‘BFSI sector’s 30-40 per cent attrition rate demands urgent talent retention strategy’

Dhriti Prasanna Mahanta, Vice President and Business Head of Teamlease Degree Apprenticeship, in an exclusive interview with Bizz Buzz, underscores the pressing issue of high employee turnover in the BFSI sector. “Even junior staff members are enticed by competitors' offers, including lucrative salary packages and benefits, further fueling employee turnover. Hence, urgent action is imperative to implement effective talent retention strategies,” says Mahanta. This sector faces alarming attrition rates, with industry data showing an average annual rate of 30-40 per cent, and even higher figures in insurance and retail banking.

Factors contributing to this trend include rising operational costs, intense competition, and the preference for experienced personnel, leading to talent poaching. Mahanta emphasises the need for comprehensive strategies, such as apprenticeships, to nurture skilled workforces and reduce attrition. Proactive measures are crucial to maintaining operational continuity and competitiveness in the BFSI sector

Why there is an alarming attrition rate within the BFSI sector, emphasizing the urgent need for effective talent retention strategies?

The alarming attrition rates within the BFSI sector are not isolated occurrences but interconnected symptoms of systemic challenges. The Industry data paints a concerning picture, revealing an average annual attrition rate of 30-40 per cent, with even higher figures observed in specific sectors such as insurance (60-70 per cent) and retail banking (35-40 per cent). These figures underscore the pressing need for proactive measures to stem the tide of talent turnover. One contributing factor to this trend is the aim to minimize operational costs amidst rising costs of hiring and squeeze on revenue growth, intensifying the strain on existing staff members who must contend with additional reporting duties. This strain is particularly acute in private banks facing stiff competition from emerging entrants into the market. Furthering this is the industry's inclination towards experienced personnel over freshers leading to talent poaching within banks and non-lending institutions. Even junior staff member is enticed by competitors' offers, including lucrative salary packages and benefits, further fueling employee turnover.

In light of these formidable obstacles, urgent action is imperative to implement effective talent retention strategies. Initiatives such as apprenticeships offer a promising avenue to bridge the gap between talent demand and supply, providing hands-on training and specialised skill development to nurture a skilled workforce. Moreover, banks and financial institutions must prioritise efforts to keep employees engaged and motivated. By fostering a supportive and rewarding work environment, organisations can reduce attrition rates and mitigate the substantial costs associated with recruitment and training. However, failing to address these pressing issues will jeopardise operational continuity and undermine competitiveness within the sector. To safeguard the future sustainability of the BFSI industry, stakeholders must collaborate and invest in comprehensive talent retention strategies.

What are the challenges leading private banks like HDFC and Kotak face, showcasing real-world examples of attrition rates ranging from 34-46?

Attrition rates in the sector have been relatively similar across private banks, with leading institutions experiencing an average attrition rate of 30-40 per cent. The consequences of this high turnover extend beyond immediate concerns, particularly affecting junior-level, non-supervisory positions. This attrition crisis can be attributed to long working hours, limited growth prospects, and the attractive compensation packages offered by new-age Fintech startups. Unencumbered by legacy infrastructure, these startups offer more convenient and tech-savvy financial products and services that attract customers away from traditional banks.

However, banks have increased apprenticeship intake to address these challenges. They can help build a pipeline of future talent familiar with the bank's culture and working practices, and at a considerably better cost range. By nurturing young talent, banks can reduce their reliance on experienced professionals who are susceptible to job hopping. Apprenticeship programs, especially degree apprenticeship programs, can provide individuals with specialized skills in digital banking, wealth management, and financial technology, preparing them for the evolving financial industry, and thus developing stronger loyalty amongst the cadre.

How do apprenticeship programs offer a transformative solution to combat attrition by fostering employee loyalty, skill development, and productivity? Also, please emphasize the significant impact of apprenticeship skilling on job creation. The IT and BFSI sectors are projected to generate approximately 5 million jobs by 2025.

Apprenticeships are essential for the BFSI sector as they create a sense of loyalty between employers and employees, promoting skills such as communication, teamwork, and interpersonal relationships. According to a survey, 76 per cent of employers believe that apprenticeships significantly reduce attrition by fostering this loyalty. Companies can demonstrate their commitment to their employees' growth and success by investing in workforce development through apprenticeship initiatives, strengthening their allegiance to the organization.

Moreover, apprenticeships are crucial for developing skills and addressing critical skill gaps within the BFSI sector. These programs enhance skills such as financial analysis, risk management, customer relationship management, and regulatory compliance, which are vital in navigating the financial industry's skill deficit challenges. Apprentices gain a comprehensive understanding of their roles by combining theoretical knowledge with hands-on experience, improving their skills and boosting their confidence. This results in heightened productivity, ensuring that employees can effectively fulfil their responsibilities and contribute to the overall organizational output.

Furthermore, apprenticeships provide a structured pathway for career advancement within the BFSI sector, promoting leadership, mentorship, and career planning skills. Experienced mentors guide and support apprentices, facilitating knowledge transfer and skill refinement in specialized roles such as financial advisors, investment analysts, loan officers, underwriters, and claims adjusters. This mentorship creates a cohesive bond within the organization and reduces the inclination of apprentices to seek opportunities elsewhere, thereby reducing turnover rates.

Additionally, apprenticeships promote experiential learning, augmenting participants' problem-solving abilities and resourcefulness. This hands-on experience cultivates a workforce equipped to navigate complex challenges, leading to streamlined workflows and heightened productivity within BFSI organizations.

Moreover, apprenticeships promote a culture of continuous learning within BFSI organizations, encouraging employees to enhance their skills and knowledge. By investing in developing a skilled workforce, companies in the BFSI sector ensure adaptability, resilience, and lifelong learning among their employees, thus fortifying their position in the competitive landscape.

Despite the potential benefits of apprenticeships, the BFSI industry in India struggles with a low adoption rate, with only 4 per cent of the labour force receiving structured apprenticeships and less than 0.5 per cent of enterprises having formal apprenticeship programs. However, with the BFSI sector poised for remarkable growth, strategic investments in tailored apprenticeship programs are imperative to address specific skill needs, thereby securing the sector's global prominence by 2050.

Furthermore, the number of apprentices in the BFSI sector has grown significantly. From 2018-19 to 2023-24, the total number of apprentices surged from 1478 to 28086, reflecting an astounding growth of approximately 18 times. This exponential growth underscores the BFSI sector's commitment to addressing skill gaps and fostering talent development while leading the way forward.