High Attrition Rates in Private Banks Pose Operational Risks: RBI
Employee attrition in private sector banks has risen to around 25%, creating significant operational risks, according to the Report on Trend and Progress of Banking in India 2023-24, released by the Reserve Bank of India (RBI).
The report highlights that attrition rates are notably high in select private sector banks and small finance banks (SFBs). While the total workforce in private banks exceeded that of public sector banks (PSBs) during 2023-24, the turnover rate has surged over the past three years, averaging around 25%.
The RBI noted that high employee turnover disrupts customer services, results in the loss of institutional knowledge, and increases recruitment costs. The central bank has urged private banks to view attrition reduction as a strategic priority rather than just a human resource function.
To address these challenges, the report recommends strategies such as:
•Enhanced onboarding processes.
•Comprehensive training and career development opportunities.
•Mentorship programs.
•Competitive benefits and incentives.
•Fostering a supportive workplace culture to drive long-term employee engagement.
Gold Loan Policies Under Scrutiny
The RBI also raised concerns about irregularities in gold loans, including issues with top-up loans. It has advised banks and other supervised entities to review their policies, processes, and practices related to gold loans, identifying gaps and taking corrective measures within a specified timeframe. The central bank emphasized the need for close monitoring of gold loan portfolios and ensuring robust controls over outsourced activities and third-party service providers.
Climate Change Risks to Financial Stability
The report also underscored the growing impact of climate change on the profitability of financial institutions, growth prospects, and inflation dynamics, all of which could threaten financial and price stability. To address these risks, the RBI has called for strengthened regulatory and supervisory frameworks, including:
•Enhanced risk management guidelines.
•Improved disclosure requirements.
•Periodic stress testing.
•Robust verification and assurance mechanisms.
These measures aim to ensure that regulated entities are better equipped to assess and mitigate climate-related financial risks.
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