RBI flags high attrition in private banks

As per the RBI report on private banks, for the first time so far, total employees in PVBs are more than what public sector banks have concerning the amount of workforce, while the average attrition rate in PVBs has gone up massively over the last three years to around 25% today. The impact of attrition on the banking sector includes disruption in customer service in private banks and loss of institutional knowledge.

As stated in the report, escalating attrition rates lead to spending on recruitment and training, resulting in a dent in productivity and efficiency due to the loss of experienced employees. It also creates an adverse impact on the morale of employees, resulting in instability in the organizations. Employee retention in banks becomes more critical with respect to banks, especially with increased attrition, as this adversely influences their status as employers and reduces the ability to attract skilled specialists.

Bankers asserted that attrition was primarily experienced among the lower bracket employees. In contrast to public sector banks, the entry-level 'executives' in PVBs are used primarily for engaging customers and generating leads rather than doing any of the actual banking activities. Given the less bank compensation and benefits and the absence of a long-term career path, the employees are often on the move for better pay. RBI emphasized that attrition needed to be treated as a committed bank strategy rather than a human resource issue. Banks need to bring their attention to the onboarding and training processes, mentorship programs, and career development opportunities to improve their retention levels. Considering competitive pay and creating a culture of a supportive workplace is crucial for ensuring employees' long-term engagement.