contested the claim stating that at the time of availing lower quantum of loan the borrower had not submitted an insurance proposal form and hence, the bank had not taken insurance. our analysis revealed that the loan installments paid by the customer included the insurance premium as well but the bank had failed to complete the process of insurance. the appellate authority adjudicated that the bank was at fault and it didn ’ t have appropriate procedure to secure insurance after the sanction of the loan and hence, an award was given in favour of the customer. 14. several field level studies have been undertaken by various consumer organizations in this area. rbi has also undertaken study on mis - selling of third party products ( tpps ) in semiurban and rural areas which has revealed startling facts. the right to suitability enshrined in our charter of customer rights has been totally ignored or rather knowingly violated for the reasons best known to the banks. rbi is seized of this issue and may be constrained to take strict actions including imposition of heavy penalties, if the banking industry continues to follow such unethical and unacceptable practices of mis - selling of third party products. it would be appropriate for the banks to put in place a system of periodic inspection of the sale of third party products by involving their internal inspection teams and plug the loopholes, wherever identified. the pccos need to play a central role in administering this. money muling 15. another area that the banks need to guard against is misuse of accounts for money muling. in a recent episode, it was observed that an idle account was used for receiving and transferring large fund without the knowledge of the account holder. the fact came to light only when the income tax authorities served a notice on the account holder. this episode highlights the failure of bank ’ s systems and processes for monitoring of accounts. the newly opened accounts under the pmjdy could be very vulnerable to such sharp practices and hence, banks need to clearly guard against them. kite flyers and the ponzi scheme operators also sometimes use mule accounts to swindle public money. i sincerely urge the pccos gathered here to seriously introspect on this aspect as this is not one - bank ’ s headache or a bank - specific issue. it is an industry - wide issue with wider ramifications. banks should have a robust system to monitor the transactions being undertaken in those accounts for taking proactive action, which entails a better customer protection. though the banks have some

s mundra : customer service in banks – caveat venditor 1 keynote address by mr s s mundra, deputy governor of the reserve bank of india, at the conference of the principal code compliance officers, organized by the banking codes and standards board of india ( bcsbi ), mumbai, 23 may 2016. * * * the assistance provided by shri r. sathish and shri p. j. mathkar is gratefully acknowledged. introduction 1. shri c. krishnan, member, governing council, banking codes and standards board of india ( bcsbi ) ; shri anand aras, ceo, bcsbi ; colleagues from the banking community, representatives from the media ; ladies and gentlemen! at the outset, i would like to thank bcsbi for inviting me to inaugurate this annual conference of the principal code compliance officers ( pccos ) in the banks. over the years, bcsbi has been instrumental in driving improvement in level of service extended by the banks to their customers. all of you are pretty familiar with role of bcsbi so i am not going to elaborate on that. you must also be aware about the two sets of codes that bcsbi has developed for its member banks, namely : • code of bank ’ s commitment to customers and • code of bank ’ s commitment to micro and small enterprises these codes are reviewed periodically with a view to incorporate all the relevant regulatory guidelines, contemporary developments in the banking sector and evolving customer expectations. the bcsbi, in a way, helps the banks by providing an independent review and feedback on their adherence to the standards. rbi attaches great importance to the work and assessments of the bcsbi, which places an onerous responsibility on the bcsbi in this relatively unexplored territory. 2. i am sure that today ’ s deliberations will be a good opportunity for the participants : • to deliberate upon the issues in implementation of the codes • to appreciate the importance of imbibing the codes as a basic norm in day to day dealing with customers and • to understand the linkage of the codes with the overarching principles of charter of customer rights which is being implemented in your respective banks 3. a major challenge for all of us in the banking industry is to develop the right attitude for rendering service to customers. a broader question is whether we can define the standards of behaviour? perhaps, it may be easier to identify the elements of unacceptable behaviour and try to