraging participation from team members in
decision-making processes, fostering a sense of ownership and commitment among employees.
Transformational leadership, on the other hand, focuses on inspiring and motivating employees
to achieve their best, often by setting a compelling vision and providing support for individual
growth.
In contrast, the study found that the influence of autocratic leadership, which is characterized
by centralized decision-making and limited input from subordinates, was statistically
insignificant. This suggests that in the context of commercial banks in Kenya, leadership styles
emphasizing collaboration, empowerment, and inspiration tend to correlate with better
financial performance, while autocratic leadership may not have a significant impact.

5
Title of Research – A Case Study on Democratic and Transformational Leadership Styles
Name of Researcher – Mwangi
Date of Research – September 2022

The findings from Mwangi et al. (2022) suggest that democratic and transformational
leadership styles have a significant positive impact on financial performance indicators such as
return on assets (ROA) and return on equity (ROE) in commercial banks in Kenya. Regression
analysis revealed that these leadership styles explained a considerable portion of the variance
in both ROA and ROE, indicating their importance in driving financial success.
On the other hand, while autocratic leadership showed a positive effect on ROA and ROE, the
influence was statistically insignificant. This suggests that while autocratic leadership may

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have some potential benefits, its impact on financial performance is not reliably significant in
this context.
These findings are consistent with the results of Puni et al. (2014), who also found no
significant relationship between various leadership styles (including transformational,
transactional, and laissez-faire) and financial performance in Ghanaian banks. However, they
noted a slightly stronger correlation with democratic leadership, although it was not statistically
significant.
In summary, the studies indicate that democratic and transformational leadership styles tend to
have a more pronounced and statistically significant positive impact on financial performance
in commercial banks compared to autocratic leadership, aligning with the broader
understanding of effective leadership in organizational contexts.

6
Title of Research – Benefits of a leadership development program.
Name of Researcher –
Date of Research -

A study focusing on leadership styles and bank efficiency in the Chinese banking sector found
that transformational leadership had a notable positive effect on cost efficiency. Specifically,
it was revealed that transformational leadership could enhance cost efficiency in Chinese
commercial banks by a substantial margin, ranging between 3.4% and 3.8%.
This positive impact on cost efficiency was attributed to the facilitation of organizational
learning and innovation within these banks. Transformational leaders typically inspire and
motivate their teams, encourage creativity and risk-taking, and promote a culture of continuous
improvement. As a result, employees are more likely to engage in learning and innovation
initiatives, leading to efficiency gains.
In contrast, transactional leadership did not exhibit a significant relationship with bank
efficiency in this study. Transactional leaders primarily focus on contingent rewards and
punishment based on performance, rather than inspiring or motivating their teams towards a
broader vision. Consequently, they may not stimulate the same level of organizational learning
and innovation as transformational leaders, hence the lack of significant impact on bank
efficiency.
Overall, the study underscores the importance of transformational leadership in driving cost
efficiency in Chinese commercial banks, highlighting the critical role of fostering
organizational learning and innovation within the banking sector.
7
Title of Research – Impact of leadership styles on Employee’s Performance

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Name of Researcher – Agarwal & Singh's

Date of Research – March 2020

Agarwal & Singh's (2020) study in commercial banks in the UAE revealed that leadership
styles significantly impact employee performance. Specifically, transformational and
democratic leadership styles were found to have a positive relationship with employee
performance, whereas autocratic leadership did not significantly predict employee
performance.
Transformational leadership involves inspiring and motivating employees by setting a
compelling vision, fostering innovation, and providing support for individual growth.
Democratic leadership, on the other hand, encourages participation from team members in
decision-making processes, fostering a sense of ownership and commitment among employees.
The study's findings suggest that organizations led by leaders who adopt transformational and
democratic styles are more likely to see higher levels of employee performance. This aligns
with the broader understanding that these leadership styles tend to create environments where
employees feel empowered, motivated, and engaged, leading to enhanced performance.
Conversely, the study found that autocratic leadership, characterized by centralized decision-
making and limited input from subordinates, did not significantly contribute to employee
performance. This highlights the importance of leadership style in shaping organizational
success, particularly in terms of financial outcomes, with democratic and transformational
styles being more conducive to positive performance outcomes.
In summary, Agarwal & Singh's study underscores the critical role of leadership style,
particularly democratic and transformational styles, in influencing employee performance and
ultimately impacting the overall success of an organization, including its financial
performance.

8
Title of Research – Leadership behavior influences the company’s culture.
Name of Researcher – Wu et al.
Date of Research – March 2022

The research conducted by Wu et al. (2022) in hospitals demonstrated that transformational

leadership behaviors exhibited by supervisors and management positively influenced
performance outcomes. Specifically, two dimensions of transformational leadership,
intellectual stimulation, and individualized consideration, were found to be associated with
higher branch sales performance.
Transformational leadership emphasizes inspiring and motivating employees by fostering
innovation, providing support for individual growth, and encouraging critical thinking and

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creativity. Intellectual stimulation involves challenging employees to think critically and

innovate, while individualized consideration focuses on providing support and attention to the
individual needs of employees.
The study's findings suggest that when leaders in hospitals exhibit transformational leadership
behaviors, such as stimulating intellectual curiosity among employees and showing
consideration for their individual needs, it positively impacts performance outcomes, such as
branch sales performance.
These results provide evidence that adopting a transformational leadership style can potentially
lead to improved financial performance not only in hospitals but also in other organizations
such as commercial banks. By fostering a culture of innovation, individual growth, and support,
transformational leaders can create environments where employees are motivated to perform
at their best, ultimately contributing to the organization's success.

9
Title of Research –
Name of Researcher – Obamiro
Date of Research – October 2019

While democratic and transformational leadership styles are generally recognized as beneficial,
research such as that conducted by Obamiro et al. (2019) suggests that the effectiveness of
leadership styles may vary depending on the context. In their study on Nigerian banks, they
found that autocratic leadership had a significant positive influence on profit after tax,
indicating its potential effectiveness in driving performance under certain conditions. However,
democratic leadership was found to be most strongly correlated with higher returns on
investment, highlighting its overall effectiveness in promoting financial success.
These findings suggest that different leadership styles may have varying impacts depending on
the specific organizational context and goals. While autocratic leadership may show
effectiveness in certain situations, such as those observed in Nigerian banks, democratic
leadership appears to be more consistently associated with better financial outcomes,
particularly in terms of returns on investment. Therefore, understanding the contextual nuances
and selecting the most appropriate leadership style accordingly is crucial for optimizing
organizational performance.

10
Title of Research – Impact of Leadership on driving employee engagement
Name of Researcher – Jain and Chaudhary
Date of Research - 2014

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 “A Study of Leadership Styles in Banking Sector”

Research conducted by Jain and Chaudhary (2014) on leadership styles of bank managers in
India highlights the broader impact of leadership beyond financial indicators. Their findings
suggest that adopting a participative leadership style and emphasizing workplace relationships
can lead to improvements in integrity, business ethics, and harmony within nationalized
commercial banks.
Participative leadership involves leaders encouraging input and involvement from employees
in decision-making processes, fostering a sense of ownership and commitment among the
workforce. Emphasizing workplace relationships entails prioritizing communication,
collaboration, and trust-building among employees and between management and staff.
By adopting a participative leadership style and prioritizing workplace relationships, bank
managers can create environments where integrity and ethical behavior are valued and
promoted. Employees feel empowered and engaged, leading to a culture of transparency,
accountability, and mutual respect.
These findings underscore the importance of leadership style not only in driving financial
performance but also in shaping organizational culture, ethics, and employee perspectives.
Effective leadership that prioritizes participation and relationship-building can contribute to a
positive work environment and ultimately enhance the overall success and reputation of
nationalized commercial banks.

11
Title of Research – A Comparison between Strategic leadership Styles and Democratic
leadership styles
Name of Researcher – Musinguzi
Date of Research – December 2018

The study conducted by Musinguzi et al. (2018) in the UAE maintenance industry highlights
how leadership style can shape corporate culture and influence various aspects of
organizational performance. Specifically, they found that strategic leadership and democratic
leadership styles had a significant positive impact on inspiring employees toward achieving the
organizational vision.
Strategic leadership involves setting a clear direction and long-term goals for the organization,
aligning strategies with the overall mission, and adapting to changes in the external
environment. Democratic leadership, on the other hand, fosters participation and collaboration
among employees in decision-making processes, empowering them to contribute to the
achievement of organizational goals.
The findings suggest that these leadership styles effectively engage and motivate employees,
aligning their efforts with the company's mission and vision. By emphasizing strategic

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direction and involving employees in decision-making, leaders can create a corporate culture
that promotes innovation, commitment, and shared purpose among employees.
Overall, the study underscores the importance of leadership style in shaping corporate culture
and driving organizational success. Strategic and democratic leadership styles are shown to be
effective in inspiring employees and aligning their efforts toward achieving the company's
vision, ultimately contributing to improved performance and competitiveness in the UAE
maintenance industry.

SUMMARY

In summary, the literature suggests that democratic and transformational leadership styles
generally have a positive impact on financial performance in commercial banks, while
autocratic and laissez-faire styles may be less effective. However, the influence of leadership
style on performance is nuanced and influenced by various factors such as national culture,
bank size, and organizational strategy.

While many studies primarily focus on financial metrics such as return on assets (ROA) and
return on equity (ROE), leadership style also affects other aspects of organizational
performance, including cost efficiency, innovation, employee perspectives, and workplace
culture. For example, democratic and transformational leadership styles are often associated
with improved employee motivation, integrity, and innovation.

It's important to recognize that the effectiveness of different leadership styles may vary across
diverse banking environments and contexts. Factors such as national culture and organizational
strategy can significantly impact how leadership styles influence performance outcomes.

Given the complexity of these dynamics, more comparative research is needed to better
understand the contextual effectiveness of different leadership styles in various banking
environments. Such research can provide valuable insights for bank leaders and policymakers
seeking to optimize leadership practices and improve overall organizational performance.

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3 RESEARCH METHODOLOGY

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