Why Is The Attrition Rate Higher In Private-Sector Banks Compared To Public-Sector Banks?

Gone are the days when people entered into one service or company and retired from the same. Now is the era of job shifting for the sake of better career opportunities and better lifestyles. However, some data suggest that ‘sarkari banks’ have lower attrition rates than private ones. Is it true? Let’s move down the lane to know more.

Private sector banking behemoths like HDFC Bank, Axis Bank and Kotak Mahindra Bank have recorded an attrition of 34%-50%.

• HDFC Bank, the top private lender, sees attrition of 34%.
• Axis Bank-35%
• Kotak Mahindra Bank’s attrition surged to 50%.
• Yes bank reported a 43% rate of attrition. 

PSBs like SBI, BoB, PNB and Canara Bank have reported attrition of less than 5% as they are seen as more stable employers. 

• SBI, India’s largest mass lender, reported a 3% attrition rate among its 250,000 employees, including resignations, retirements, and VRS. 
• Canara Bank’s attrition rate is 4.26%.
• In the case of PNB and BOB, it is just merely above 1%.

What causes low attrition in Public Sector Banks, aka PSBs?

Extensive recruitment procedure and frequent training.

Recall the famous IBPS examinations conducted each year for clerical, PO(Probationary Officer), and SO(Specialist Officer) posts. According to SBI Chairperson Mr Dinesh Kumar Khara, candidates who apply for PSB jobs are typically committed to serving since they undergo a rigorous recruiting procedure, which is not the case with private sector banks. Second, the workforce is subjected to frequent training and development programs that enhance their abilities and keep them engaged, which is also scarce in private-sector banks.

Better Payscale.

Today, a newly appointed officer at a PSB might earn anywhere from 60,000 to 80,000 per month, somewhere 30% to 40% more than private sector employees. This discrepancy persists until the mid-level, after which private sector earnings skyrocket, and there is no comparison explaining the disparity in attritions. In contrast to private banks, attrition in the government-owned banking sector is low until the middle level. This is because PSBs provide more fantastic pay packages than private banks. However, things alter as you progress up the ladder.

Benefits that are complementary to the basic pay scale.

Higher salaries and public sector benefits like housing, pensions, and more manageable work hours encourage employees to stay with their PSB positions for a longer period of time. 

Is the tough working culture in private-sector banks a reason for higher attrition?

HR consultants feel that attrition in private sector banks reflects the demanding work environment. Bank personnel in the private sector are expected to work long hours, go the extra mile, respond to clients with warmth and quickness, be proactive, recognise possibilities, and cross-sell, all contributing to a challenging work environment. And if these demands are not fulfilled, the targets are not achieved, then mental and verbal abuses are typically more common in private sector banks.

For instance, recall the viral LinkedIn video of HDFC bank from Kolkata region, where the senior official is brutally involved in verbal abuse to his subordinates for not achieving the targets. Trust me, it was horrible!

In its annual report for FY23, HDFC Bank stated that attrition had increased over the previous fiscal year.  A large chunk of this was at the ‘non-supervisory personnel’ level. One cause for this growth is a post-Covid phenomenon, which may have forced the younger workers to reevaluate what they “want from their lives.”

Competition within the industry is another cause of attrition.

Banks have had good growth in the previous two years, with future growth prospects looking bright on the strength of economic development. Lenders have increased employment as they grow their operations and develop skilled staff. Add to that the rivalry between NBFCs and new-age fin techs, and the struggle for talented human resources has increased in response to shifting market dynamics, according to industry players.

Is the attrition similar at all levels?

Most attritions are seen in entry and junior-level positions, like sales, services, call centres and some in collections. Kotak Mahindra Bank’s case, which saw the highest attrition of 50%, said that this data revolves around entry-level positions. On the other hand, mid-level positions saw attrition of 20%, and senior and top-level positions marked an attrition rate of around 10%. This shows that top-level management positions in Private sector banks have better employee stability. Most attrition occurring at the initial level suggests that the workforce’s younger talent is also taking advantage of the market environment to discover better chances.

According to Ryan Lowe, Partner – People Advisory Services and HR Consulting Leader – Financial Services, EY, turnover is high until employees reach the level of Branch Manager (BM) or managerial role because employees in retail banking often start at a relatively low base and this does not get corrected drastically in the initial years. Employees are eager to relocate anytime a rival offer with a better base income becomes available. Furthermore, retail banking positions are challenging due to lengthy working hours, high pressure, and extra geographical considerations, such as staff being put in remote or non-preferred towns and cities.

Another factor highlighted in the scenario is that banks work six days a week and require mandatory attendance, which many younger workers may not prefer. Additionally, the post-pandemic emergence of numerous new opportunities with virtual/hybrid working and flexible hours has significantly contributed to this rise in turnover.

Conclusion.

The subject of attrition is not new. So, why has it suddenly gained prominence and is everyone talking about it? The trends came after RBI Deputy Governor MK Jain cautioned banks in May that they face operational risks due to excessive attrition, a lack of succession planning, personnel skilling, and outsourcing. They must recruit and retain talent. Attrition and excessive personnel turnover result in the loss of institutional knowledge, service interruption, and increased recruiting expenses. Similarly, Jain stated that a lack of succession planning might offer major operational concerns, particularly for essential jobs.