Deepali Pant Joshi: Banks must build a structure to provide superior and
efficient customer service
Inaugural address by Dr Deepali Pant Joshi, Executive Director of the Reserve Bank of India,
at the Conference of Principal Code Compliance Officers of banks, convened by the Banking
Codes & Standards Board of India (BCSBI), Mumbai, 20 May 2014.
* * *
Accompanying charts can be found at the end of the speech.
Respected Shri Mahajan, Smt Rama Bijapurkar, member, Governing Council, Banking
Standards Codes and Standards Board of India (BCSBI), Shri N Raja, CEO, BCSBI and
banker colleagues. At the very outset, I thank Shri Mahajan, Chairman, BCSBI for the kind
invitation to address Principal Code Compliance Officers of the BCSBI, this afternoon. I
attach a great deal of value to this interaction. The day long deliberations will provide you the
opportunity to
• Brainstorm with PCCOs of the member banks on issues relating to Code
implementation.
• Discuss how to raise the bar for customer service in your own banks.
• Share experiences and good practices.
The Banking Codes and Standards Board of India is an autonomous and independent body
set up by the Reserve Bank. BCSBI is mandated to evolve Codes and Standards for banks
to follow while dealing with their customers so as to ensure that the customers are enabled
certain minimum standards of customer service. BCSBI has developed two sets of Codes for
member banks viz.
1. Code of Bank's Commitment to Customers and
2. Code of Bank's Commitment to Micro and Small Enterprises
These Codes are periodically reviewed and revised in order to reflect the extant regulatory
guidelines, contemporary developments in the banking sector and evolving customer
expectations.
Consumer confidence and trust in a well-functioning market for financial services promotes
financial stability, growth efficiency and innovation over the long term. (Chart)
Financial consumer protection, when reinforced with financial inclusion and financial literacy,
will lead to enhanced financial stability. We have had a great thrust on financial inclusion; as
a result, several new consumers of banking products have come into the banking system.
We have to ensure adequate customer protection for these new users of banking services.
We have to help them through financial education, literacy and awareness to use the diverse
range of products and services offered by the banks. Awareness of the customer has to be
increased. With greater awareness of customers, must come, heightened responsibility of
the provider of financial services. Please appreciate that today RBI, BCSBI and banks are all
working under a greater lens of public scrutiny and under Right To Information. Implementing
the consumer protection framework in such an environment necessitates that banks have
complete knowledge of products and services offered and treat their customers fairly. This
idea by itself does not mean much to the customers unless it is set against metrics enshrined
in standards and codes.
Through customer protection initiatives banks must ensure adequate protection of rights of
their individual, vulnerable, small customers. As Dr Raghuram Rajan expressed in his
Seminal Report, A Hundred Small Steps - Report of the Committee on Financial Sector
Reforms and I quote "Consumer protection is important. Not every household is fully
cognisant of the transactions they enter into. While the line between excessive paternalism
and appropriate individual responsibility is always hard to draw in a developing country like
ours, it may well veer to a little more paternalism in interactions between financial firms and
less sophisticated households". In his much acclaimed book "Fault Lines", the Governor has
addressed the issue of multiple fault lines caused by a sophisticated, amoral and competitive
financial sector. We need to guard against such fault lines by ensuring that our banking
sector which has done well so far continues to do so. We have a banking system which
abides by the laws, which is sensitive and empathetic to the needs of customers and has a
robust grievance redress mechanism.
The Pan India Banking Ombudsman Scheme functions as an inexpensive, swift grievance
redress mechanism. Banking Ombudsman has to work through the processes of conciliation
mediation and adjudication. Here, the nodal officer has an important role to play. The rules
require that the banks must first examine the complaint and try to resolve it. It is necessary
for the nodal officer to give a swift revert on the complaint to the Banking Ombudsman. It is
also essential for the nodal officer to do a root cause analysis and drill down to the specific
cause of the complaint to ensure that the same is addressed. For every complaint that is
received, there may be several such irritants across branches, or there may even be a
systemic issue underlying the complaints which may be serious.
All the member banks have adopted these codes, drawn up in consultation with the member
banks through IBA. At ground level, the position of code implementation is not satisfactory.
Complaints received by Banking Ombudsman Offices across the country and also through
interactions with customers in Town Hall meetings by both Banking Ombudsmen and BCSBI
clearly reflect the need to raise the benchmark for customer service through more effective
implementation of these codes.
BCSBI monitors and assesses the compliance with its codes and standards. These
assessments bring into sharp focus the flagrant violations of the code and shortcomings in
code implementation. This aspect merits serious attention by PCCOs. 10% of the member
banks rated by BCSBI in 2012-13 have good rating, with 52% earning Above Average and
38% earning Average/Below Average ratings. These clearly show that a number of banks
need to tone up their code implementation and thereby fulfil their commitments to their
customers in terms of the codes.
According to the category-wise data on complaints sourced from all 15 offices of Banking
Ombudsmen, majority of complaints were regarding credit/ debit cards fallowed by
nonobservance of the fair practices code, deposits account, failure of commitments made under
the BCSBI code and pensions. There is serious concern on the number of complaints,
though the disposal rate may be 95%. I find that there are several violations of the BCSBI
codes. This is not a situation of comfort for the RBI and difficult to comprehend as the banks
have voluntarily accepted the codes formulated by the BCSBI. (Charts)
In a sense, BCSBI is functioning as a self-regulatory organization. There is a need to
improve customer services in public sector banks across all spheres of banking and
particularly in areas related to deposits accounts, loan and advances, failure of commitments
made, non-adherence to the BCSBI code and pension. In addition, services related to
credit/debit cards, which have been subject to frequent complaints from customers in recent
years, need to be improved across all banks groups. With the advent of technology, there is
a need to further strengthen customer service in areas of net and mobile banking to enhance
customer confidence in these technologies. There is a further need to improve the customer
data base, which apart from facilitating banks to acquaint themselves with the whereabouts
of the customers, would help them to prevent incidents of fraud/money-laundering.
Complaints related to unauthorized fund transfers, fraudulent withdrawals from ATMs using
duplicate cards, phishing E-mails aimed at extracting personal information have registered
significant increase in recent times. Going forward, there is a need for building up a robust
mechanism to prevent incidents of fraud in areas of mobile/net banking and electronic fund
transfer.
Treating customers fairly, "TCF", also must ensure that there is a clear specification of
liability, if things go wrong. Simplicity of the product sold must be ensured and there is a duty
to inform the customer about the features of the product. Mis-selling will invite
consequences. Banks must help customers fully understand the features, benefits, risks and
costs of the financial products they buy, minimize sale of unsuitable products by encouraging
best practice before, during and after the sale The sense of protection which consumers
expect and experience while dealing with banks is the benchmark against which we need to
evaluate our customer care and customer service policulture of customer-centricity and
sensitivity to the needs of the customers especially those belonging to the vulnerable
sections of the society. The market forces, competition, technology will continue to help
banks achieve better penetration and extend their reach, but these attributes must also result
in better, affordable and easy access to banks and banking. As Dr. Rajan puts it, we need a
frugal model. We all need to enshrine basic rights for all financial services consumers by way
of a Charter of bank customers' rights.
FSLRC has expressed that all financial laws and regulations must protect the interests of the
consumers. It recommends a framework for customer protection against mis-selling and
defrauding through the fine print stealth banking etc. We must protect customers against
unfair contract terms, unjust conduct and protection of personal information through fair
disclosure and redress of consumer complaints by financial services providers.
Annual Policy Statement released on April 1, 2014 by Dr Rajan, Governor RBI has clearly
spelt out that consumer protection is an integral aspect of financial inclusion. The Reserve
Bank proposes to frame comprehensive consumer protection regulations based on domestic
experience and global best practices. The banks that have internalized the codes enunciated
by the BCSBI may not have much difficulty in adapting to the new statutory framework. The
statutory framework also comes with explicit rights, the customers enjoy and the implicit
duties that are cast on the banker.
The Nachiket Mor Committee on Comprehensive Financial Services for Small Businesses
and Low Income Households has pointed out and I quote "When the fact is considered that
imbalances in information, expertise and power between the buyer and seller of financial
products will only be exacerbated in the future then it becomes clear that, existing
approaches to customer protection have severe limitations. The "Caveat Emptor" principle
has led to fundamental flaws in our present consumer protection architecture. From the
principle of "Caveat Emptor", Let the Buyer beware, we have to move to the principle "Caveat
Venditor", Latin for "Let the Seller Beware". It is a counter to "Caveat Emptor" and suggests
that seller can also be deceived in a market transaction. This forces the seller to take
responsibility for the product and discourages sellers from purveying products of inferior
quality. The principle vests the burden of proving that the shortcoming, deficiency of service
was absent, on the seller of the product. So what should be the framework governing
customer protection? (Chart)
We need to enshrine these principles in a Customer's Charter of Rights and duties of banks
towards their customers. "Caveat Venditor" will necessitate these. Last but not the least;
banks must focus on improving the skillsets of staff and front-line managers who are face of
the bank for the customers. With increasing competition, banks that survive and succeed will
be the ones that provide quality service. Research studies have repeatedly shown that
customers are willing to pay for quality service.
Banks that wish to stay ahead must therefore systematically build a structure that aims at
providing total quality service which is superior and efficient. I wish your deliberations all
success and close with the hope that, these will have an impact far beyond immediate issue.
Thank you for a patient hearing.
BIS central bankers' speeches
Complaints received in the offices of Banking Ombudsmen: 2012-2013:
Complaint Category wise
Complaints regarding Non-adherence to BCSBI Codes: 2012-2013
Complaint Category-wise
BIS central bankers' speeches