The RBI should constitute a committee of experts with majority representation from  users of banks’ services to ensure that a fair, just and equitable charter is evolved

The draft Charter of Customer Rights proposed by the Reserve Bank of India (RBI) is only a half-baked product, serving no useful purpose. What is required is a foolproof comprehensive charter of rights in the interest of consumers, who are at the receiving end of never ending problems faced in their day to day dealings with banks in our country. The RBI has proposed to give the freedom to banks to decide on various issues concerning service quality suggesting only broad contours of the charter. The charter, in the words of Sucheta Dalal, Founder-Trustee of Moneylife Foundation is “a set of pious motherhood statements and the entire charter is meaningless unless there are specific and steep penalties” for non-compliance. The draft charter does not meet the expectations of harassed bank customers, who deserve a much better deal, more so when a large majority of people in our country are financially not literate and nearly 25% of our population is totally illiterate. Under these circumstances, giving total freedom to each bank to devise its own standards of service and provide for compensation for its own failures is asking for total chaos in the banking system in our country. The draft charter does not serve the ends of justice for the following reasons:

1. The drat Charter requires much more clarity both in its contents and in its implementation. In the present form, the charter will go the way of “Code of Bank’s commitment to Customers” introduced a few years ago under the aegis of Banking Codes and Standards Board of India (BCSBI). This code was more in the nature of showing lip sympathy to bank customers as it was only long on promise but very short on performance. It has virtually disappeared from the banking scene, causing considerable loss of face to the RBI. Therefore, the proposed Charter should not be a repetition of past mistakes, but should serve as ground rules for uplifting the quality of customer service in banks for ensuring complete customer satisfaction with no cause for complaints.

2. The Charter of Customer Rights, therefore, should list out standards of service in crystal clear terms and appropriate time norms for their compliance applicable for all banks in their day to day dealing with all customers. These rules should spell out what services are available to bank customers as a matter of right and free of all charges, and what services are available for a fee. And this fee should be capped at a reasonable level to ensure that there is no exploitation of customers who are weak, helpless and ignorant of banking terms and legal norms to follow. This will streamline the service levels at all banks and eliminate most of the complaints that are caused by the indifference of banks to meet the needs of bank customers.

3. In order to make the charter workable and effective, it should prescribe appropriate penalties for mal-implementation or non-implementation of the basic guidelines laid down in the charter. Besides it should provide for reasonable compensation to customers who suffer because of the laxity or negligence on the part of the banks, who blatantly violate the spirit of the charter, thereby giving a sense of justice and fair-play to aggrieved customers.

4. The charter should also provide for a prescribed time frame for resolving issues and there must be conditions. Under this, individual complaints should get converted into class-action suits providing for rectification without requiring every individual to file a complaint. This would not only help those who do not understand the nuances of making a complaint, but also considerably reduce the burden of redressing individual complaints. This will elevate the entire process of complaints redressal mechanism to a new level of customer convenience and fair-play.

It is appropriate to quote here what Dr Deepali Pant Joshi, Executive Director of RBI stated at the MR Pai Memorial Award function while handing over this year’s award to Moneylife Foundation earlier this week in Mumbai.

Dr Pant Joshi spoke about the need for an “ingrained suitability clause in financial products,” that would put the onus of suitability of the product on the banker or financial institution, instead of the customer. This would naturally mean that it was high time that the financial services and banking institutions move from the maxim of Caveat Emptor (Buyer Beware) to Caveat Venditor (Seller Beware), she added.

In the context of rampant mis-selling by banks prevailing today, the earlier you put into practice this doctrine of consumer rights, the better it is for the people of our country.

“The only watchword is the present customer experience should be better than the experience of the previous generation of customers,” said Dr Pant Joshi.

The present draft charter of customer rights appears to be an in-house exercise of RBI without any concrete consultation with the stake holders. Unless and until the charter is widened to cover the views of the vital stakeholders like depositors, borrowers and all other customers of banks, it would be futile to expect that this charter will be of any consequence to the consumers.

The RBI should, therefore, immediately constitute a committee of experts with majority representation from the users of banks’ services and other stake holders to ensure that a fair, just and equitable charter is evolved in the best interest of consumers.

If what is said by Dr Pant Joshi, is to be implemented, it requires a larger canvas of consultations and a stricter enforcement of rights of customers to make it an epoch making document that can change the face of Indian banking for the greater good of bank customers, in particular, and our economy in general.

(The author is a banking analyst and he writes for Moneylife under a pen-name ‘Gurpur’ )