Reserve Bank of India (RBI) governor, Shaktikanta Das expressed concerns over customer complaints in private sector banks at the Conference of Directors of Private Sector Banks, Mumbai, on November 18, 2024, in Mumbai. ‘Trust is the bedrock of banking, and the industry fundamentally relies on the faith of depositors and investors for its stability and growth’, Das said in his address to the Directors of the private sector banks.
While he was talking about good governance in banking, he raised the issue of customer complaints. Referring to the inspection report, he said that the customer complaints are being classified as customer queries. In many cases, it has not even been raised to the next level for resolution. These incidences are against the primary objective of governance and customer-centricity. Banks should work towards this and ensure that customers’ grievances are not silenced without resolution and escalated whenever needed.
Here are the key issues Das talked about.
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Customer Complaints Are Classified As Customer Queries:
Das noticed that banks are categorising customer complaints as customer queries. Because of the misclassification, the redressal of complaints will be different affecting customer service standards.
Complaints Are Not Escalated To The Internal Ombudsman Of Banks:
As per the guidelines, a customer facing some issue with a bank is required to make a complaint to the bank through the mail, physical mode, or online through the CPGRAM portal and if the response is not received within 30 days or is not satisfactory, it needs to be escalated to the RBI Ombudsman.
RBI observed that the banks are not escalating the complaints internally. As per the laid procedure, the banks should escalate customers’ complaints internally to the internal ombudsman (IO) if these are not resolved before they convey it to the customer. RBI introduced the internal ombudsman scheme mechanism in 2015, and under it is the bank's duty to escalate complaints if resolution is unsatisfactory. Customers need not escalate it to the IO of the bank.
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Service Charges And Penalties Used For Profit-Making:
Banks should look at their charges and the penalties imposed on customers for various services. Whatever internal policies banks make for customer service, grievance handling, pitching the products, etc., it should align with the ‘regulatory expectations’ (the 10-point standards) and be practiced religiously. Das emphasised that these should not be used for profit-making purposes.
Further, banks sometimes do not disclose the charges or make selective disclosures of the penalties and the charges, which deteriorates the customer-centric standards and should be avoided.
Forced Bundling:
The observations from the inspection report found that the banks sometimes force customers to have bundled products even if a customer does not need them. This could be due to the lack of transparency and awareness that banks push customers to buy or invest in products as a bundled product. For example, a bank locker with an account or a fixed deposit.
Fair Lending Practices:
Lending is a profit-making activity but it should not be unfair to the customers. At times, the bank does not disclose the charges to the customers or charges them without their information. Das advised banks to follow fair lending practices by making loan details transparent to customers and improving the grievance redressal system.
He emphasised increasing financial literacy among customers especially the rural and marginalised populations who do not understand the complexities of financial products and are vulnerable to unfair practices.
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Here is the 10-point charter referred by Governor Das.
10-Point Charter From ‘Governance In Banks: Driving Sustainable Growth And Stability’ In 2023:
Governance and Stability
Ensuring requisite qualification and expertise in the Board
Objective and Independent Board
Role of Chairperson, Board Committees, and Managing Director/Chief Executive Officer
Tone from the Top; Corporate Culture and Value System
Quality of Information
Effective oversight of Senior Management
Business Model and Conduct
Integrity and Transparency of Financial Statements
Independence of Assurance Functions; risk management, compliance, and internal audit
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While highlighting the lacuna on the customer centricity, governance, business model, and transparency aspects in Monday’s conference on November 18, 2024, Governor Das reminded private sector banks of the 10 points from last year’s conference and asked them to take appropriate measures ensuring that banking remains a trustworthy institution.
According to the annual report of RBI for the financial year 2022-23, the total complaints had increased in FY 2022-23 by a whopping 68.24 per cent. The total number of complaints in FY2022-23 was 7,03,544 compared to 4,18,184 the previous year. However, around 67 per cent of complaints (4,68,270) were not maintainable and closed by the Centralised Receipt and Processing Centre (CRPC).