High employee attrition rates across select private sector banks (PVBs) and small finance banks (SFBs) which has increased sharply over the last three years, with average attrition rate of around 25% has caused concern with banking regulator the Reserve Bank of India (RBI) asking lenders to prevent this.
“The total number of employees of PVBs surpassed that of public sector banks (PSBs) during 2023-24, but their attrition and employee turnover rate pose significant operational risks, including disruption in customer services, besides leading to loss of institutional knowledge and increased recruitment costs,” the RBI said in its report on Trend and Progress of Banking in India 2003-24 which has been submitted to the government.
Stating that in various interactions with banks, it had stressed that reducing attrition was not just a human resource function but a strategic imperative, the RBI said banks must implement strategies like improved onboarding processes, providing extensive training and career development opportunities, mentorship programmes, competitive benefits, and a supportive workplace culture to build long-term employee engagement.
Emphasising on its concern on Dark Patterns, which are design interfaces and tactics used to trick users into desired behaviour, the regulator said these have emerged as a new form of mis-selling.
“The Central Consumer Protection Authority (CCPA) notified guidelines on prevention and regulation of dark patterns on November 30, 2023, with the objective of identifying and regulating such practices. The Reserve Bank is also looking into the prevalence of such practices among its REs and considering appropriate policy actions,” it said in the report.
Pointing out at top-up loans, which had grown significantly in the last one year and such money believed to be finding its way to the stock market, the RBI said such additional facilities were often sanctioned with minimal processes and due diligence, with liberal underwriting standards and lax adherence to prudential guidelines on loan-tovalue (LTV) ratios, risk weights, and without ensuring the end-use of funds.
It said though in November 2023 it had instructed that all top-up loans extended by Regulated Entities (REs) against movable assets, which are inherently depreciating in nature, should be treated as unsecured loans for credit appraisal, prudential limits and exposure purposes, it said it would still assess the need, if any, for additional regulatory interventions to mitigate the identified risks in cases of other top-up loans.
In the report RBI said the asset quality of banks improved, with the gross non-performing assets (GNPA) ratio falling to its lowest in 13 years at 2.7% at end-March 2024 and 2.5% at end-September 2024.
Banks’ profitability rose for the sixth consecutive year in 2023-24 and continued to rise in H1:2024-25 with the return on assets (RoA) at 1.4% and return on equity (RoE) at 14.6%.
“The combined balance sheet of urban co-operative banks (UCBs) expanded in 2023-24, with asset quality improving for the third consecutive year while capital buffers and profitability were strengthened,” it said.
The non-banking financial companies (NBFC) sector exhibited double digit credit growth, while its unsecured lending contracted and asset quality improved further – the GNPA ratio dropped to 3.4% at end-September 2024; strong capital buffers kept the CRAR well above the stipulated norm at end-September 2024, as per the report.
Published – December 26, 2024 08:53 pm IST
