Money & Banking
RBI to focus on mis-selling, KYC violations and usurious service charges
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.
 

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COMMENTS

GLN Prasad

2 weeks ago

Let us be Honest. RBI never focused on these activities at any time and always decided in favour of Banks. May be, they are aware of the facts of increasing costs affecting the profitability, but ignored that it is these customers' amount bank advanced and still the depositors are receiving raw deal. The respect they give to Borrower is hundred times more than the respect a depositors who maintains a million of rupees in their accounts. Many managers are not even aware of their names and never meet them as a courtesy, whereas borrowers occupy a role in every activity by the Bank. Discussing these after decades is funny.

tejnath samant

3 weeks ago

Regarding service charges for investment in NRI repatriable in share market, I would like to mention that NRI's are charged hepty fee of Rs. 172 for each transactions. Only in case of calculating Sort term gain, the bank has to deduct gain tax and depost to income tax. In all other cases the bank has to do nothing but reporting to RBI which is done by broker also.
I have taken up the matter with the bank but no reply. We as a group should take up with RBI.

PRAKASH D N

3 weeks ago

We will be happy only when RBI shows it's teeth in dealing with usurious service charges by banks. What is the action taken by RBI against SBI and other few banks who have started squeezing customers .?

Simple Indian

4 weeks ago

MLF has been fighting for customers' rights and grievance redressal for years now, yet RBI has rarely acted in Banking customers' favor. In fact, it has turned a blind eye to various violations of its own rules and guidelines by Banks. RBI remains the most powerful but least effective regulator in India. Long live customer services in Banking system.

SuchindranathAiyerS

4 weeks ago

State Bank of India charged me at the rate of Rs 115 per 40 entries to give me a Statement for my PERSONAL Current Account which was hardly readable. This is the only statement of my account for the previous financial year and I had neither asked for nor received any other. A fortune for an essential and integral service to Banking!

This cannot be called usurious (as it is not interest). It is more like the President of India's retrospective tax, where, having got you into a corner, extortion (not usury) is applied.

Stealing money from the innocent for the benefit of the criminals (including the Bankers and the Neta-Babus) who got away with our money (Non Performing Assets).

REPLY

Sucheta Dalal

In Reply to SuchindranathAiyerS 4 weeks ago

Please file a complaint with the Banking Ombudsman about being ripped off. provide proof. copy it to RBI's deputy governor Mr Mundra. Write to us for emails IDs if needed. The banking ombudsman details are available online

SuchindranathAiyerS

4 weeks ago

State Bank of India charged me at the rate of Rs 115 per 40 entries to give me a Statement for my PERSONAL Current Account which was hardly readable. This is the only statement of my account for the previous financial years and I had neither asked for nor received any other. A fortune for an essential and integral service to Banking! This cannot be called usurious (as it is not interest). It is more like the President of India's retrospective tax, where, having got you into a corner, extortion (not usury) is applied.

SuchindranathAiyerS

4 weeks ago

State Bank of India charged me at the rate of Rs 115 per 40 entries to give me a Current Account Statement which was hardly legible. This is the only statement of my account for the previous financial years and I had neither asked for nor received any other. A fortune for an essential and integral service to Banking! This cannot be called usurious (as it is not interest). It is more like the President of India's retrospective tax, where, having got you into a corner, extortion (not usury) is applied.

Subbarao

4 weeks ago

While government is pushing for digitisation by reduce supply of currency notes in market banks are gouging us with predatory charges for wallets. SBI is a great example as can be seen from enclosed press report "SBI customer? Now shell out more for these transactions from June 1
http://www.financialexpress.com/money/sbi-customer-now-shell-out-more-for-these-transactions-from-june-1/696071/".

India's manufacturing sector expansion eases in May: PMI
India's manufacturing sector output slowed down last month due to a softer expansion in new orders and production, a key macro-economic data showed on Thursday.
 
The Nikkei India Manufacturing Purchasing Managers' Index (PMI), which is a composite indicator of manufacturing performance stood at 51.6 from the index reading of 52.5 reported in April 2017.
 
An index reading of above 50 indicates an overall increase in economic activity, and below 50 an overall decrease.
 
"The upturn in the Indian manufacturing sector took a step back in May, with softer demand causing lower expansions in output and the amount of new work received by firms. Moreover, there was a renewed decline in new export orders," said Pollyanna De Lima, economist at IHS Markit and the author of the report.
 
"Echoing a more positive tone, the PMI dataset highlighted a stronger increase in businesses' input purchasing, while optimism reached a six-month peak. Additionally, cost inflationary pressures cooled."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Railways to provide 'book now pay later' option
Railways have decided to provide the 'buy tickets now and pay later' service for any Express trains, an IRCTC official said on Thursday.
 
According to the Indian Railway Catering and Tourism Corporation (IRCTC) Ltd official, soon passengers would be able to buy tickets from the IRCTC website and pay later.
 
IRCTC spokesperson Sandip Dutta told IANS: "IRCTC has collaborated with a Mumbai-based firm ePayLater for adding the new service option."
 
"Through this service a passenger can book a ticket five days prior to the journey with a service charge of 3.5 per cent and pay it in the next 14 days," Dutta said.
 
He also said that this option was valid only on etickets.
 
Elaborating on the new feature, Dutta said, "The way a credit card is issued after evaluating the CIBIL score of a customer, same procedure will be followed."
 
"Those who want to opt for this service have to give their name, email ID, mobile number, their PAN card or Aadhaar details," the IRCTC official said.
 
The officer also said that once the customer gets approval to use the feature, they would be sent an OTP (one time password) to enable them to use the service.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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