Taking cognizance of several complaints from customers, letters and memorandums, the Reserve Bank of India (RBI) has finally said that it would look into mis-selling, know-your-customer (KYC) violations and usurious service charges levied by banks as part of its supervisory cycle.
"...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," says SS Mundra, Deputy Governor of Reserve Bank, in a recent speech at Mumbai. Strangely enough, the RBI has refused to communicate this to non-governmental organisations (NGOs) and concerned citizens who have repeatedly raised issues with the banking regulator.
As part of its advocacy efforts, Moneylife Foundation has led the effort to fight for customer rights. Despite our efforts, we have seen very little evidence on the ground of concrete action by the regulator to prevent institutionalised mis-selling of insurance and hybrid derivatives or to punish even egregious cases of unfair treatment of consumers.
According to Mr Mundra, all banks have since reportedly adopted or incorporated the Model "Customer Rights Policy" based on the Charter formulated jointly by Indian Banks' Association (IBA) and Banking Codes and Standards Board of India (BCSBI). "I am sure that the (BCSBI) 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 and non-adherence to the Charter during supervisory process," he added.
The Charter of Customer Rights issued on 3 December 2014 recognises five basic rights of bank customers: Right to Fair Treatment; Right to Transparency and Fair and Honest Dealing; Right to Suitability; Right to Privacy; and Right to Grievance Redress and Compensation.
The Charter covers almost every problem that consumers were likely to face. Three years later, the RBI has not fixed timeframes for grievance redressal nor announced penalties for failure to treat consumers fairly, despite repeated appeals by consumer groups. Consequently, the Charter remains a toothless tiger.
Even the model Customer Rights Policy prepared by IBA talks about 'strict' measures to provide customers the right to grievance redress and compensation. It says, "The customer has a right to hold the financial services provider accountable for the products offered and to have a clear and easy way to have any valid grievances redressed. The provider should also facilitate redress of grievances stemming from its sale of third party products. The financial services provider must communicate its policy for compensating mistakes, lapses in conduct, as well as non-performance or delays in performance, whether caused by the provider or otherwise. The policy must lay out the rights and duties of the customer when such events occur."
"In pursuance of the above Right, bank will deal sympathetically and expeditiously with all things that go wrong; correct mistakes promptly; cancel any charge that has been applied wrongly and by mistake; and compensate the customer for any direct financial loss that might have been incurred by the customer due to its lapses," the IBA model policy says.
However, the ground realities continue to be different for bank customers. Especially, banks never accept their mistake and continue to charge the customer without any question of compensation. As Moneylife highlighted in the case of Satyam Savla, the bank collected excess interest of over Rs6.4 lakh from him by increasing his repayment tenure to 122 EMIs. These were subsequently reduced to 114 in 2012, when the interest rate was reset at his request. Since then, he has written innumerable letters to the Bank and to its managing director, Aditya Puri, to no avail. Mr Savla then filed a complaint with the banking ombudsman (BO), but this was also rejected and the case was closed. (Read: Borrowers Beware: Your Bank May Be Ripping You Off
Moneylife Foundation has been at the forefront of speaking up for bank customers. An online petition launched by us has garnered more than two lakh signatures. (Sign the Petition
). One of the key points of the petition is about unreasonable and unfair bank charges. "Frequent increase in charges and billing customers by stealth through opt-out clauses that are not noticeable must be stopped immediately. For e.g. HDFC Bank started levying charges for an invite-only program, which unethically assumes that the customer is already in and willing to pay for it. The levy is stopped only when the consumer notices it and calls the bank to protest; this too is not an easy process," the petition says.
The petition at Change.org has asked RBI to come out with a master circular or notification giving teeth to the Charter of Customer Rights, with clear provisions fixing timelines for redressal and escalation, penalty for negligent service and interest and/or compensation to customers for losses caused due to mis-selling.
So, unless there is a change in attitude of the Reserve Bank, customers would continue to face difficulties while dealing with banks. And till then the RBI's supervisory cycle would remain only at supervision level.