N epal’s banking sector has spent years building branches, digital platforms, risk systems and regulatory capabilities. But there is another infrastructure that may determine whether these investments generate sustainable performance, which is ‘people’. The sector employs about 50,000, of whom about 80% works in private banks and 20% in public banks. Women account for 40% of the workforce. At the same time, consolidation has reduced the number of commercial banks from 27 in 2020 to 20, fundamentally changing the competitive and organisational landscape.
Against this backdrop, a finding from a recent study of human resource (HR) practices in Nepal’s commercial banking sector has drawn great managerial attention: employees reported relatively low satisfaction with their jobs, yet their intention to leave was also low.
At first glance, this seems like good news. Employees are not leaving. But it may actually be an alarming situation. The important question for bank CEOs is no longer simply, “How do we retain our employees?” It is: “Why are our employees staying?”
1. The Problem: Retention Without Satisfaction For decades, employee turnover has been treated as one of the clearest indicators of HR health. If employees stay, organisations tend to assume that their HR systems are working. That assumption is increasingly unreliable. Employees express dissatisfaction arising from limited growth opportunities, inadequate compensation and weak performance-management systems. Yet, turnover intention remains low.
This creates what might be called the “sticky employee” phenomenon: employees are dissatisfied enough to disengage, but not dissatisfied enough to leave. The organisation may therefore experience hidden turnover: not employees leaving the payroll, but employees leaving psychologically.
Why does such a paradoxical situation exist? The possible reasons could be: a) Nepal’s banking jobs continue to offer a strong bundle of security, social recognition and financial benefits; b) Employees may also perceive limited attractive alternatives in the labour market; and c) Cultural risk aversion, organisational loyalty and the
perceived cost of changing employers further discourage mobility.
2. Analysis: Why Are Employees Staying? Several established theories of motivation help explain this paradox.
Herzberg’s two-factor theory distinguishes between hygiene factors, such as salary, security, policies and working conditions, and motivators such as achievement, recognition, responsibility and advancement. Nepali banks may be providing sufficient hygiene factors to prevent employees from leaving while failing to provide enough motivators to make them genuinely enthusiastic about their work.
This explains how an employee can simultaneously think: “I do not want to leave this bank” and “I am not particularly satisfied working here.”
The job demands–resources (JD-R) perspective offers another explanation. Banking jobs can involve high workloads, sales pressure, regulatory demands, customer expectations and long working hours. These are job demands. Resources such as autonomy, supportive leadership, recognition, career opportunities,
learning and adequate staffing can offset those demands. When demands remain high but resources are inadequate, burnout and disengagement can emerge, even when employees remain in the organisation.
A third explanation comes from organisational commitment theory. Employees do not stay only because they want to. They may stay because they feel they ought to, or because leaving would be costly. The latter one, often described as continuance commitment, is particularly relevant to Nepali banking. Job security, social status, accumulated benefits and uncertainty about alternative employment can make leaving unattractive even when intrinsic satisfaction is low.
3. The Challenge Globally, banking is moving from branch-centred and transaction-oriented work toward digitally enabled, data- driven and increasingly AI-supported business models. The World Economic Forum’s Future of Jobs Report 2025 identifies technological change as a major force reshaping employment and reports
that approximately 39% of workers’ existing skill sets are expected to change or become outdated by 2030.
AI, big data, cybersecurity and technological literacy are among the fastest-growing skills, alongside analytical thinking, resilience, creativity and adaptability.
The WEF identifies bank tellers among occupations expected to decline, while technology-intensive financial roles are among those growing fastest.
This has an important implication for Nepali banks: the employee who is retained today may not possess the capabilities the bank needs tomorrow.
This changes the meaning of HRD. Training cannot remain primarily compliance-oriented. In general, training in Nepali banks often focuses on compliance rather than strategic competencies, attributing to major skill gaps.
Internationally, the emphasis is shifting toward continuous reskilling and talent mobility. The WEF reports that 85% of surveyed employers plan to prioritise workforce upskilling, while 63% identify skill gaps as a major barrier
to business transformation.
Financial institutions are also beginning to explore AI in talent management itself. The analysis note of Deloitte Centre for Financial Services (2025) shows that financial-services organisations face recruitment and retention challenges while AI remains relatively underused in talent functions.
Nepali banks therefore face a double challenge: they must make existing employees more satisfied while simultaneously making them more future-ready.
4. The Solution The answer is not simply higher salaries. Compensation matters, but throwing money at a motivation problem is unlikely to solve it. Banks need to redesign the employee value proposition around four interconnected dimensions: fairness, growth, meaning and flexibility.
First, make performance management credible. Address the current weaknesses in performance appraisal by establishing objective, transparent, and criteria-based performance management systems.
Employees need to understand what
good performance means, how it is measured and how performance affects rewards, development and promotion. Appraisal should become a management conversation of banks rather than an annual administrative ritual.
Second, make career progression visible. One of the strongest reasons employees become dissatisfied is not necessarily where they are today, but uncertainty about where they can go tomorrow.
Banks should establish transparent career pathways, competency frameworks and succession plans. Employees should be able to see the skills required to move from assistant to officer, officer to manager and manager to leadership positions. Career development should not be based on informal relationships (Afano Manchhe, Bhansun and Chakari/Chaplusi), rather it should depend on demonstrated competence.
Third, turn training into employability. A training programme should answer a simple question: What capability will this employee gain that matters to the bank and to the employee’s future?
Banks should shift from compliance- based training to need-based impactful training by combining banking knowledge with data analytics, cybersecurity, AI literacy, digital customer experience, risk management, leadership and strategic thinking.
This is particularly important because learning can convert the retention paradox into a competitive advantage. Employees who see their organisation investing in their future are more likely to reciprocate through commitment and loyalty.
Fourth, redesign work itself. Employee dissatisfaction cannot be addressed entirely through HR policies if the underlying job remains exhausting. For example, long working hours, workload pressures and inadequate work-life balance are common concerns of employees.
What capability will this employee gain that matters to the bank and to the employee’s future?
Banks should examine staffing levels, shift arrangements, workload distribution, leave practices, flexible work possibilities and frontline employee wellbeing. This should not reduce accountability, rather create an environment of sustainable performance system.
What CEOs, HR Managers and Nepal Rastra Bank Should Do? The challenge requires action at three levels.
For bank CEOs: stop treating low turnover as proof of employee satisfaction. Put employee engagement, internal mobility, critical-skill development and leadership quality on the strategic dashboard. The board should periodically review human- capital indicators alongside financial and risk indicators.
For HR managers: transform HR from an administrative and compliance function into a strategic business
partner. The poor HR-business alignment, insufficient employee voice and weak performance systems are persistent challenges at present. HR should therefore own workforce analytics, succession planning, competency development and employee experience, not merely recruitment, payroll and training administration.
For Nepal Rastra Bank: move beyond regulating financial capital to strengthening human capital governance. Establish minimum Banking HRM Governance framework for recruitment, performance appraisal, succession planning, diversity and training. Periodic HR reporting, HR audits and incorporating HR indicators into supervisory and compliance assessments are also suggested.
In an increasingly digital banking industry, human capital may become the most important competitive advantage that technology cannot replace. Therefore, Nepal’s banks should stop asking only how to retain employees. They should start asking how to make employees want to stay and want to contribute. That is precisely the difference between merely having a workforce and actively building human capital.
(Thapa is Assistant Professor at Central Department of Management, Tribhuvan University.)
