RBI governor’s growth optimism overlooks India’s rural distress

livemint.com:

Bank of India (RBI) governor Shaktikanta Das draw attention to some of these contemporary dilemmas confronting central banks. The RBI governor, in copybook central banker mode, has duly pointed to a systemic risk routinely discounted by large commercial banks: high levels of staff attrition.

Most leading private banks have experienced 30-40% attrition rates on an average during 2022-23. One of the reasons for the high turnover levels is growing demand for experienced hands from non-banking finance companies and freshly-minted fintech firms.

Private banks hit by high attrition rates have maintained a nonchalant exterior, claiming that exits were largely concentrated at the junior and entry-level positions, leaving their core institutional knowledge and expertise unaffected.There are many ways to unpeel this. One, entry-level human resources policies in banks and other financial service providers often resemble feudal systems, over-working executives and under-paying them.

But, more importantly, a large proportion of the staff heading for exits is from the sales function because these employees are unable to cope with the aggressive and unrealistic (even unethical occasionally) sales targets typically set for loans, credit cards or insurance products. In essence, most private banks have become sales factories, calibrated with perverse incentives and carrying seeds of future crises.

But questions about a central banker’s role have been revived by the RBI governor’s growth optimism. At Business Standard’s recent banking conclave, Das exuded confidence: “The second quarter GDP number, as and when it is released, at the end of November, in all probability will surprise everyone on the upside." This implies that GDP growth for