S S Mundra: Customer service in banks - time to raise the bar!
Keynote address by Mr S S Mundra, Deputy Governor of the Reserve Bank of India, at the Annual
Conference of Principal Code Compliance Officers, organized by the Banking Codes and
Standards Board of India, Mumbai, 30 May 2017.
* * *
Shri A. C. Mahajan, Chairman, Banking Codes and Standards Board of India (BCSBI); Shri
Anand Aras, CEO, BCSBI; colleagues from the banking industry; representatives from the
media; ladies and gentlemen! At the outset, I would like to thank BCSBI for inviting me for this
annual conference of the Principal Code Compliance Officers (PCCOs) in the banks.
2. During the past 12 years of its existence, BCSBI has played a pivotal role in enhancing
awareness about customer service in banks. The Code of Bank's Commitment to Customers
and the Code of Bank's Commitment to Micro and Small Enterprises developed by BCSBI set
out common minimum standards for customer service in banks.
3. Monitoring of compliance to the Codes by member banks is one of the mandates of BCSBI
which is fulfilled through visits to a representative sample of branches by authorized
representatives of BCSBI. BCSBI, thus, helps the banks by providing an independent review and
feedback on their adherence in practice, to the self-prescribed standards. From 2013, BCSBI
has been rating banks on Code Compliance based on the inputs from branch visits and
customers feedback. This rating indicates level of implementation of important provisions of
these Codes at the first customer touch point in the bank. A release now of these ratings in
public domain is intended to increase transparency, generate public awareness and also instill a
sense of competition among the member banks for achieving a higher level of customer service.
A perusal of the ratings, however, does not exhibit any significant improvement in consumer
service rating of banks. Only 12 of the 46 banks rated by BCSBI received 'high' rating in terms of
performance while 24 were above average and 10 remained as 'average' performers. In fact, the
position has marginally worsened since 2015 survey.
4. Despite outlining of minimum standards for customer service through codification of banks'
commitments to customers, we observe that the number of complaints received by the offices of
Banking Ombudsmen continues to rise. For the first time since its inception in 1995, the number
of complaints to BOs exceeded one lakh last year. The one lakh mark has already been crossed
in the current year (July 2016 to May 2017). Our analysis has shown that percentage of
complaints on non-Adherence of BCSBI Code - Clause 8(1)(s) and 8(2)(d) of BOS over a six
year period from 2010-11 to 2015-16 has increased from 24 % to 34%. A survey conducted by
BCSBI suggests that the increase could be on account of disconnect in application and
understanding of Codes among frontline staff of the member banks. Perhaps, engagement of the
Top Management with implementation of codes in their respective banks has also declined. I
urge PCCOs to take effective steps for creating greater awareness and understanding amongst
the frontline bank staff by ensuring buy-in from the Top Management.
5. In my address today, I intend to focus on few important measures which BCSBI, the PCCOs
and the banks can initiate to further the cause of customer service in the sector.
a. Updation of codes: I am aware that BCSBI has been periodically updating the Codes of
Banks' Commitments by factoring in the relevant regulatory guidelines, developments in the
banking sector and evolving customer expectations. I am glad to learn that the Code of Banks'
Commitment to Customers is currently under review. As you are all aware, in 2014 RBI had
released the "Charter of Customer Rights" declaring five basic rights of bank customers as
broad, overarching principles for protection of bank customers. All banks have since reportedly
adopted/incorporated the Model "Customer Rights Policy" based on the Charter formulated jointly
by IBA and BCSBI. I am sure that the committee reviewing the Code of Banks' Commitments to
their Customers would be guided by the spirit of the principles listed out in the "Charter of
Customer Rights". On its part, Reserve Bank will be monitoring aberrations/ non-adherence to
the Charter during supervisory process. Specifically, I would urge the committee to factor in
following recent developments in the sector and weave them into the Codes appropriately while
reviewing the same:
(i) New branch authorization policy: use of banking correspondents
Business Correspondent (BC) Model has been a major facilitator for financial inclusion especially
in unbanked/under-banked areas. Recent RBI circular on 'Rationalization of Branch Authorization
Policy' recognizes BCs as an important pillar for delivery of banking services in under-banked
areas of the country. Some of the BCs in the past have abused the trust placed in them by the
banking system and defrauded their customers. As BCs generally serve a less 'financially
literate' population, it is important that their activities are brought under closer scrutiny by the
banks. The banks have to take ownership of BCs that they employ and also put in place
appropriate grievance redressal mechanism for cases involving them.
(ii) MSMEs: RBI has recently set out guidelines on 'Framework for Revival and Rehabilitation of
Micro, Small and Medium Enterprises' for early resolution of stress in the accounts of MSMEs,
following an ordinance by Government of India. Under this framework, the revival and
rehabilitation of MSME units having loan limits up to Rs.25 crore is envisaged. Further, with a
view to provide timely financial support to MSMEs facing financial difficulties during their Life
Cycle, RBI had advised the banks to review their existing lending policies and incorporating
therein, among others, provisions for sanctioning of Standby Credit Facility in case of term loans,
Additional Working Capital Limits, Mid Term Review of Regular Working Capital Limits, and
Timelines for Credit Decisions.
b. Synergizing the roles of PCCOs and Internal Banking Ombudsmen (IBOs) in the
banks: As I understand the customer grievance redressal architecture in the banking sector
suffers from certain structural inconsistencies. I am compelled to make this statement as I see
scope for greater role clarity and synergy in how the PCCOs & the IBOs in the banks operate. I
believe the PCCOs which act as BCSBI's nodal Point of contact with the member banks and
serve as extended arms of BCSBI for monitoring implementation of Codes in the banks at all
levels must play a more preventive role. For that to happen, the PCCO needs to be suitably
senior in hierarchy with reporting lines to the CEO/ Customer Service Committee of the
Board. I understand, however, that currently this is not uniformly so.
Similarly, the office of the Internal Banking Ombudsman which has been in place in the banks for
almost last two years does not seem to have become an effective forum. Our objective in
institutionalizing the office of IBO was to ensure resolution of a majority of the complaints at the
level of bank itself. Office of IBO was envisaged as the ultimate authority to which all
unresolved/partially resolved complaints were to be escalated before giving final verdict to the
complainant. Only in cases where the customer remained unsatisfied with the resolution should
she need to approach the BO. A continuous rise in the number of complaints to the BO is
perhaps a pointer to the fact that the institution of IBO has not been very effective or has
not been empowered enough by the Management.
It would be appropriate for the banks to invest in an efficient technology platform which doesn't
merely aggregates and tracks the complaints but also undertakes a root cause analysis of
various complaints received, thereby enabling proactive preventive action.Tthe PCCOs and IBO
could collaborate in identifying areas where the frontline staff needed clearer operational
instructions and provide them training/handholding. This is extremely important in a scenario
where pace of staff attrition/staff rotation have risen significantly. The banks could also
contemplate investing in a technology-aided FAQ platform which the frontline staff could consult
for addressing customers' queries rather than misinforming them.
I wonder whether time has come to prescribe
some mandatory qualifications for the PCCOs
also in line with that for the CFOs/CTOs. That said, RBI would be conducting an assessment of
the efficacy of the IBOs during the supervisory visits and would expect the bank management to
bring more synergy into the working of the PCCOs and the IBOs for a speedier and efficient
grievance redressal.
c. Electronic banking - security issues
Technology is being increasingly used in delivery of banking services in recent years. However, it
has also brought in associated risks of security as is evident in few high profile cyber-incidents in
the recent past. There have been several incidents of theft of personal information, fraudulent
use of ATMs, net banking frauds, ATM/ Debit card incidents or cases of unauthorized access to
bank servers. Hence, there is an immediate need for plugging all the gaps and vulnerabilities in
tech-enabled service delivery.
With greater thrust on digital banking especially in the wake of withdrawal of legal tender status of
specified bank notes and consequent increase in complaints relating to unauthorised/fraudulent
transactions, a need for having a comprehensive policy to limit the liability of customers cannot
be over-emphasized. RBI had come out with a draft circular on "Customer Protection - Limiting
Liability of Customers in Unauthorised Electronic Banking Transactions" earlier and based on
feedback received from the concerned stakeholders, final guidelines are expected to be issued
shortly. In view of the impending guidelines it would be prudent on part of the banks to internally
tighten their IT security systems and operating procedures so that grievances are minimized.
d. Customer service in the emerging regulatory/supervisory environment
i) As you are aware, several new small finance banks and payment Banks have started their
operations in the recent past. A significant chunk of the customer base of these banks would
comprise of first- time bank customers belonging to rural and semi-urban population. It is
imperative that these people are made adequately aware about the need for exercising due
prudence while transacting else they can fall easy prey to fraudsters.
RBI has already advised the Small Finance Banks and Payment Banks to put in place a high
powered Customer Grievances Cell to handle customer complaints as part of their licensing
conditions. These banks are also to be covered under RBI's Banking Ombudsman Scheme as
per the licensing conditions. On their part, BCSBI would need to enroll these new entities as
member banks so as to ensure compliance to its codes and standards.
ii) The banks also need to be prepared for following impending regulatory changes as well as
enhance their focus on some of the supervisory concerns relating to customer complaints that
have been observed by RBI. On the face of it, these might look quite obvious but these are
extremely important from the view point of customers.
The narration in the passbooks/ bank statements at present is quite cryptic and generally
inscrutable. This is despite extant RBI guidelines that mandate recoding of intelligible
particulars in the statements. Of late, we have received numerous complaints not only from
customers but also from the investigative agencies who find it extremely difficult to
understand the transactions during the course of their investigations. RBI is in the process of
reiterating its guidelines to banks to provide essential minimum relevant details in respect of
various transactions in the passbook/statement.
The safety of cheques put in the cheque drop boxes as also the quality of cheque leaves
enabling printing of fake cheque leaves is a matter of concern for RBI.
Customer service to senior citizens is an area of major concern for the RBI. Difficulties
faced by pensioners in receiving updated pension, issuance of life certificates, verification of
signature, need for periodic KYC etc. Several grievances have also been received from
nominees of deceased customers while seeking settlement of death claims.
Documents to serve as an address proof for KYC compliance continues to remain a major
irritant even while the customers are permitted to submit a simple declaration about the
current address which may be different from the address proof which was originally
submitted to banks. Similarly, the customers are also allowed to open a small account in the
banks even without "proof of identity and address" by submitting a recent photograph and
signature.
While banks have been granted autonomy in fixing minimum average balance or for
charging for premium services, it should not be used as an excuse to deny service or
to drive away common man.
6. Some of these and many similar issues facing customers would have emerged from the root
cause analysis which I alluded to a little earlier paving the way for banks to take corrective action.
I would like to use this forum to inform that RBI would be extensively focused on mis-selling of
third party products, instances of violation of KYC guidelines, imposition of usurious service
charges during the current year's supervisory cycle. Further as you are aware, RBI has
specifically established a department for examining the instances of regulatory violations with a
view to taking enforcement actions on the errant banks.
Way forward
7. In view of new developments in the area of banking, BCSBI would have to proactively identify
the areas in which the Codes need to be revised and made contemporaneous. Before
concluding my talk, by way of setting out customer service agenda for the banks and a few
specifically for the PCCOs for the ensuing year, I would like to reiterate following points:
Work towards operationalizing a query portal which will be useful for the inexperienced
frontline staff especially in view of higher attrition/rotation. This would enable them to impart
correct information rather than avoiding or giving wrong information.
Updation of Code of Bank's Commitment to Micro and Small Enterprises should include
commitment on revival and rehabilitation framework and lifecycle financing of MSMEs.
Though the BOs don't intervene in credit decisions, several complaints about delayed
decision-making in granting of loans to MSMEs, education and housing loans are received.
There is a need to include a suitable clause in the code for setting deadline for
decisionmaking on such loans.
The payment system area has become quite integrated with customers of non-bank players
utilizing the banking channels to fund their e- wallets etc. In situations where conflict arises, it
would be expected of banks, being the senior and long -established players to take initiative
for quick resolution so that the customer is not put to harassment
Lessen the frustration faced by the customers while dealing with call centers or automated
response systems. In this context, while the efforts by some of the banks to use artificial
intelligence-driven chatbot for enhancing customer service are welcome, it needs to be
ensured that the customers do not end up receiving robotic responses!
8. I would like to end this section by once again reiterating the idea of 'account number
portability' which I first advocated a couple of years ago. Back then the concept might have
appeared somewhat abstract but with technological advancements in the field of payment
system such as UPI etc. coupled with massive enrolments under Aadhaar and their linkage to
individual bank accounts, it has come within the realms of possibility. As such, the prospect of an
aggrieved customer silently moving her account to another bank in the near future has become
very real.
Conclusion
9. I would like to conclude by acknowledging BCSBI's role in the area of customer protection and
in formulation of policies for elimination of customer grievance. I have briefly spoken on the role of
the Codes of BCSBI and the need to keep them dynamic. In the current scenario, the Codes
have to respond to three significant developments in the banking sector - (a) the growing
challenges and realities of industry mainly arising from adoption of technology; (b) addition of new
customers in the formal banking structure arising from the financial inclusion efforts and (c)
emergence of new entities like payment banks and small finance banks. Under the
circumstances, it is imperative to design an architecture where BCSBI, BOs, IBOs and PCCOs
complement the efforts of each other without any friction/overlap. I am sure the forum will
deliberate upon some of these issues in greater detail in course of the Conference.
I once again thank BCSBI for inviting me and wish the Conference all success!