Mumbai: Macroeconomic headwinds notwithstanding, the banking, financial services and insurance (BFSI) sector is expected to give out an average double-digit salary increase, said senior industry executives. Top performers in high-demand functions such as risk, compliance, technology and frontline roles are likely to take home handsome pay-outs, as companies want to retain key talent at a time when attrition continues to be high.
The average annual increment after the performance appraisals for fiscal 2024 is likely to be 10%, according to a study conducted for ET by Ciel HR Services. For high performers, it could be 12-20%.
Most companies are expected to announce the hikes in the next 2-3 weeks.
About 34% of the companies covered for the study reported likely increment rates of 15% or higher, while another 34% expect the hikes to be between 10% and 15%. About 18% said the increment will hover in the range of 5-10%, while for 14%, it could be below 5%.
The study covered 170 companies, including major banks, non-bank finance companies, insurers as well as asset management and fintech firms.
“Attrition in the BFSI sector continues to remain high and companies are focussing on talent retention,” Ciel HR chief executive Aditya Narayan Mishra said.
While elevated interest rates, geopolitical tensions, high oil prices and challenges to raise capital are concerns, the focus will intensify on retaining existing talent as banks continue to expand branches, ramp up retail and SME books and expand digital offering, experts said.
“The domestic economy is doing well and credit demand is strong. There is a high push among banks to gather deposits. There is a focus on ramping up retail while continuing with digital offerings. Banks are looking at branch expansion in a big way as part of a long-term focus. There is also a lot of push on SME books,” said Abheek Barua, chief economist at HDFC Bank. “As a result, it is crucial for companies to retain talent, especially as attrition is still fairly high even if it has lowered from last year’s peak levels.””People in compliance, risk, AI, Gen AI, and frontline sales staff are crucial talents for the future and they may be adequately rewarded,” he added.
“Private banks’ profits have been going up in Q1, Q2 and Q3 of last FY and Q4 too is expected to be robust. Salary hikes to staff will also be commensurate,” said Madan Sabnavis, chief economist at Bank of Baroda.
Niche areas like wealth management and fund management are witnessing potentially higher appraisal rates, reflecting evolving talent demand within the sector and good returns in the stock market and mutual fund industry. Salary hikes in the insurance and banking sectors are expected to remain the same as last year with slightly higher increments for tech-specific roles.
The average annual attrition in the BFSI industry – especially in the frontline sales roles – is around 30-40%, according to industry estimates. Attrition is as high as 60-70% in insurance and 35-40% in retail banking, while in broking, it is about 25%, as companies continue to lose out manpower to peers in the BFSI sector or to other industries, said industry insiders.
While one section of companies is witnessing higher attrition, for some, it is showing signs of stabilising or lowering, executives said.
“On the macro side, concerns loom around household savings not keeping pace with credit growth, uncertain private investment scenario and strong global headwinds including (US) Fed rates, geopolitical tensions, strain on raising capital, and banks will keep a close watch on these factors,” said Barua.
“Appraisals will remain in line with last year while we continue to acquire talent in areas such as digital, compliance and risk, among others,” said the HR head of one of the largest private sector banks, who did not wish to be named. “We are expanding our branch network where we will need to ramp up manpower, even as banks are sweating it out due to the global headwinds,” the person added.
