RBI Highlights Operational Risks Due to High Attrition in Private Banks

MUMBAI: The Reserve Bank of India (RBI) has recently pointed out the escalating attrition rates in private sector banks (PVBs) and small finance banks (SFBs) as a significant risk factor. For the first time, the total workforce in PVBs has exceeded that of public sector banks (PSBs), with the average attrition rate in PVBs soaring to around 25% over the last three years. This high turnover introduces substantial operational risks, including disruptions in customer service and the loss of institutional knowledge.

According to the RBI report, the increasing attrition rates not only escalate recruitment and training costs but also hamper productivity and efficiency by the departure of experienced employees. It adversely affects employee morale, leading to instability within organizations. The challenge of retaining talent is becoming more daunting for banks, especially as high attrition rates tarnish their reputation as employers, making it harder to attract skilled professionals.

Strategies to Mitigate Attrition and Enhance Employee Engagement

RBI emphasizes that addressing attrition is not merely an HR issue but a strategic necessity for the banking sector. Banks are urged to prioritize onboarding and training processes, mentorship programs, and career development opportunities to improve retention. Competitive compensation and fostering a supportive workplace culture are pivotal to ensuring long-term employee engagement.

High turnover also impacts customer satisfaction, with frequent employee departures potentially compromising service quality. "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 stated.