MUMBAI: High attrition levels in private sector banks (PVBs) and small finance banks (SFBs) are a risk factor, RBI said in a report.
While the total workforce in PVBs has surpassed that of public sector banks (PSBs) for the first time, the average attrition rate in PVBs has risen sharply over the last three years to around 25%, RBI said. This turnover introduces significant operational risks, including disruptions in customer service and the loss of institutional knowledge.
According to the report, high attrition increases recruitment and training costs, hampering productivity and efficiency due to the departure of experienced employees. It also impacts employee morale, creating instability within organisations. Retaining talent is becoming a growing challenge for banks, particularly as high attrition tarnishes their reputation as employers and makes it harder to attract skilled professionals.
Bankers said that high attrition levels were largely at the lower end. Unlike public sector banks, entry-level ‘executives’ in PVBs are primarily used for customer engagement and lead generation rather than actual banking activities. Given the low salary levels and absence of a long-term career path, employees often move to improve their compensation. RBI emphasised that addressing attrition is not merely an HR issue but a strategic necessity for the banking sector. Banks need to prioritise onboarding and training processes, mentorship programs, and career development opportunities to improve retention. Competitive compensation and fostering a supportive workplace culture are critical to ensuring long-term employee engagement.
High turnover also affects customer satisfaction, with frequent employee departures potentially compromising service quality, RBI said. “Banks need to implement strategies like improved onboarding processes, providing extensive training and career development opportunities, mentorship programs, competitive benefits, and a supportive workplace culture to build long-term employee engagement,” RBI said.
