Bank Account Portability: What Is Preventing This Game-changing Move for Customers?
What is the most effective solution to poor service, mis-selling and harassment by banks which are entrusted with your hard-earned savings? Simple. Bank account portability; or the ability to vote with your feet and switch to a better bank. The idea of bank account portability, which will truly force banks to compete for their customers, has been on the cards since 2012, when the Reserve Bank of India (RBI) initiated the process of creating unique customer identification code (UCIC). Since then, almost every hurdle to implementation—technology issues, high costs, absence of unique codes, etc—having been substantially addressed; but account portability is nowhere on the cards.
 
Over the years, banks have used technology to their advantage locking in customers into a complex web of services, such as standing instructions to pay bills, equated monthly instalments, automated roll-over of fixed deposits, auto debits of debit card dues and linkages to trading and demat accounts. They have also made the process of closing accounts a multi-step and long-drawn affair. 
 
Account portability will free bank customers from this enslavement. It will allow them to switch smoothly to another bank with the same account number and all standing instructions (deposit renewals, nomination, direct debits of credit cards, utility bills and equated monthly instalments) intact, without complicated account opening procedures or know-your-customer (KYC) hassles.
 
Number portability in the telecom sector was successfully implemented in 2014, despite industry resistance. It led to a huge churn initially; but things have settled down after service-providers worked at treating customers well and offered lower tariffs, less opaque subscription plans and eliminated hidden charges. Bank account portability may also lead to an initial churn which could be avoided by giving banks a window to clean up their act with regard to customer services; but things will settle down or the better banks will benefit.
 
In 2012, the RBI circular introducing the UCIC clearly identified the need for a unique customer identifier ‘across different banks and financial institutions’ to aid ‘setting up a centralized KYC Registry’. 
 
Banks dragged their feet over creating UCIC; but RBI has doggedly pursued this with repeated circulars in 2013, 2014 and a focus on compliance (even in cooperative banks) in its annual inspection reports. My sources say that all banks now have UCICs for every customer, allowing them to track all customer relationships and instructions through this single number. 
 
In 2012, RBI had also issued a notification asking banks to permit ‘intra-bank account portability’ in all cases where KYC was ascertained. It allowed your account number to remain the same anywhere in India, within the same bank. It had then said that bank account portability was possible and could be achieved in three years. The lobbying against it began immediately, raising fears of disruption and ‘fierce competition’. Nine years later, most people accept that disruption is good, but apparently not for banks. 
 
In 2015, the Financial Conduct Authority of the UK released a report on models for implementing account number portability and it began to be adopted in Europe too. In India, both, Unique Identification Authority of India (UIDAI) and National Payments Corporation of India (NPCI), a centralised payment system, said that inter-bank portability was feasible. This was at a time when the IT (information technology) industry and fintech companies were lobbying for quick and easy on-boarding of customers through Aadhaar and the government was forcing customers to link their bank accounts to their Aadhaar and phones.
 
In May 2017, then RBI deputy governor, SS Mundhra, announced that bank account portability was not only possible, but would be a “far-reaching step towards enhancing competition and improving customer service.” He said that digital banking would ‘play a huge role in enabling bank accounts to be ported with the same ease as mobile numbers’ due to apps like BHIM, IMPS and UPI.  
 
Regular readers of Moneylife would know that the demand for bank account portability was high on our list of demands in a change.org petition in  2017 to highlight how banks were fleecing customers. This campaign was supported by all bank unions. Contrary to reports, unions were never opposed to bank account portability; it is public sector bank (PSB) managements that were against it. 
 
In May 2018, exactly a year after Mr Mundra’s speech, Zee News reported that RBI had put portability on the ‘back burner’ for a variety of vague reasons which have never been correctly addressed. A central banker tells me that the Indian Banks Association is delaying implementation on the plea that core banking platforms of banks are not compatible. Interestingly, this has not prevented the government from pushing nine banks into an elaborate merger. And banks haven’t dared to resist.
 
RBI’s reluctance to push portability is also clear from the reaction of at least two senior former central bankers who are strongly opposed to it. One argues that banking is different from telecom; customers already have multiple bank accounts with different banks (to avoid putting their eggs in one basket). Also, that banking is ‘highly confidential and portability would give a third party (central entity) access to certain information if not all’. I strongly disagree with both premises. Yes, customers have multiple bank accounts for safety and that makes it even more imperative that they have the flexibility to switch when they encounter poor service or high charges. The data confidentiality argument is also rather hollow—sensitive customer data is already shared with four credit bureaus and can be easily tapped by all potential lenders. Also, when ATM networks can be seamlessly shared across the banking system, why should account migration be an issue? 
 
The second central banker agrees that all big banks are opposed to portability. Consequently, there has never been a frank and holistic debate on the “need, desirability, capability, methodology or cost benefit of permitting account portability” which is key to implementation. “We have not even achieved proper intra-bank portability, especially for domestic and international transactions,” he says.
 
Number portability would give newer banks a fighting chance to compete for customers (especially when the increase in deposit guarantee had de-risked deposits up to Rs5 lakh) and they welcome the idea. But the banking system operates like a closed club and they have no voice, a private banker tells me. The fact is that most hurdles to portability have already been fixed, barring the announcement of a holistic roll-out plan. The two key pillars to portability are the UCIC, which is already in place, and a centralised KYC.  
 
A centralised KYC is already available through CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India)—a central registry which, among other things, operates and maintains a KYC registry, governed under PML (Prevention of Money Laundering) Rules 2005. CERSAI’s Central KYC record registry, started in 2016, was to have ended the regular harassment over KYC and beneficial ownership across regulators. It covers RBI, SEBI, IRDAI and PFRDA and already has over 220 million KYC records. CERSAI’s CKYC is a 14-digit number linked to ID proof and stored in electronic format. Most importantly, it is painstakingly verified and not limited to self-attested photocopies as with all other KYC requirements. The mystery of why every financial regulator continues to harass investors, depositors and customers with fresh KYC for every new financial relationship will probably be resolved only when someone gets around to filing a public interest litigation (PIL) or class-action suit to demand some answers from our policy-makers. 
 
When CERSAI set up the verified, centralised KYC, another key requirement of portability was also put in place. And, yet, as customers, we neither have portability nor an end to harassment over KYC, while banks continue to take advantage of the fact that customers have little choice to switch. Clearly, the hurdle to portability is not technology but how banks have grown accustomed to treating customers. Will RBI governor Shaktikanta Das bite the bullet and push it through? 
 
 

Comments
Newme
4 months ago
What\'s wrong in closing account in one Bank and opening account in another bank?
With Aadhaar it easy to open new account.
angelo.extross
4 months ago
It's not desirable to take the PIL route each time. The Regulator/s are justly expected to work in the interests of the clients they serve.
suketu
4 months ago
Superb thoughts and point of view.
Premkumar R
4 months ago
Fully agree with the argument.
sundar_ramang
4 months ago
Fully agree..There must be portability..That will ensure PSB's treat their depositors well and render prompt service rather than treat customers like dirt.
venkata9
Replied to sundar_ramang comment 4 months ago
In my opinion based on my own personal experiences, I found that the PSBs have always treated with a greater amount of respect than the private banks.

I think the PSBs get a lot of flak unfortunately but it's not always the case.
yerramr
4 months ago
You hit the nail on the head once again. It is not just deposit accounts but even credit accounts that are standard should be facilitated with portability if the customer is not satisfied with the service. The Bank that transfers the account, should also transfer all the loan documents in which case, there needs a change in the Law because documentation of one bank differs from another bank with different sets of covenants. When the Law of land is uniform, why the covenants of one bank specifying the obligations of the loanee, should differ among Banks? Once this issue is legally resolved, even standard credit accounts could also be portable.
sucheta
Replied to yerramr comment 4 months ago
Excellent point Dr Raju... you should write on how this should be standardised. I think there is already talk about a digitised repository for this. CERSAI can do it. Stock Holding Corporation also has vaults. Do consider writing on it.
kalemohan
4 months ago
But the banks to which acct is transferred from there other branch are not merging two accts with same 'KYC' & same names because they want all acct holder's signatures. In case of 'Dena Bank SB acct ' now 'Bank of Baroda' is ported to Bank Of Baroda where another SB acct is previously opened of the same group of family. They want both to be merged for ease of operation. But bank is not accepting. Similar case was in SBI but they have merged the accts hassle-free no problem faced. All banks in this case are PSUs(i.e. nationalized banks)1.SBI of Hyderabad 2.SBI 3.Dena Bank (now Bank Of Baroda)4. Bank Of Baroda. All in pune city and in the same suburban but at different locations. What is problem I never understand. Only in SBI there was no problem they have merged hassle-free. Problem is only with Bank OF Baroda. Are there different rules no uniformity in rules. Why so?
svrsama2015
4 months ago
An idea whose time has come. Some of the private sector banks with haloes around their heads that their account holders as supplicants. Walking into a branch is risking being waylaid by a staff member to sell insurance, credit card or a ‘pre-appproved’loan! Banks are simply uninterested in depositors. KYC is used mindlessly and sometimes ruthlessly.
yanmantram
4 months ago
Best thing for KYC is to get all information under Aadhaar and update adhaar with Father name, mother name with their aadhaar number, place of birth, contact details mobile/email ID. Citizen should update only at Aadhaar and all details will be automatically updated for bank account, demat, license, passport, etc. No need for citizen to give change of address at every place. Any one want to change the address or contact details, citizen should update only at Aadhaar. This will solve many problem for compliance. No need for voter ID, before the election as per the PIN code aadhaar authority can prepare the list as per pin code the list of voter. This will reduce the cost of voter ID preparing every time the list of voter. One day One election and any one vote from their place by showing the aaadhar or bio metric way. 1000s of crores will be saved.
sureshtb4246
4 months ago
My suggestion to all the bank customers, when they approach consumer court under the consumer protection act 2019, include The Chairman as Second party and see the difference, with Special reference to SBI
Free Helpline
Legal Credit
Feedback