Attrition in private banks improving, but long way to go: Swaminathan

Substantial regulatory focus on customer in the coming days

Attrition rate in private sector banks has improved over last financial year, but there is a long way to go in retaining talent, Reserve Bank of India's Deputy Governor Swaminathan J said in Mumbai.

 

Addressing a conference of directors of private sector banks on Monday, the deputy governor said that average attrition rate in the private sector banks was 25 per cent in financial year 2024, with certain banks experiencing even higher level rates over the past three years.

 

“Post our interactions on this matter last year with select entities, we do see an improvement but it is still a long way to go. The attrition numbers are not merely statistics; they are indicators of deeper challenges in the bank’s approach to employee engagement and retention,” he said in his speech, which was uploaded on the RBI website on Tuesday.

 

 

Swaminathan said if banks lose talented employees, especially at the junior and frontline levels, they are not just losing people but losing experience, customer relationships, and operational continuity.

 

“This may have a significant impact in the customer ownership and result in less than satisfactory experience at the frontline counters,” he said.

 

Observing that reducing attrition is not just an HR function, rather a strategic imperative, he urged lenders to explore and support initiatives that emphasize career development, mentorship programs, competitive benefits, and a supportive workplace culture that makes employees feel valuable.

 

The deputy governor also cautioned banks against potential concentration risks saying that banks often gravitate toward particular sectors, segments, or products that appear profitable or “safe” in the short term.

 

“However, over-reliance on any one area can lead to imbalanced exposures, making the bank vulnerable if conditions within that sector or product category suddenly change,” he said.

 

The deputy governor also highlighted glaring deficiencies in customer service by banks.

 

Asking banks to focus on customer service, he said customer centricity is going to attract substantial supervisory focus in the coming months and years.

 

“High standards of customer service are not just expectations, they are obligations you owe to those who trust you with their money,” Swaminathan said.

 

He said that it is concerning that in many cases, customer grievance mechanisms, including the Internal Ombudsman structure, are treated more as a formality than as a robust, effective resource.

 

“The Internal Ombudsman mechanism should be more than words on paper; it should operate with the spirit and diligence necessary to resolve issues impartially and promptly,” he said.

 

Observing that updation of know your customer norms remains an operational concern he flagged the issue of accounts getting frozen denying the customers access to their funds. Lack of proactive approach by banks is the main reason for such lapses, he said.

 

“Our root cause analysis indicates a set of issues, including high pendency at bank level in periodical updation of KYC details of the customers, lack of a proactive approach in assisting and obtaining the required customer documents, inadequate staff deployment in such critical functions resulting in overcrowding or denial of service at branches,” he said.

 

The deputy governor said that directing the customers to approach their ‘home branch’ for availing such services rather than being empathetic to their needs by attending to them at a branch of their convenience and failure to update the details in the system even after the customers have provided the required documents have resulted in account being frozen by banks.