Employee attrition rates are high across select private sector banks (PVBs) and small finance banks (SFBs), according to RBI’s Report on Trends and Progress of Banking in India 2023-24.

The central bank cautioned that high attrition and employee turnover rates pose significant operational risks, including disruption in customer services. They also lead to loss of institutional knowledge and increased recruitment costs.

The report noted that the total number of employees of private sector banks (PVBs) surpassed that of public sector banks (PSBs) during 2023-24, but their attrition has increased sharply over the last three years, with average attrition rate of around 25 per cent.

In a speech last month at the Conference of Directors of PVBs, RBI Deputy Governor Swaminathan J noted that the attrition rates in the private sector banking industry have been significantly high.

In FY24, the average attrition rate in the private sector bank group was around 25 per cent, with certain banks experiencing even higher levels over the past three years, he said.

“Post our interactions on this matter last year with select entities, we do see an improvement but it is still a long way to go. The attrition numbers are not merely statistics; they are indicators of deeper challenges in the bank’s approach to employee engagement and retention.

“If banks lose talented employees, especially at the junior and frontline levels, you are not just losing people— you are losing experience, customer relationships, and operational continuity. This may have a significant impact in the customer ownership and result in less than satisfactory experience at the frontline counters,” cautioned Swaminathan.

Therefore, reducing attrition is not just an HR function but a strategic imperative.

“As directors, I would urge you to explore and support initiatives that emphasize career development, mentorship programs, competitive benefits, and a supportive workplace culture that makes employees feel valued.

“By prioritizing employee stability, Boards are setting the foundation for long-term growth and building a bank that attracts and retains talent, and nurtures it for future leadership roles,” the Deputy Governor said.

The report observed that banks need to implement strategies like improved onboarding processes, providing extensive training and career development opportunities, mentorship programmes, competitive benefits, and supportive workplace culture to build long-term employee engagement.

Meanwhile, according to a survey conducted by the Reserve Bank in October 2024, 45 per cent of the respondent Regulated Entities indicated that they were using Generative AI for tasks such as assisting employees and document summarisation.