Banking Sector in Crisis: Thousands of Indian Bankers Leave Jobs Amid High Attrition Rates

India’s banking sector is in the midst of a remarkable expansion, driven by a surge in credit demand and economic growth. However, this rapid development has exposed a troubling trend: alarmingly high attrition rates among bankers.

The push to meet the financial needs of over 1.4 billion people has intensified pressure on banks, leading to one of the worst attrition rates globally. Despite a slight dip in recent figures, attrition in India’s finance sector remains nearly twice the global average and surpasses rates in major economies like the US, Japan, and Germany. Junior bankers are particularly hard-hit, with some of the largest private lenders reporting turnover rates exceeding 50%.

The causes of this high churn are multifaceted. The booming economy has given entry-level bankers ample opportunities to jump between firms for better pay, but this often comes at the expense of job security and career advancement. While senior bankers in India enjoy salaries comparable to those in Hong Kong and Singapore, those at the entry-level face persistently low wages. This disparity is exacerbating the gap between the wealthy and the less fortunate, echoing comparisons to the Gilded Age in the US.

Additionally, the rapid diversification of banking services in India has created a mismatch between the skills of junior staff and the demands of the modern financial landscape. Managers, often ill-equipped to handle the challenges of today’s financial environment, contribute to this issue. With millions of new bank accounts opened in the past decade and banks exploring previously inaccessible sectors, the competition has intensified among traditional banks, fintech firms, and shadow lenders.

Kamal Karanth, co-founder of Xpheno, highlights the pressure on banks to continuously attract business, which disproportionately affects younger employees. “The sales teams are the worst affected,” he notes, “Front-line staff have to sell company products aggressively and end up facing tough working conditions and the wrath of consumers.”

Junior bankers like Ajay and Chirag face additional hurdles. Ajay, 23, experienced frustration at a Mumbai bank where he was tasked with challenges beyond his capabilities, leading to a high turnover among his peers. Chirag, 25, found his role in a shadow lender’s wealth team did not match his expectations, struggling with a lack of access to influential clients and facing barriers due to his socio-economic background.

The Reserve Bank of India is aware of the situation, with Governor Shaktikanta Das noting the central bank’s focus on managing attrition levels. The high turnover not only inflates recruitment and training costs but also threatens to damage the reputation of Indian banks.

Gender and socio-economic barriers further complicate the landscape. Women in finance face significant hurdles in promotion, and entrenched hierarchies based on caste and economic status create additional obstacles for outsiders trying to break into the industry.

The need for meaningful reform is clear. Rajkamal Vempati of Axis Bank emphasizes the importance of nurturing internal talent through programs like Project Thrive to combat high churn rates. Despite some progress in reducing attrition, the sector must address underlying issues to retain talent and support sustainable growth.

As India’s banking sector continues to expand, addressing these challenges will be crucial to maintaining stability and fostering a more equitable industry.