Attrition rates in private banks jump to over 30% on increased competition

Staff turnover rates for the specialty private banks It jumped more than 30 percent in fiscal ’23 led by increased competition in the marketplace and significant rise especially in technology and sales roles.

Most players like Axis bankAnd Kotak Mahindra BankAnd HDFC Bank It reported an increase in turnover rates, which also includes a decrease due to death, retirement, disciplinary action, and the exit of low-performing employees.

For Axis Bank, the high rate was despite the absorption of 3,200 employees from Citibank of India after acquiring the consumer banking business of the latter as of March 2023. However, the bank said that 46 percent of its vacancies in FY23 were filled internally.

In its annual report, HDFC Bank said very high levels of attrition were observed in the IT sector and frontline staff, with Managing Director and CEO Sashidhar Jagdishan attributing this to a post-Covid phenomenon “that may have prompted the young workforce to ‘reset what they want’ from their lives”.

The bank also quoted an analysis of human resources trends by consulting firm Aon, which estimated the overall attrition rate for the banking sector at 24.7 percent between January 2022 and September 2022.

Decreased beginner level

Banks insist that the bulk of the attrition is at the bottom and entry levels. Earlier this week, HDFC Bank’s CFO Srinivasan Vaidyanathan said the highest attrition rate of 40-50 per cent was for junior positions, while the rate for mid-level positions averaged 20-30 per cent and for senior positions was much lower at around 7 per cent.

Kotak Bank’s attrition rate for entry-level and entry-level positions was 50-52 percent for male and female employees, mid-level positions 19-20 percent, and senior management 10-19 percent.

While banks have been highlighting initiatives and training programs to retain and attract new talent, experts believe high turnover rates are a cause for concern, given that even for senior management, attrition is much higher than the pre-Covid 10-year average rate of around 3 percent.

Intensifying competition

Banks have seen healthy growth over the past couple of years, and with future growth projections looking healthy as well against the backdrop of economic growth. Lenders have accelerated recruitment as they expand their operations and build a specialized workforce.

Added to this is competition from NBFCs and new-age fin technologies, and competition for skilled human resources has intensified amid changing market dynamics, industry participants said.

“Most of the attrition occurs at the lower level. This means that the young talent in the workforce is also taking advantage of the market situation to find better opportunities.”

The trends emerged after Deputy Governor of the Reserve Bank of India, MK Jain, warned banks in May that they were facing operational risks due to factors such as significant attrition, lack of succession planning, employee skills and outsourcing, and there was a need for them to attract and retain talent.

“Attrition and high employee turnover lead to loss of organizational knowledge, disruption of services and increased staffing costs. Similarly, lack of succession planning, especially for critical roles, can pose significant operational risks,” said Jain.