A recent report by the Reserve Bank of India (RBI) has shed light on rising employee attrition rates in private sector banks and small finance banks (SFBs). The report outlines the operational risks and strategic challenges posed by high employee turnover, urging banks to adopt comprehensive measures to address the issue.
High Attrition in Private Banks
During 2023-24, the workforce in private sector banks surpassed that of public sector banks (PSBs). However, attrition in private banks has seen a sharp rise over the past three years, with an average turnover rate of 25 per cent. The report highlights the operational risks associated with high attrition, such as:
- Disruption in customer services.
- Loss of institutional knowledge.
- Increased recruitment and training costs.
RBI’s Strategic Imperative
The RBI emphasizes that addressing attrition is not merely an HR concern but a critical strategic imperative. To counter high employee turnover, the report suggests:
- Enhanced onboarding processes to integrate new hires effectively.
- Providing robust training and career development opportunities.
- Introducing mentorship programs for employee support and growth.
- Offering competitive benefits to retain top talent.
- Building a supportive workplace culture to encourage long-term engagement.
Irregularities in Gold Loans
The report also flagged irregularities in the granting of loans against gold ornaments and jewellery, including top-up loans. To mitigate risks, the RBI advised supervised entities to:
- Review their policies and processes on gold loans to identify gaps.
- Initiate timely remedial measures to address these gaps.
- Closely monitor gold loan portfolios.
- Ensure stringent controls over outsourced activities and third-party service providers.
Climate Change Risks to Financial Stability
In addition to workforce and operational challenges, the report underlines climate change risks as a growing concern for financial institutions. These risks impact profitability, growth prospects, and inflation dynamics, ultimately affecting financial stability. The RBI recommends strengthening regulatory and supervisory frameworks by:
- Enhancing risk management guidelines and disclosure requirements.
- Conducting periodic stress testing.
- Implementing verification and assurance measures to mitigate climate-related risks.
