Moneylife Events
Customer service in banking is not negotiable, asserts Dr Chakrabarty

The focus of the 'Open House with Dr Chakrabarty' organised by Moneylife Foundation was on all aspects of banking services, especially on mis-selling of third party products, grievance redress system and technology glitches in banks

At a Moneylife Foundation programme today attended by a packed audience in Mumbai, the deputy governor of Reserve Bank of India (RBI) Dr KC Chakrabarty said that, "Customer service in banking is not negotiable, but customers must be aware about their rights. If customers depend on regulator for simple things like reading forms in details before signing blankly, then the banking system will not function". He was speaking at an Open House in Mumbai organised by Moneylife Foundation.

"Customer is the most important part of a banking system and it is necessary that the bankers do  not ‘squeeze’ customers. However, after saying this, we must understand that banking is not just a service but it is also a business and banks need to levy charges on services in order to survive", Dr Chakrabarty said.

While accepting that mis-selling should not happen in banks, the RBI deputy governor said, “Mis-selling is same across banks and brokers and we need to decide to first identify what is mis-selling. For example, insurance penetration in our country is just 5-6%. However, even the highly educated people fall for ‘higher returns’, rather than the insurance and sign papers blankly”.

Earlier, while welcoming the guests, Debashis Basu, Founder Trustee of Moneylife Foundation and Editor & Publisher of Moneylife, said, “Ideally, banks should stop selling third Party Products: They often do not know what they are selling and do not care what happens to customers who buy them. There is no formal process of learning about a product, or about ethical selling. And they are never accountable for the outcome.” Moneylife Foundation has been arguing that while bankers are supposed to stand for trust; they hold a lot of money on behalf of customers. “Yet, today, bankers are often being referred to as banksters for mis-selling third-party products or for rampant mismanagement of money under the garb of wealth management services. Insurance products, gold at higher than market prices with no buyback, and the worst of all, Wealth Management Products including unregulated products like Art Funds are all sold by banks by exploiting the depositors' trust. Unfortunately, this often inflicts large losses on the hapless bank depositor,” pointed out Mr Basu. Moneylife has narrated several such cases. “As a consumer organisation, all we want is something simple and logical: we want bankers to be made responsible for what they sell,” appealed Mr Basu to the Deputy Governor.

Monelife Foundation placed before the Deputy Governor, a few submissions regarding third  party products.

Selling process: If they continue to sell these products, a specific sign off by the customer on all clauses denoting risk factors and disclosure is a must. The BCSBI along with consumer bodies can be asked to work on these in a time bound manner but not more than three months.

Onus on banks: The onus of selling products appropriate to customers must be on the banks. Otherwise, they will keep selling a five-year locked in mutual fund to a 79-year old man. Or sell ULIP to a 60+ retiree, which requires hefty premium payments to be made for a five years before it starts making any returns at all.

Paper trail: Banks must be made responsible to create proof and trail mail/hard copy when relationship managers/tellers accost customers at home or at the banks. A clear email spelling out specific terms and pros and cons must be sent to the consumer.

Compensation: RBI must codify compensation to victims of mis-selling. Since the onus of proving appropriateness of products must be on the bankers, there must be detailed specified penalties when mis-selling is established.
Sale of gold: Indians love to buy gold and trust their bank. This can be a dangerous combination. On every auspicious occasion, such Akshaya Tritiya banks heavily advertise the sale of gold coins. Banks charge a huge premium over the spot price and also different banks charge different prices. Having sold, banks cannot buy back the gold they sell. It is only fair that if banks are allowed to continue sell gold, all these major drawbacks of buying gold from banks must be prominently displayed at the bank, the websites and the ads.

Mr Basu also pointed out that “the RBI has set up an elaborate system of customer services committees. A committee of the board, a standing committee, a branch level committee etc. We would be happy if there was an audit of whether these committees are actually formed, are they meeting, are customers encouraged to share their grievances and so on. If there is a yearly report of the functioning of these committees in the public domain with independent benchmarking, that would actually make the idea useful for customers.”

One of the many issues that Moneylife has taken up with the Reserve Bank of India (RBI) is the need for a technology audit of banks and the systems and processes that they adopt. Over the years, individual banks have often configured systems in a manner that hurt depositors' interest. And, since technology changes are complex and outsourced, the process of incorporating even small, but necessary changes is both cumbersome and expensive.

Recently Moneylife wrote how SBI deducted 40% as TDS (System glitch deducts 40% amount as TDS from SBI depositors’ account! ). What is the reporting and monitoring system for this? HDFC bank was found regularly deducting TDS from the principal (Now, even your fixed deposit principal may be at risk ). Surely, bankers are expected to know that tax is on income and can never be deducted from principal under any circumstances? It is even a violation of the RBI master circular. But the bank kept justifying it to customers with the argument that their systems are geared that way. Who will audit and fix these? Is there an annual audit on the robustness and correctness of bank IT systems?

This is certainly the thought process in the developed countries. From Australia to the US, many countries are now creating a separate agency, whose job will only be to regulate and supervise financial conduct and consumer protection across all financial products. India has started considering this too. Financial Sector Legislative Reforms Commission has suggested creating a consumer protection agency. Meanwhile, by June-end, we are supposed to get a new set of rules from the RBI, on wealth management and sale of third party products.



Vaibhav Dhoka

3 years ago

The fact is banker himself doesn't know the schemes he is selling.But he has full information about deposit he holds and targets GULLIBLE customer because the string is attached to service condition(for promotion)Therefore this is not selling it is dumping third party product in customers throat.


3 years ago

The Bank customers have become a ‘PUNCHING BAG’ not only for the banks but even for the Regulator RBI

I am sorry for the above blunt statement , but it becomes real when in the OPEN HOUSE an authority no less than the DY. Governor of Reserve Bank of India ( RBI) says that there can not be any effective redressal from the regulator to the legitimate grievance of a Bank customer as for as the ‘Service charges’ charged by the banks for various services are concerned. He had even declared that the issue of service charge in not “Negotiable”. This makes the Consumer as the “Punching Bag” vulnerable to exploitation and victimization.
This is, to say the least, open example of abdication of duty and non-deliverance by the authority who is accountable to regulate and protect the Interest of banking service ‘Customers’ who are consumers and entitled to protection from ‘Unreasonable, exploitative and unfair charges’ under the law of the land. Let us analyse his argument rationally that ‘Because Banking to day is not a service, but a Business/ commercial activity’, the protection to users on charges is not ‘Negotiable’. This interpretation is wholly misplaced. In fact RBI itself defines that ‘The current account’ transactions are in the category of “Commercial” but small and SB account operation is a part of ‘Service’. On this reckoning itself SB account holders can not come under’ Commercial service’ .Further this analogy can be applied to all other sectors too viz; Insurance , Telecom, Reality , commodity selling etc. But then Government has framed the Regulations for Redressal of Consumer Grievances, appointed the Statutory Regulators to protect the interests of the consumers even for such commercial services.
As a part of its ‘Financial Services’, RBI under the policy framed in 2006-07, a working group was especially constituted to frame a code for ‘Fair Practices’ to be adopted by the banks for various banking services . These recommendations were accepted by the RBI and another statutory body to effectively implement and monitor this fair practices code was constituted named as “Banking Codes and Standards Board of India ( BCSBI) . Although the RBI did not frame any “Time Bound” grievance redressal system , the power to monitor the ‘Reasonableness’ of any service charge’ levied by the bank was vested in it. Lately for some unknown reasons , the Power to monitor Reasonableness of any service charge was delegated to the ‘Indian Banks Association’(IBA). Now imagine the plight of the consumer . Every bank has the liberty to levy any amount of service charge for any service’ rendered or even not rendered’ to the customer . There is no transparency in applying this charge on the criteria of service-vs. the cost to the bank. It is pure and simple ‘Business’ of money making’ from the hapless customers. If someone had the courage to ‘Protest’ against any such service-or non-service charge , the consumer has to first spend his own ‘Airtime’ or paper/postage/transporting expenses to lodge such complaint . RBI has not even asked all banks for a ‘Mandatory and TOLL FREE, consumer help-line’. Needless to mention that the concerned bank will maintain that the charge is reasonable . Then to decide whether it is indeed ‘Reasonable or not’ you approach the IBA. IBA is not ‘duty bound or time bound ‘ to even acknowledge such ‘Appeals and Requests’. And when it replies, it is invariably in favour of ‘Holding Fair’ what the concerned bank has done . And that is ‘The End’ for the consumer ,unless he/she has enormous, patience resources and undying will to approach the HC in a writ petition on any trifle issue to make the RBI ACT or go to the Consumer For a to claim compensation for deficiency in service ,which will take years . So in reality this is what the Dy. Governor of RBI had meant.
In this scenario, therefore, the poor Indian banking Consumer will remain a ‘Punching Bag’ to go on receiving blows of financial losses , mental torture, and harassment for any transaction ,even expressly for the mistake or ‘Non-deliverance ‘ of the banks due to either human error or IT failure. In an well analysed article on wrongful “TDS’ deduction and refusing to credit back the same by the wrongdoer banks, shri GURUPUR in another issue of ‘Moneylife’ had asked for some ‘Penalties’ to be levied on the defaulter banks. But in this bleak and anti consumer stance taken by the Regulator, the demand will only remain on paper as a Day Dream. As long as RBI does not change its stance to become “Consumer Centric , from the present ‘Bank Centric’; deliverance in the ‘Financial Services sector’ will continue to remain a grim reality .
To end my comments, I would like to quote what Mr. Rajiv Takru , Secretary ,Financial Services ,Ministry of Finance Govt. of India had stated a couple of days back for prevailing stance of RBI.
“ You must understand , no institution is an island . RBI is not an Island . We must understand that it is extremely important to have some apex body which sits down and deliberates.” But when the RBI authority declares ‘Bank Service charges are non negotiable, no deliberation is possible.

Now the ball is in the court of Consumer Activists, NGOs and Forums either to fight for the “Restoration of Rights of the Consumers” or remain as silent spectators
--Mohan Siroya
Consumer Activist and Chairperson of Consumer Complaints Cell.


3 years ago

When will good governance become non-negotiable i.e. mandatory in India ? All talk and no action when it comes to governance. Thats the story of India in past 65 yrs. Everything has advanced except the same old governance system. Governance systems around the world need to be re-written. They are completely out of touch of current times.


3 years ago

Typical Babu talk. Asking people to fend themselves but RBI taking no action.
Especially with Mr. Chakravarti, who is fond of talking, I do not know why Moneylife should give him one more opportunity.


3 years ago

Madam Dalal - Customer service meetings (periodicity depends on staff strength - monthly/ quarterly) is only for statestical purpose. I have been branch head/ controllers of a largest bank, some points, including some phony complaints are written in the minutes books, signatures taken in the minutes from customers who are always willing to oblige the branch and report sent to controllers. Controllers get a pat on the back as his all branches have conducted the meetings and he writes the issue in his annual appraisal.

D A Bhatt

3 years ago

My opinion and perception is as under. This is good inference of which direction our country is heading. This is just like you break traffic rules and say that say that there is no accident.

Gopalakrishnan T V

3 years ago

The Customer service is not negotiable agreed.Customers have their own rights and duties are also okay. But not giving any service, ignoring him out rightly by giving some excuses or silly answers, misguiding him at the counters, trapping him with all types of mutual fund and insurance products,not intimating the customers about the due dates for renewal of FDs, sending the customers away from the premises without opening the accounts in the name of KYC compliance etc have not been touched upon by the DY Governor satisfactorily. The customers have to virtually fight in the premises that too by educated customers leave alone the illiterate and ignorant ones to get some transactions done is the actual state of affairs in branch premises particularly in PSBs. When some one approaches the banks including SBI for certain forms like account opening form, the reply is that the forms can be down loaded from the Computer. This has happened on the day with SBI that too in Bangalore City when the DG is having the meet in Mumbai on Customer Service. The ground realities can be understood only when one experiences the bitter truth. KYC means know your Contact before you enter the branch premises is what is the reality or else Kill your customers if they come without contacts is what is in practice.

Dayananda Kamath k

3 years ago

in one of the nationalized bank, which has won excellence in use of technology awards from rbi, their software allowed to value date cash transaction to back date. and only one leg of the transfer entry also canbe value dated to back date. when this was pointed out one of the genral managers classic remark was don't dig out new problems as we already have lot of problems in the soft ware. if this is the attitude of bank managements what you can expect. and today he is heading one of the other nationalized bank. and the further classic remark of the head of the audit division is you are the only one reporting problems in the software non other auditor is reporting these things, as if it is my fault to report my findings. even today the banks credit entry to the loan account can be changed to principal or to interest and any change can make your account npa and charge you overdue interest. and many of the operating staff do not know the significance of the issue. they had a problem in mobile recharge through atm where your talk time will be recharged. but amount debited will be credited back to your own account instead of service providers account.i have to right remind and follow up to make rbi understand the implications. after some nasty letters rbi banglore did an audit and found that there exists a problem but no steps were taken to correct it nor rbi took any action on the bank. but i received a show cause notice from the bank.

Ramesh Iyer

3 years ago

Mr. Debashis Basu of MoneyLife has raised pertinent points in this Open House with RBI Dy. Governor Dr. Chakrabarty. All these issues were discussed in recent issues of the MoneyLife magazine as well, and it is commendable how Moneylife intervened or facilitated resolution for aggrieved customers of the BFSI sector. However, in the Crosshair section of the Moneyife magazine Ms. Sucheta Dalal had also discussed how Dr. Chakrabarty, despite being responsible for the Customer Services portfolio at RBI knew all the solutions, but chose to remain aloof, of didn't press for changing systems and processes. Hence, I wonder how this 2 hour Open House would make any difference to the plight of Banking customers. The RBI Dy Governor's past responses have indeed made me cynical.


Suiketu Shah

In Reply to Ramesh Iyer 3 years ago

Agree with yr commments.This reflects poorly on RBI Dy Governor and great on ml who is achieving so so much inspite of so much opposition.It makes ml efforts much more meaningful when the circumstances to fight this is so difficult.


3 years ago


nagesh kini

3 years ago

Tedious on interest from Fixed Deposits with banks is a sore point that is hurting the senior citizens. I've had to meet go along with a 86 year old customer of BOB to get them to reverse at times 100% deducted before they "forgot to deduct earlier, even though the depositor held a duly acknowledged Form 15H. This old man was banking only with BOB for 46 long years.
That the RBI is more concerned in concerned with serving the big industialists and doesn't care for small aam janata is evident from the reduction from the additional 1% to 0.50% and now 0.25% granted to senior citizens.

nagesh kini

3 years ago

Tedious on interest from Fixed Deposits with banks is a sore point that is hurting the senior citizens. I've had to meet go along with a 86 year old customer of BOB to get them to reverse at times 100% deducted before they "forgot to deduct earlier, even though the depositor held a duly acknowledged Form 15H. This old man was banking only with BOB for 46 long years.
That the RBI is more concerned in concerned with serving the big industialists and doesn't care for small aam janata is evident from the reduction from the additional 1% to 0.50% and now 0.25% granted to senior citizens.

nagesh kini

3 years ago

Tedious on interest from Fixed Deposits with banks is a sore point that is hurting the senior citizens. I've had to meet go along with a 86 year old customer of BOB to get them to reverse at times 100% deducted before they "forgot to deduct earlier, even though the depositor held a duly acknowledged Form 15H. This old man was banking only with BOB for 46 long years.
That the RBI is more concerned in concerned with serving the big industialists and doesn't care for small aam janata is evident from the reduction from the additional 1% to 0.50% and now 0.25% granted to senior citizens.

Shadi Katyal

3 years ago

It is nice to hear that customer service is being recognized as one of the rights of the customer but in which banks. Most of nationalized banks don't care and rudeness is unbelievable.Is it due to their union power and inability of Management to take any action.
Let us hope this new leaf is good for the people.

Not possible to give bank licenses to all eligible seekers: RBI

Applicants have to submit their applications by 1st July for evaluation to get a new bank licence, the RBI said, even as it extended the validity of in-principle licence nod from 12 months to 18 months

Making it tougher for aspirants, the Reserve Bank of India (RBI) today said it will look for very high quality applications to issue new bank permits and may not be possible to issue licences to all eligible applicants.


“There is no predetermined number. RBI will be very selective while considering the applications for new bank licences. It will look for very high quality applications,” the apex bank said in a notification elaborating its response to the queries raised by various stake holders.


“It may, therefore, be not possible to issue licence to all the applicants meeting the eligibility criteria,” it said.


On the timeline for granting in-principle approval for bank licence, RBI said: “It will not be possible to indicate the timeline for grant of in-principle approvals at this stage.”


The RBI, which had on 22nd February issued final guidelines for issuing new banking licences, today came up with clarifications to various queries, as many as 443 from 39 entities, raised by prospective licence seekers.


Applicants have to submit their applications by 1st July for evaluation to get a new bank licence, it said, even as it extended the validity of in-principle licence nod from 12 months to 18 months.


The regulator also said after getting in-principle approval, the licencee has to open the branches within 18 months from the date of in-principle approval.


“After the in-principle approval is accorded by RBI for setting up a bank, the promoters/promoter group have to set up the NOFHC and the bank within 18 months from the date of in-principle approval and the bank has to commence banking business within this period after obtaining the banking licence from RBI...” the notification said.


Cadila Healthcare 4Q ahead of estimates; but margins under pressure, says Nomura

Cadila Healthcare’s 4Q was ahead of estimates by 10% at the operating level, driven by higher royalty income in the quarter. Though there is limited clarity on FY14 US launches, Nomura believes FY15 launches are likely to be significant enough to drive margins

CDH’s (Cadila Healthcare) 4Q was ahead of Nomura’s estimates by 10% at the operating level, driven largely by higher royalty income in the quarter. Gross margins remain under pressure due to a price drop in the US market and higher contribution from Authorised generic sales, said Nomura Equity Research in its Quick Note on the company’s fourth quarter performance.


EBITDA margin at 18.6% in FY13 dropped 301 bps (basis points) y-o-y and is the lowest in many years. US approvals remain the most important factor driving margins. There is limited visibility on interesting US launches in FY14. Therefore, most of the margin expansion is expected in FY15 when most of the interesting approvals are expected to contribute.

The management’s guidance of a 15% effective tax rate (versus 25%-30% earlier) to an extent negates the risk of slippage in the US, said Nomura. “We are currently reviewing our earnings estimates. On our current estimates, the stock is trading at 18.6x FY14F and 16x FY15F EPS, a 0-25% discount to other generic companies, which we believe is justified given near-term earnings risk. We remain Neutral,” the brokerage added.


Cadila Healthcare reported sales at Rs15.6 billion, a growth of 16.5% y-o-y, 1.6% ahead of Nomura’s expectation. Gross margins were the lowest in the past 28 quarters, declining 367 bps y-o-y. Gross margin was under pressure due to pricing erosion in the base US business, price erosion in Taxotere and higher contribution from authorised generics sales. However, employee cost and other expenses were lower than our estimate and as a result EBITDA margins were in line with estimates, said Nomura. Net earnings were boosted by a tax write-back.


For the quarter, EM and Europe recorded 86% and 36% growth y-o-y, respectively. The growth in Europe was driven by France and Spain. EM growth was driven by countries in Asia-Pacific and Africa, as per company. US revenues declined 1% q-o-q due to lack of any meaningful launches. For FY13, CDH launched only seven new products, including one product from Nesher. Japan revenues in rupee terms were under pressure due to yen depreciation, with sales growth at 3.7% y-o-y. India formulation growth at 14.4% was largely in line with expectations, the brokerage said.


High-value launches in the US are critical for margin expansion. However, the developments in the recent past and management commentary fail to provide clarity on such launches in the near term.


CDH has so far filed 173 ANDAs, with 97 awaiting approvals. CDH filed an impressive 33 ANDAs in FY13, which include eight injectables, two topical (the first of derma filings) and the third transdermal. The pipeline presents some interesting product opportunities, but there is limited clarity of upside being realised in FY14, believes Nomura.


CDH lost a district court case on Prevacid, which was the potential low competition opportunity near term. The hearing date for Lialda is yet to be decided. There is limited visibility on other important products such as Asacol, Toprol XL, nasal sprays and transdermals at this stage. The nasal spray facility was inspected by the USFDA last year and the transdermal facility will likely be inspected next quarter. The management suggests most of the upside will be realised at best towards the end of FY14. The company has guided for 22 approvals in FY14 (with two from Nesher) and expects moderate growth of 20% y-o-y.


 Nomura expects the new price ceiling for products under NLEM (National List of Essential Medicine) to be announced soon. According to the management, the overall impact of the pricing control is estimated at 2.5% of domestic sales. The implementation could also lead to some destocking by the channel on the impacted products, thereby slowing growth in 1QFY14. New product launch momentum has been maintained, as the company launched 90 new products in India versus 92 last year. The number of first-time launches was 21 against 29 in FY12.


Brazil and Mexico have been categorised as home markets by CDH and hold long-term potential. However, the approval pace in Brazil has slowed, adversely impacting growth. The company has 100 filings in Brazil, with 18 new dossiers filed in FY13. The company has obtained three new approvals in Mexico and is planning commercial launch in 2QFY14. Overall, 20 dossiers have been filed in Mexico, of which six were filed in FY13, according to Nomura.


Consumer business recorded healthy growth of 26% y-o-y, maintaining the growth momentum of the previous quarter. The growth was driven by Sugar Free, which has now started to grow in double digits, according to the management. The company has maintained its guidance of consumer business sales reaching Rs5 billion in FY14.


JV sales at Rs1.15 billion recorded a muted 1.1% growth y-o-y. Pricing pressure in Taxotere in the Hospira JV has adversely impacted growth and more importantly margins, according to Nomura. The Hospira JV collaboration has been expanded for 12 additional products, of which site transfer has already taken place for three (two for US and one for EU). These additional products will drive volume growth, though may not add to margins, stated the brokerage. The Nycomed JV has expanded to three more APIs. Overall, the management believes that JV sales will deliver growth in FY14 on a low base.


EBITDA margin for FY13 at 18.6% (Q4 margin at 16%) was the lowest in many years, and declined 301 bps y-o-y. Nomura expects improvement in margins from here on, driven by new launches in the US, Prisim 2 initiatives to control costs and improvement in margins in countries such as France and Spain. Clearly, US approvals is the most important factor.

Though there is limited clarity on FY14 US launches, Nomura believes FY15 launches are likely to be significant enough to drive margins.


The management expects an effective tax rate at 15% going forward (including MAT credit) compared to 25%-30% guidance earlier. The capex for FY15 is estimated by the company at Rs6 billion (versus Rs7 billion in FY14), and is likely to come down thereafter.


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