Opinion: RBI must address frontline Banking and Financial Services attrition
The BFS frontline staff face a perfect storm: attrition at historic highs, stagnant wages, and rising pressures from digital shift. Time RBI created a Productivity and Attrition Task Force for them
By T Muralidharan
India’s banking and financial services (BFS) sector relies heavily on its frontline workforce for sales, customer service, and operational activities. Yet attrition — especially infant attrition within the first 3-6 months — remains alarmingly high, eroding productivity, customer trust, and increasing operating costs. The Reserve Bank of India (RBI) has acknowledged attrition concerns but requires a dedicated mechanism to measure and address them.
A Productivity and Attrition Task Force (PAT) is urgently needed to standardise reporting, link wages to productivity, and recommend sustainable workforce practices. Without timely action, BFS institutions risk systemic inefficiencies, rising costs, and higher operating risks
Silent Drivers of Growth
The BFS sector is one of the largest employers in the country with over 1 million workforce. Their roles are far more than entry-level jobs. They form the first point of contact for customers — whether it is convincing someone to open their first savings account, processing a home loan, recovering overdue EMIs, or solving digital transaction disputes.
In sales, frontliners directly influence revenue growth. In customer support, they shape trust, complaint resolution, and long-term retention. In operations, they ensure compliance and transaction accuracy. Without this human engine, banks cannot scale outreach, service new geographies, or deepen financial penetration. Frontline efficiency is, therefore, national productivity in disguise.
Yet, despite their importance, frontline employees are the weakest link in the BFS value chain. This threatens not just institutional performance but also India’s employment agenda.
Attrition: A Chronic Challenge
The RBI Report on Trend and Progress of Banking in India 2023-24 highlighted that attrition in private sector banks and small finance banks (SFBs) has risen sharply to around 25 per cent, posing significant operational risks. These include disruptions to customer services, loss of institutional knowledge, and increased recruitment costs. Importantly, the RBI emphasises that reducing attrition is not merely an HR issue but a strategic imperative for banks.
Boards of banks are being advised to monitor workforce metrics alongside credit quality and non-performing assets (NPAs). However, current reporting and supervision frameworks barely scratch the surface. Attrition is treated as an HR statistic rather than a systemic risk.
The Unreported Crisis
Industry studies paint a worrying picture: BFS frontline annual attrition rates range between 35 per cent and 50 per cent, among the highest across industries. In sales-heavy functions (loans, insurance, cards), attrition often exceeds 50 per cent. Customer service and collections are only marginally better.
However, the real crisis is hidden inside these averages. A large chunk of exits happens in the first 3-6 months of employment — a stage when companies have already sunk training and onboarding costs but have not yet recovered productivity from the hire. This infant attrition is the silent killer of BFS efficiency.
Unlike gross attrition data, infant attrition is not systematically reported to the RBI. Banks and NBFCs disclose headcount churn but do not break it down by tenure bands. Ground-level evidence suggests that 50 per cent of frontline hires leave within 180 days. These are people who never reach full productivity, or stabilise in the organisation, and never generate returns on salary, and hiring and training costs.
The lack of standardised reporting means policymakers underestimate the drag this places on productivity, credit delivery, and customer experience. Without the RBI mandating disclosures, infant attrition will remain invisible in official statistics while silently eroding sectoral efficiency.
Productivity–Attrition Link
Attrition is not just about replacing headcount. It directly reduces productivity in three ways:
• Lost Learning Curve: Every time a new hire quits early, their partial training and initial customer exposure vanish with them.
• Team Disruption: High turnover creates unstable branch teams, which affects sales performance and service consistency.
• Managerial Overload: Supervisors spend disproportionate time on recruitment and firefighting instead of mentoring or business development.
Data shows that once a new employee crosses 50 per cent of the target, attrition drops by a factor of three. Frontline productivity has a direct bearing on wages. Employers argue that wages cannot rise because productivity remains low. Yet productivity remains low because attrition erodes continuity and mastery.
The result is a vicious cycle: stagnant wages (Rs 18,000-25,000 per month in many BFS frontline roles), rising cost of living in urban centres, and unsustainable migration for semi-urban youth who move to cities but cannot make ends meet. This leads to disillusionment and frustration among them and faster exits — reinforcing the attrition trap.
Beyond HR Metrics
Frontline attrition is not an isolated HR problem. It is a systemic issue with multiple spillovers:
• Financial inclusion risk: Unstable field teams mean weaker outreach in underserved geographies.
• Credit quality risk: Poorly trained or transient staff often drive mis-selling and weak collections.
• Customer trust risk: High turnover leads to inconsistent service, eroding faith in formal finance.
• Economic risk: Wage stagnation and urban migration stress create broader social vulnerabilities.
As the central bank tasked with financial stability, the RBI cannot leave this problem to HR departments.
The Mandate of PAT
The proposed PAT should be a specialised task force constituted by the RBI, with the following mandate
• Standardise industry-wide reporting of attrition by tenure bands. Link attrition reporting with productivity and credit performance indicators.
• Conduct a systematic study of wage-productivity-vintage linkages in frontline BFS roles.
• Recommend wage correction frameworks tied to productivity improvements.
• Define minimum standards for hiring, induction, training, and infant attrition.
• Assess migration sustainability.
• Provide regular updates to RBI and align with financial inclusion goals.
The PAT must be multi-stakeholder to ensure credibility and actionable outcomes. It could include RBI representatives (Department of Supervision, HR & financial inclusion), banking and NBFC HR leaders, industry bodies like IBA (Indian Banks’ Association) and FIDC (Finance Industry Development Council), academic experts, and independent experts in workforce analytics.
The Urgency
The BFS frontline workforce is in the midst of a perfect storm: record attrition, stagnant wages, and rising stress from retail assets and collection challenges. At the same time, customers are shifting to digital-first yet remain human-reliant, even as AI disruption is on the rise.
This workforce is too important to be left at the mercy of fragmented HR practices. If the RBI delays action, the consequences will be severe: higher credit costs due to weaker collections, more mis-selling scandals, slower financial inclusion, and greater youth disillusionment with BFS careers.
(The author is Founder Chairman, TMI Group and Quanta People)
