Sunit Arora outlines why Indian banks are having problems with employee retention and suggests some solutions.
Traditionally, a job in banking ranks among the most coveted in India, but something has drastically changed in the post-Covid era. Attrition rates for employees in India’s private banks have gone through the roof. Dealing with high attrition is akin to continuously filling a leaky bucket. Bankers in India are not used to doing this. No wonder this HR crisis is the key concern in banking today.
Look at the numbers to understand why. Top private banks showed average attrition levels at entry-level roles of 35-40% in 2022/23, the highest level in 3 years, according to an analysis by moneycontrol of the annual reports of the top four private banks. India’s largest private sector bank HDFC Bank saw 40-50% attrition for entry-level jobs; another big private bank Kotak Mahindra Bank’s annual report for 2022/23 showed a staggering 58% attrition among junior employees.
Though much of the churn is for entry-level jobs, even the middle level roles have been seeing attrition rates of 20-25%, much higher than the 10-15% prior to the pandemic. To be sure, employee churn rates at public sector banks is lower, given the benefits and job security they offer, but in recent years private sector banks have been capturing a greater share of deposits and outstanding loans from their nationalised counterparts. They are also at the frontline of innovation in banking.
The central bank is worried
Top officials from the Reserve Bank of India have been in touch with private banks about the high attrition rates in banks. “We have asked them to look at it because every bank at the end of the day has to build up its core team. It’s for the banks to really analyse and deal with it. We have not prescribed any norms or standards,” said Shaktikanta Das, RBI governor, at a summit organised by Business Standard.
This raises many questions. What are the root causes of this high attrition in banking? How is the churn affecting banks? And what can be done to stem this exodus? According to the RBI governor, one of the reasons is a generational change. “Today’s youngsters are thinking differently, with so many opportunities, especially coming from the fintech sector and non-banking finance companies (NBFCs). The youngsters are a very impatient generation and there is nothing wrong with it,” he said at the conference.
Pandemic impact
Attrition rates really picked up pace post the pandemic. “Banking is very intense. Post Covid, employees are going through a phase of fatigue from its intense, aggressive growth culture. This is particularly true at the junior level, which deals with sales and customer service. It’s not the easiest job, and now there are multiple options,” said Rituparna Chakraborty, co-founder of Teamlease, one of India’s leading recruitment companies. Those options go beyond fintech to sectors such as fast-moving consumer goods.
A fundamental issue is that banking can lack the buzz of other industries. In particular, there is a lot of regulatory paperwork in banking, which means longer hours doing routine work that some employees do not find exciting. Often, a competing offer makes the grade simply because the workplace is closer to home or the hours are more flexible.
Then there are the pressures of meeting sales targets. Traditional banking is finding it tougher to raise low-cost deposits in the face of competition from mutual funds, insurance and myriad payment service providers. Young employees are handed high fund-raising targets. According to bankers, employees are under intense pressure to sell products, with incentives becoming an important component of salaries.
There is a perception that technology can make the job of a banking sales executive easier. The fact is that technology cannot substitute for boots on the ground. This is even more applicable to a differentiated market like India, where financial inclusion remains the key goal. Digital penetration varies outside urban India and the bank branch is still important for a majority of customers.
The way ahead
Obviously, firms will have to work harder to retain employees. “Banks will have to find ways to delay the inevitable attrition. Can I extend the average 11- month employee tenure by an additional four months? Here, the softer elements of business, like HR, come into play,” said Chakraborty of Teamlease. Bankers would also be seeking some leeway from the RBI to reduce the regulatory burden on branches, a major cause of the high workload. There has to be a middle path to reduce the burden on employees without sacrificing risk and regulatory safeguards.
What about employees? It’s clear that the right training is crucial at a junior level. Most senior bankers say that is the differentiation the industry seeks to foster. If an employee feels empowered by upskilling they are more vested in the sector.
Some churn among very junior employees is to be expected in any sector as they find their feet in the world of work. What is disturbing at banks is that attrition is rising among the middle management. This layer keeps banks going. They are the ones who do the real work. Here again, training and upskilling is a way to safeguard talent.
Finally, banking needs more women. The proportion of female employees in all scheduled commercial banks remains about a quarter (24.17%). Female participation in India’s workforce has been on the decline for nearly two decades. There are socio-cultural reasons for this, but it’s clear women want safe, understanding workplaces. Banking has to work towards filling this need. Banks would benefit too by tapping into the talents of half the population.
Sunit Arora is an independent journalist and editor based in Delhi. His twitter handle is @sunitarora