Skip to main content

High staff attrition a significant operational risk to banks: RBI Dy Guv

By

 Outsourcing, lack of succession planning and staff skilling also areas of concern, Jain says

High attrition and employee turnover pose significant operational risks, including disruption in customer services, as well as ethical issues for banks, Reserve Bank of India (RBI) Deputy Governor M K Jain said. These issues could have an adverse financial impact on banks, Jain added while addressing board members of banks on Monday. Among the risk factors that he listed were high attrition, lack of succession planning, (particularly for critical roles) and skilling of staff, besides outsourcing.

 

Attrition and high employee turnover lead to loss of institutional knowledge and increase recruitment costs. Banks, Jain said, need to ensure that employees have the necessary skills and knowledge to adapt to new technologies and business practices. Referring to the challenges from outsourcing, the RBI deputy governor said its risks include potential loss of control over critical operations, data security breaches and an increased dependency on third-party providers. He also said that banks should be careful about process risks since errors, inefficiencies or breakdowns in operational processes can lead to financial losses, compliance failures or customer dissatisfaction.

 

Risks stemming from ethical issues at the operational level can also have serious repercussions for banks, including reputational damage, legal and regulatory consequences, erosion of customer trust and an adverse financial impact, he cautioned. Jain also dwelled on technology-related risks and said the fintech revolution in banking is bringing a disruptive paradigm shift. Banking services are now being bundled with other financial and non-financial services and giving consumers the convenience of accessing the full spectrum of financial products. Indeed, the pace of technological changes is so rapid that banks will have to transform like tech companies, continuously innovating and investing in technological upgrades, he said. The deputy governor added that the risks of cyberattacks, data breaches and operational failures have also increased.

 

-Business Standard 01st June, 2023.

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more