Non-banking financial companies (NBFCs) are expected to witness a rise in attrition among front-line and mid-level staff as various new entrants ramp up hirings.
As a result of this, experts feel that the operating expenditure of incumbent NBFCs will rise further as they rush to make new hires and retain existing employees.
It also unveiled plans to launch business and merchant loans for self-employed individuals, auto loans, home loans, and loan against shares.
With the demerger of Jio Financial Services from itself, Reliance Industries joined the list of large corporates that intend to capitalise on the rising demand for credit.
Recently, Bajaj Auto announced that its subsidiary Bajaj Auto Consumer Finance has received the Reserve Bank of India (RBI) approval to carry out operations as a non-deposit taking NBFC.
With the entry of these entities, incumbent NBFCs face a greater risk of attrition as the new entrants ramp up hirings with an aim to meet strategic objectives, say experts. “The challenge will actually be at the ground level. I am talking about the branch staff, credit executives, collection executives etc. These employees will see stability in a company like Jio Financial,” says Bhavik Hathi, managing director, Alvarez & Marsal.
“Because the compensation levels are so low, these employees do tend to move for even a differential of `5,000 a month,” he added.
With a digital and physical focus, entities like Jio Financial Services are expected to hire a front-end staff from across various departments. This will in turn, lead to higher attrition among incumbents, say experts.
The battle for headcount comes when attrition is already a problem at a front end or mid-level staff.
Latest data from TeamLease Services indicates that attrition at NBFCs was at nearly 110% in 2022-23(April-March), among the highest in the banking, financial services and insurance segment.
Specifically, experts pegged the attrition at around 45-50% at permanent staff, and at around 7-8% per month for contractual staff.
“Today, companies want skilled professionals who are able to deliver growth in a short period of time. Nobody wants to offer a learning curve. Everybody wants experience. This competition often leads to poaching of talent in banks and NBFCs and this results in churn,” says Chatterjee.
In order to deal with the churn, NBFCs have adopted to variety of strategies including mass hirings, salary revisions and offering lucrative employee stock option plans.
While the salaries at NBFCs have largely been stagnant for the past three financial years, two-to-three large lenders have made revisions in June and July, a senior official at a staffing and recruitment services company said. Here, the salary hike is in the range of 10-15%.
“Any industry tries to shore up its defenses if there is a feeling of high attrition / talent movement. This creates a temporary shortage and may lead to increase in both salary and non-salary expenses in the said industry,” Lohit Bhatia, President- Workforce Management, Quess Corp said.
The consolidated operating expenses of Bajaj Finance and IIFL Finance rose 20% and 23% year-on-year(y-o-y) respectively in July-September. It rose 5% and 7% respectively on a sequential basis.
With the entry of new entities, many incumbents are opting to increase their headcount so that they have sufficient manpower to manage their businesses. Experts feel that there is a skill-gap among the available pool of prospective employees, and this has accentuated the challenge for these NBFCs.
“While entry-level talent is hired in large volumes when a city/state is launched, the mid and senior hires continue for a longer period till projects are well stabilized and address all talent concerns,” Bhatia said, adding that these staff may be hired from similar industries that require specific skills or even from different fields which are not “super niche.”
On the other hand, the staff expenses of Jio Financial Services rose nearly 167% q-o-q in the September quarter, which indicates that the company is on a hiring spree.
“While new entrants require people in bulk at the entry level, they would also require zonal or area managers to oversee these employees. The easy pray here is existing NBFCs and banks,” Chatterjee said.
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