High employee attrition of 25% in private banks poses operational risks: RBI

Private sector banks in India are dealing with a spike in employee attrition, with turnover rates climbing to about 25%, according to the Reserve Bank of India’s latest “Report on Trend and Progress of Banking in India 2023-24.” 

The report notes that certain private sector banks and small finance banks (SFBs) have seen especially high levels of staff departures in recent years. The total workforce at private sector banks surpassed public sector banks (PSBs) during 2023-24. However, attrition at private lenders has risen sharply, now averaging around 25%.

Operational risks

The RBI cautions that these trends pose “significant operational risks,” including the potential for disrupted customer service, a loss of institutional knowledge, and higher recruitment costs.

The central bank also emphasized that reducing attrition is not just a human resources task, but a “strategic imperative.” It urged banks to address the issue proactively to maintain operational stability and ensure smoother customer experiences.

Employee retention

To reverse these trends, the RBI recommends stronger onboarding processes, comprehensive training, career development opportunities, mentorship programs, competitive benefits, and a supportive workplace culture.

By focusing on these strategies, banks can enhance long-term employee engagement and lessen the impact of staff turnover on daily operations.

The report also notes “several irregularities” in granting loans against gold ornaments and jewelry, including top-up loans. In response, the RBI advised supervised entities to review their gold loan policies, processes, and practices, and to ensure adequate oversight of outsourced activities and third-party service providers. Banks have been directed to identify gaps and implement remedial measures in a timely manner.