Vault Matters: Banks must rethink business strategies to address high attrition

Attrition is particularly high at entry- to mid-level functions in private banks.

High attrition and the banking industry have been linked for at least the last six years. Strangely, it’s only recently that the Reserve Bank of India has taken keen note of it. Usually, the regulator stays away from commenting on softer aspects like this. But why is this drawing the regulator’s attention? The answer is simple. Not only does it have a cultural impact on the industry, but the business implications could have far deeper reach within the banking sector.

Just yesterday, a video of SN Subrahmanyan, Chairman of India’s largest infrastructure major, L&T, went viral. He was caught saying that he was quite sad that employees don’t work on Sundays and questioned what one would do staring at their spouse’s face at home on Sundays. The remark followed a question about why the company cannot adopt a five-day working policy like most multinationals. While his statement was lopsided, sexist, and condescending, it also highlights why many Indians are constantly seeking jobs abroad or with global firms. But SNS, as he is popularly referred to in circles, is not alone. Several months ago, former Chairman and Founder of Infosys, NR Narayana Murthy, and Ola’s Founder Bhavesh Agarwal also made similarly debatable statements.

Toxicity in Private Banks

While not expressed in exactly the same manner, the culture in private banking is increasingly toxic, much like these sharp words. The industry has always been highly target-oriented, but it is turning into a space where humanitarian considerations are being disregarded, a trend also popular in the world of consulting. Additionally, many employees are left feeling lost about the purpose of their work.

A branch head of a private bank I used to interact with a few years ago is now working as a senior resolution manager at a call centre. According to him, his job isn’t very different from his previous role, though now he is a more contented person. He is able to take the side of his teammates in a more compassionate manner and shield them from abuses. As a bank manager, he claims circumstances were such that he would resort to abusing staff to meet targets.

Dilemma of Bank Employees

There is another dilemma regarding what exactly bank employees are selling these days. If a branch meets its business targets, which should ideally include loans and deposits, zonal heads question why they sold fewer insurance or equity brokerage products. Regardless of meeting core business targets, branch employees face the brunt of not keeping pace with the allied products—ones that typically ensure higher commissions and fee income for banks.

Rising Attrition Rate at Private Banks

This explains why attrition is particularly high at entry- to mid-level functions in private banks. That said, here’s something the finance ministry should be concerned about: videos often emerge of abusive branch or circle managers in public sector banks taking teams to task for not meeting benchmarks for allied products. Presently, attrition in PSU banks is in low single digits. With PSU banks seeing a reduction in headcount, and their pay structures far below what private peers offer, it’s only a matter of time before attrition catches up in PSU banks.

Unfortunately, resolving this issue should not be the priority of the RBI. It is for each bank to decide what is best for their employees. More importantly, banks need to get a better grip on how they want their financials to look. For the sake of other income, should they squeeze out the talent in the sector? Self-realisation alone will help resolve the issue.