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

Employee turnover rates for major private banks jumped to over 30 per cent in FY23 led by increased competition in the market and high churn especially in technology and sales roles.

Most players such as Axis Bank, Kotak Mahindra Bank, and HDFC Bank have reported an increase in the turnover rates, which also include attrition on account of death, superannuation, disciplinary action and exit of low performance employees.

For Axis Bank, the high rate was despite the absorption of 3,200 employees from Citibank India following the acquisition of the latter’s consumer banking business effective March 2023. However, the bank said that 46 per cent of the vacancies in FY23 were filled internally.

In its annual report, HDFC Bank said very high attrition levels were witnessed in the IT segment and frontline staff, with MD and CEO Sashidhar Jagdishan attributing it to the post Covid phenomenon “which might have prompted the younger workforce to“ recalibrate what they “want from their lives”.

The bank also quoted a HR trend analysis by consulting firm Aon, which estimated the overall attrition rate for the banking sector at 24.7 per cent between January 2022 and September 2022.

Junior level attrition

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

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

While banks have been highlighting initiatives and training programmes to retain and attract new talent, experts believe the elevated turnover rates are of concern, given that even for senior management the attrition is significantly higher than the pre-Covid 10-year average rate of about 3 per cent.

Intensifying competition

Banks have been witnessing healthy growth over the last two years, and with future growth prospects also looking healthy on the back of economic growth. Lenders have accelerated hiring as they expand operations and build a specialised workforce.

Added to that is the competition from NBFCs and new age fin techs, and the competition for skilled human resource has intensified amid the changing market dynamics, industry participants said.

• Read:  Are these private sector banks out of the woods?

“Most of the attrition is happening at the lower level. It means that the younger talent in the workforce is also leveraging the market situation to find better opportunities.,” said Sumit Sabharwal, CEO of TeamLease HRtech adding that the current trends “serve as a clarion call for banks to re-evaluate their talent management strategies”.

The trends have emerged after RBI Deputy Governor MK Jain, in May, warned banks that they face operational risks due to factors such as high attrition, lack of succession planning, skilling of staff and outsourcing, and there is a need for them to attract and retain talent.

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

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