Private sector banks’ high and sharply rising attrition is in the spotlight, thanks to the mandatory disclosures in banks’ annual and business sustainability reports since FY2023. However, inter-bank comparison may not be an accurate indicator of the attrition in a particular bank, as some large banks use unlisted subsidiaries and associate companies to undertake back-office functions and sales for the bank; these banks do not disclose attrition data for subsidiaries. Hence it is problematic to compare the attrition data of such banks with the data of banks which directly employ all their staff engaged in banking activities.
Nevertheless, in the absence of public data on attrition in banks’ unlisted related companies, the attrition reported by a bank is the only indicator available to assess employee wellbeing, work culture, customer service and continuity in the bank.
Indusind Bank has a subsidiary, Bharat Financial Inclusion which is primarily engaged in microfinance and also offers other banking services such as merchant acquisition and remittances and employs over 36,000 staff. However, the attrition data pertains only to the standalone Indusind Bank. Following the precedents set by Axis Bank and Kotak Mahindra Bank, Indusind Bank’s FY2023 annual report conveniently omitted any discussion on the bank’s sharp rise in attrition, from 37% in FY2022 to an alarming 51% in FY2023. Indusind Bank’s reported attrition is the highest amongst the private sector banks, but the directors on the board evidently did not believe that the fact of more than half of the staff exiting to be relevant to discuss with shareholders in the annual report. Indeed, the word “attrition” is to be found only in 3 places in Indusind Bank’s annual report, and all those instances pertain to the mandatory actuarial calculation. There is no attempt by the board to educate shareholders on why attrition is rising, why it is the highest in the bank’s peer group and what remedial measures the management is taking to reduce attrition. As commercial banking in India is staff-intensive, and retail banking is even more staff-dependent, the silence of the board on such an important issue is worrying.
It is regrettable that the Indusind Bank board of directors chose to follow the examples of Axis Bank and Kotak Mahindra Bank, instead of the examples of HDFC Bank and Yes Bank, where the CEOs were willing to discuss the issue of attrition with shareholders in their annual report. What is most surprising in Indusind Bank is that this happened despite the fact that, in the 10-member board of directors, all directors apart from the CEO are independent directors. Independent directors on the board are there to defend the non-promoter interest, and not to merely rubber stamp decisions of the executive/promoter. In Indusind Bank, it appears that the independent directors are either completely ignorant of attrition, or went along with the bank management’s silence. This is puzzling, as independent directors completely dominate Indusind’s board, unlike the situation in peer bank boards. Despite this, they collectively chose to be silent on the important issue of attrition when even the then Reserve Bank of India (RBI) deputy governor had gone public in end May 2023.
If the Bombay High Court favours the RBI in its judgement in this dispute, it would appear that the latter is empowered to invoke Section 46(1) on Uday Kotak, the CEO and Dipak Gupta, the joint managing director of the bank, as it has specifically used the word, “wilful” to describe the bank’s conduct.
Hemindra Hazari, is a commentator with over 25 years’ experience in the Indian capital markets. He has specialized in research on banking and the macro-economy. He has managerial experience of establishing profitable equities business, leading and mentoring analysts.