Banking
Personalization of banking: Woes of bank customers
Though the banks claim to be taking particular care of senior citizens, the ground reality conditions are far different
 
Hailing, as I do from the district of South Kanara, in Karnataka that gave birth to four of India’s oldest large public sector banks—Canara Bank, (Canara Banking) Corporation Bank, (Canara Industrial & Banking) Syndicate and Vijaya Bank, also at one time home to more than 22 smaller banks that were merged, I have had close family ties with the three Canaras, going up to their chairmen levels. Subsequently as the RBI (Reserve Bank of India) empanelled Statutory Auditor of Banks and now as an activist in assisting in addressing banking concerns of citizens, I can modestly claim to be the know of many of the banking woes bank customers face in their dealings with banks that have come to be an essential part of their lives—from kids to salary earners to pensioners and elders receiving funds from their NRI sons and daughters. 
 
In the good old days the friendly neighbourhood banks were the locally driven like Punjab National Bank (PNB) and Allahabad Bank in the North, UCO and United  in the East, Bank of Baroda, Bank of India, Central, Maharashtra and Union in the West and the three Canaras, Vijaya, Indian, Indian Overseas in the South—all that were all subsequently nationalized. There are privately owned banks like the South Indian, Federal, Dhanalaxmi, Catholic Syrian, Karur Vysya and Tamil Nadu Mercantile. Then, there is a plethora of co-operative banks such as the publicly held Mumbai-based Saraswat Co-operative, NKGSB, Shamrao Vittal and politicians-controlled State, District and local level co-operative banks. Many foreign banks beginning with the pre-Independence British—National & Grindlays, Mercantile, Barclays and Hong Kong & Shanghai, followed by the Americans also joined the Indian banking bandwagon. With the RBI opening up the banking sector large Indian financial institutions like ICICI, HDFC, IDBI, UTI and Kotak Mahindra have set up their own banking entities and now RBI has invited applications for more. 
 
Top on the list of customers’ grievances of over 13,000 received by the Banking Ombudsman in the last fiscal come deficient customer services. Quite a few from the elders which the banks choose to call “Senior Citizens”. Though the banks claim to be taking particular care of them, on ground reality conditions are far different. Elderly customers at the entrance have to stand before the opening time out in rain or sun, even after staff has come in. All that the banks can do for them is to make them sit inside till the counters open.  Security concerns are cited for not opening the shutters earlier. A few tottering senior citizens are certainly no security threat. Once the counters open these senior citizens need to be attended just before others. After all they want their pass books updated to check on their credits for in-coming pensions, remittances from children, cheques deposited, dividends and debits for ECS, standing instructions and to withdraw cash by those not E-savvy, that will take a few minutes to attend to.
 
Cash withdrawal has to be simplified as having a teller at the cash disbursements verifying the signature and ascertaining the balance before dishing out the cash at the same counter. Canara Bank follows this practice. Union Bank has the cumbersome requirement of the customer having to stand in queue at the pass book clerk to collect the token; the cheque then goes to an officer for signature and balance verification ultimately to the cashier. The pass book clerk in this bank performs the dual task of updating the pass books as well as issuing tokens and the elders have to keep waiting. Pass book printing machines are now installed in heavy savings based branches to mitigate this.  Other banks ought to implement such healthy practices that are working successfully. 
 
 The need of the hour is more of personalized banking services with a dedicated counter/window for senior citizens necessarily headed by an officer senior enough (not a fresher/youngster) as a special relationship manager. S/he should be capable of empathizing with the elders’ concerns and resolving them to their satisfaction. He should also be in a position to convince them well in time on the need for proper nomination and execution of wills to ensure seamless passing down of the estate to their heirs.
 
The beginning of the month pensioners’ rush at the counters can be mitigated by having designated counters for the first couple of days where only pensioners can be attended to expeditiously and at the same time ensure services to others too.  
 
The banks need to remind their pensioner-customers on phone or by SMS or email in February or early March to furnish their life certificates to ensure uninterrupted pensions credits.
 
One of the most irritating issues is the dysfunctional and unclean ATMs. Many a times frustrated customers are faced with “Unable to disburse” slips.  Common ostensible reasoning is that cash in the machine has run out, the printing roll exhausted, only high denomination currency notes dispensed, the inserted cards getting jammed or that the machine has its utility leading in frequent breakdowns. All this makes mockery of the ATM that of facilitating speedy withdrawal. The customers have to stand in a queue, collect tokens, some banks insist on pass books to issue withdrawal slip and proof of identity, waiting for the tellers’ call. Collecting smaller currency notes in exchange for the ATM dished out high value Rs500 currency notes also results in having to wait again in a queue at the cashier counter.   
 
Few private banks bend backwards to service only High Net worth Individuals (HNIs) and more particularly the Ultra High Net worth Individuals (UHNIs) by picking up their cash and cheque deposits from and deliver cash and other instruments at their doorsteps. There is no reason why this facility is not extended to senior citizens by all as well, on specific request of course. This will save them visits to the branches and waiting in queues just for updating their pass books, to deposit instruments and withdraw cash. After all many invariably maintain substantial balances in savings and term deposits to meet their emergency needs. 
 
Some foreign banks follow the obnoxious practice of levying atrocious charges on customers visiting their branches and ask them to deal with the call centres to avoid interfacing with customers in public over ticklish grievances in public in the branch lobbies. Nothing can be worse for a customer than dealing with an anonymous girl’s taped voice in a BPO:  “Dial 1 for English, 2 for Savings” going on into infinity till your patience, time and anger run out and the operator tells you “The complaint will be attended to in due course.”  
 
The other perennial problem faced by senior citizens is the lack of uniformity in the tedious issue of Tax Deductions at Source/TDS on the interest credits. The branches ought to hand over the “No tax deduction request” forms religiously in March each year to make them effective from the following accounting year essentially for monthly credits from April onwards. The declarations should be collected and earmarked. The gross interest earned has to be first credited and the tax deducted debited at the same time. This helps match the interest income and TDS facilitating advance tax computations. The practice of some banks just crediting the amount net of tax is not only harassing makes verification of interest credits difficult. Banks overlooking to deduct tax go to the extent of deducting 100% on noticing the error; this is not permitted by the taxation laws.  
 
By way of a memorandum from Moneylife to the finance minister and the governor of the RBI on this matter we have made submissions to do away with the TDS on the same lines as dividends; adding that this be considered in the Direct Taxes Code Bill. 
 
The recent trend at moving into area wholly unrelated to banking like selling mutual fund (MF) and insurance products is not advisable from the core banking activity of mobilizing deposits and effectively monitoring advances well in time before they go bad. Bank staff, in trying to provide One Stop Money Mall, is certainly not positioned to render personalized follow up services. They may market MF schemes or insurance policies by parroting the usual marketing clichés; owing to constant transfers they will not be around to service the products that they have sold—redemption of the MF units or handling insurance claims. They sell but they are simply not geared or trained in after sale services.  Fortunately the RBI and IRDA have woken up, post the Cobrapost exposé.
 
The other sore point is the vast differences in the charges levied by private banks in the name of better services. To pull up their CASA (Current and Savings Accounts) outreach banks like IDBI have done away with the levy of all charges, while others continue to levy heavy charges for fall in minimum balances, cheque dishonors, issue and cancellation of demand drafts and pay orders, verification of signatures, reissue of PIN or password, standing instructions, immediate issue of cheque books as also additional cheque books, stop payment instructions, duplicate account statements/pass books, dormant accounts, closing of accounts within six months and Demat charges; all the while insisting on five-figure minimum balance requirements. They blame the computers or back offices that are programmed to generate the levy automatically without human intervention. The RBI should come out with a reasonable charges schedule indicating a range.
 
Deregulation of savings bank interest has resulted in a rate war. Only today Yes Bank announced its hike to 7%. But its fine print says: “For deposits over Rs1 lakh”.  Dhanlaxmi, Allahabad and SBH have marginally increased interest on NRE rupee term deposits of various tenors. Higher interest earnings on savings account can translate into meaningful gains only if the amounts idling in the saving account exceed the six digit mark. This is gross mis-selling and it needs to be nipped in the bud.  
 
Banks can render greater services for customers exclusively banking at a single location by assisting them in collating all their deposits and withdrawals to help compile their tax returns. After all, when all the transactions are routed through the same branch it should not be difficult. Of course this should come at a reasonable charge. 
 
The Business Line had a front page report—“RBI flags deteriorating loan portfolios of Banks – NPAs outpace credit growth; rising risks for banking sector”. This certainly is a matter of concern for the common man as it is his deposits that go into the amounts advanced by his bank. Unlike the West, today our banking system, monitored by the RBI is quite robust, not to go the Lehman Brothers and others’ way.
 
But we should not take things for granted. We have had the Global Trust Bank go bust. Well-monitored advances with prompt action of delayed submission of securities statements, regular physical verification of securities and obtaining of returns can mitigate bad debts and non-performing assets, which certainly take time to incubate and can be curbed if acted upon in time.
 
The Indian banking system, effectively regulated by the RBI, has stood the test of time, even as there were crisis earlier in other emerging economies in the US, Eurozone, Cyprus, Greece, Far East, Mexico and Argentina. 
 
 It is not surprising that most NRIs/PIO in the West now find Indian banks safer to park their funds than trust those back there. Very rightly so – East or West, Home is the best – even when it comes to personal banking!
 
(Nagesh Kini is a Mumbai-based chartered accountant and former bank statutory auditor on the RBI panel is now turned activist. He had made senior citizen-specific suggestions to the RBI-appointed Damodaran Committee on Banking Services, two of which find a place in the final recommendations.)
 

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COMMENTS

Gopalakrishnan T V

4 years ago

It is now Customers' service to banks by providing deposits and running after them to get some attention and that too after agreeing to pay a fees for any service.Only a handful banks and that too in Private sector has enhanced SB rate of SBinterest, where as PSU banks have not even thought about it.To get TDS one has to repeatedly call on banks and even if they have all the details of Customers including e mail they never care to send the TDS as soon as the certificates are ready. Personally I had to close my FD accounts just for the reason that the bank failed to send me the TDS despite my personal visit and request by post as I was away on an assignment in a different locality. I addressed a letter to the RM of the bank in the matter and he apologised for that incident and unlike in the past the bank staff have no sensitiveness to lose the deposit and business. Since there are no alternatives to save money with safety and liquidity people particularly senior Citizens go to banks ignoring the negative rate of return and other irritants. KYC ie either kill your Customer or Know your Contacts in the bank again keep away the prospective customers is the ground reality. It is for the banks to know the customers and the insistence on that by the regulator is something unacceptable for a major chunk of customers. All are not having illegal money and money laundering activities.Not even a percentage of customers come under suspicion and for that all to be treated under suspicious character is not fair and irritating the customers. The banks should monitor the transactions and assess the customer for his suspicious conducts. The charm of having a bank account and dealing with the banks has been given a go bye and now it has become a necessity to survive and for that the customers have to necessarily put up with all sorts of harassment and inconveniences.

arun adalja

4 years ago

very good analysis and eye opening for rbi if they read it.in most of cases rbi always favours banks telling that they have to survive so they can charge whatever they think ok.but service part no improvement.keep it up.

nagesh kini

4 years ago

Both Vaidya Vasudeo and Hema have raised vital issues.
The net credit is a strict no-no. There has to be debit for the amount of the interest and a debit for TDS. We had represented to the RBI and there are RBI Directions to that effect.
I suggest you demand copies of bank advices affecting your accounts. Every entry has to be supported by a valid document, even when it is entered into the computer system. It may not take the same old format, it remains.
In Hema's case - The high- handedness of the Bank Manager needs to be taken up at higher levels from Regional to the Central Grievances Committee of the Bank, then to the Ombudsman and possibly to the Customers Service Dept. of the RBI.

REPLY

nagesh kini

In Reply to nagesh kini 4 years ago

A correction in the second line - there has to be a CREDIT entry for the interest.

RAVINDRANATH

4 years ago

Nicely articulated.

Some years back I had gone to encash some travellers cheques at Banco do Brasil in Brasilia, the capital city of Brazil. We were a tad early and had to wait outside in a queue. I saw another queue was forming a little away. Upon enquiring, my friend from the Indian Embassy informed me that the separate queue was for the senior citizens, who would be let in first once the doors opened so that they get priority in the various counters.

RAVINDRANATH

4 years ago

Nicely articulated.

Some years back I had gone to encash some travellers cheques at Banco do Brasil in Brasilia, the capital city of Brazil. We were a tad early and had to wait outside in a queue. I saw another queue was forming a little away. Upon enquring, my friend from the India Embassy informed me that there was a separate queue for senior citizens, who would be let in first once the doors opened so that they get priority in the various counters.

Vaidya Dattatraya Vasudeo

4 years ago

This is particularly with reference to interest on deposits. In SBI, I regularly give my 15H form before 15th April each year. My first quarterly interest becomes due after that. Still bank will deduct tax at source for the first quarter and credit it afterwards. While I was working in bank, we had to credit any amount as it is ( No TDS at that time, but the postage and collection charges ) and debit the charges and simultaneously issue an advice, which helped customers to know precisely what has happened. One more amusing fact with SBI is that it credited my interest with net amount to one account and afterwards reversed the deduction to another account. Banks have long ago stopped system of sending advice. RBI must make it compulsory that any debit or credit to any account, which is not generated by the customer, Bank MUST send the advice of this on the same day. So is the case of cheques deposited and returned. With the emails, it virtually does not cost anything. It should also be made compulsory that whenever it involves credit and debit, Banks must show the gross entries separately. Will RBI take note of it.

REPLY

T Sekhar

In Reply to Vaidya Dattatraya Vasudeo 4 years ago

RBI should make it mandatory for all Banks to send SMS by way of advice of credit or debit to all SB account customers, for every debit or credit not initiated by the customer. Especially, an SMS of TDS debit should be made mandatory for all Banks.

Banks used to earlier spend for an envelope, an advice, stamps etc. for one advice, costing Re 1/- to Rs. 5/-. Can't they spend some paise for an SMS now instead? And the system is so automated that no extra staff are also needed for sending such SMSs, except may be 1 or 2 for the whole Bank at the operational level.

Also, Banks nowadays offer so many services through their ATMs like NEFT or RTGS, recharging of Mobile, Ticketing, payment of Credit Card Dues or Utility Payments etc, But the ATM does not display the charge that is going to be debited to the account for availing such service. Hence Banks should also display such charges in the same ATM screen or in the Internet Banking screen every time a service screen pops up, so that the customer can make an informed decision to either avail the service or not.


- T Sekhar, Retired AGM of Bank of India.

HEMA SAMPAT

4 years ago

Woes of bank customers:
There are nationalized banks in Mumbai whose managers are hand in gloves with the eldest son in the HUF A/C.As per the rules all the co-parceners have to give consent to make the eldest son as the Karta after the father's death.But the managers of reputed banks have not taken signatures of all the co-parecners & allowed the eldest son to be the Karta.The managers refuse to co-operate or give proper information to the other co-parcener who is also a legal heir.I know of more than one bank.I request Money Life & Mr.Nagesh Kini to look into such issues & woes of customers.after the death the father's hard earned money does not reach to all his sons.Bank managers are responsible for this .They break the rules ,suppress the information & even try to suppress the information seeker though he is the legal heir.Even RBI is silent on such issues.There are no checks on such managers.Even the higher authority & the legal department try to suppress the information seeker & no justice is given to the victim of HUF A/C.Bankers' Association also ask the victim to go to the same bank from where he had got no justice.There may be many more victims not getting justice & the father's money do not reach to all his sons.His wish remains unfulfilled.Action should be taken on such managers who manage the money,break the rules& break the heart of the customers.Sr.citizens should be aware of such techniques used by banks .

Financial inclusion: Rural credit architecture needs an overhaul

Increasing the outreach of banks to cover the rural borrower with low credit needs has been one objective the nation has been pursuing religiously since 1950s, till date. But the reality of financial inclusion is eluding more than half the population

Deputy Governor of the Reserve Bank of India KC Chakrabarty, at an inaugural function of a rural branch of a public sector bank in Karnataka on 28 June 2013, said banking services in rural areas help to usher economic revolution that changed the profile of the village and the life of its residents. Mr Chakrabarty said: “You must be wondering why I have come to a village to inaugurate a bank branch. When a bank opens its branch in a village, it creates economic revolution; it goes closer to the people with various services. This revolution could be successful if the bank, its employees, and the people work together.”
 

Mr Chakrabarty said Canara Bank was trying to bring in a revolution by opening its branch in the village and offering technology-enabled services to the people. Banking services were being brought to the doorsteps of people by introducing new services such as the Samruddi Card, an Aadhaar-enabled debit card that enables cash withdrawal at micro-ATMs with the help of business correspondents of the bank. He said new technologies had enabled banks to offer new services and products to their customers, which would help improve economic activities.
 

Citing the Aadhaar Samruddi Card as an example, the executive from the public sector bank who also spoke on the occasion, said that the bank was determined to provide to rural people all schemes, products and facilities that were available to urban consumers.

From this happy scenario, let me take you to a report published by the Business Standard, on the same day (28 June 2013) quoting from a recent CRISIL study, which highlighted the following:
 

  • The bottom 50 districts in India (out of 632) have just three banks per 100,000 of population
  • Slightly more than 50% of the population just has a simple savings bank account. 
  • Financial inclusion is also the key critical parameter for the new banking licenses to be issued.
  • Although the trend is improving at the grass-root level, financial inclusion is lower than desirable.    
  • Just one in two Indians has access to a savings bank account and just one in seven Indians has access to bank credit. 
  • There are merely 684 million savings bank accounts in the country with a population of 1.2 billion.
  • The picture, in fact, looks bleaker if one excludes western and southern India. Financial penetration is the highest in the southern region.
     

The CRISIL study conducted on the basis of three parameters—branch, deposit and credit penetration —across the 632 districts in India shows the bottom 50 districts have just three banks per 100,000 of population, just half of the 7.6 bank branches on an all-India level. These districts have just 2% of the total bank branches in the country. Besides, they also have just 4,068 loan accounts per 100,000 of population as compared to an all-India level of 11,680 accounts. 
 

Lack of awareness, low incomes, poverty and illiteracy are among the key factors that lead to a low demand for financial services and, consequently, to exclusion.

RBI in its recent guidelines for new banking license has insisted that 25% of the branches have to be opened in un-banked rural centres.
 

Government and RBI are aware of the situation. Policy announcements have been focusing on improving education while in actual implementation there are imbalances. As regards efforts by the central bank, the following excerpt from RBI’s Monetary Policy Statement (2012) is relevant:
 

“Roadmap for Provision of Banking Services in Villages with Population below 2,000”
 

In pursuance of the announcement made in the Monetary Policy Statement of April 2010, the roadmap to provide banking services in every village with a population above 2,000 was finalized by state level bankers’ committees (SLBCs). Under the roadmap, 74,414 villages with population above 2,000 were identified as unbanked, which were allocated to various banks, including regional rural banks (RRBs) for providing banking services by March 2012. Banks have covered 74,199 (99.7%) of these unbanked villages. Now the challenge is to cover all the unbanked villages of the country. Accordingly, it is proposed:
 

  • To mandate SLBCs to prepare a roadmap covering all unbanked villages of population less than 2,000 and notionally allot these villages to banks for providing banking services in a time-bound manner.”
     

The RBI’s discussion paper on new banks (August 2010) had also, initially, generated some debate on financial inclusion which was one of the stated purposes of having more banks in the private sector. Perhaps increasing the outreach of banks to cover the rural borrower with low credit needs has been one objective the nation has been pursuing religiously since 1950s (when State Bank of India was established), till date (now SBI has come out with the facility to an open an account with one rupee!). But the reality of financial inclusion is eluding more than half the population and geographical area.
 

The banking system has done a commendable job in this direction in comparatively literate and affluent geographical areas through the network of rural branches, rural financial institutions (RFIs) including cooperatives, Regional Rural Banks(RRBs) and rural branches of commercial banks. The focus shifted midway, somewhere during 1990s to urban and metropolitan lending. Rise in rural deposits and urban credit created imbalances and certain bypass routes were allowed for banks to achieve their priority lending targets. Like Mutual Funds (MFs) investing in schemes of other MFs to pair risks, banks started searching for other intermediaries like microfinance institutions (MFIs) for providing credit to small borrowers. MFIs, in some cases borrow from banks at low rates and lend at up to three times the borrowing rates, in the same area where bank branches function. So as long as banks source rural deposits, they should also shoulder the responsibility of providing credit in rural areas at reasonable interest rates.
 

The situation calls for a review of the entire rural credit architecture for an overhaul. The changes necessary may include:
 

  • Reviving the role of Rural Financial Institutions ( RFIs) including rural and semi-urban branches of commercial banks, cooperatives and Regional Rural Banks which have strayed away from their mandated responsibilities,
  • Identifying costs for financial intermediaries that cannot be factored into interest costs and specifying the agency which should meet them, if the activity has to remain bankable,
  • Without going back to the abandoned “regulated interest rates regime”, working out and specifying broad bands within which ultimate lending rates should remain when bank funds are sourced for the purpose, and
  • Reducing the number of bypass routes allowed for priority sector lending to the minimum. 

 

Such a review may be necessary at this stage, irrespective of who gets a license for a new commercial bank.

 

(MG Warrier is a former general manager, Reserve Bank of India, Mumbai.)

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COMMENTS

Atul Asthana

4 years ago

Use rural post-offices for banking. And provide banking license to post-offices.
Technology enable post-offices

Rupee breaches 61 level to hit new life-time low of 61.19 against the dollar

Forex dealers said dollar firming up against other currencies in overseas markets, mainly put pressure on the domestic currency to touch an all-time low


The rupee today fell by a massive 97 paise to breach the 61-mark to 61.19, a new all-time low, against the dollar in early trade at the Interbank Foreign Exchange market, on heavy demand for the American currency amid capital outflows.

 

Forex dealers said dollar firming up against other currencies in overseas markets, mainly put pressure on the domestic currency to touch an all-time low. The local currency had plunged to 60.76 intraday on 26th June.

 

The rupee had declined by nine paise to 60.22 on Friday and the fresh fall was led by a steep rise in crude oil prices which surged over $100 in overseas markets.

 

Meanwhile, the BSE benchmark Sensex fell by 262.61 points, 1.35%, to 19,233.21 in early trade today.

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