A committee appointed by the Reserve Bank of India (RBI) to review customer service standards in RBI-regulated entities (REs) has recommended a centralised database of know-your-customer (KYC), obviating the need for submitting KYC documents repeatedly, updating model operating procedure (MOP) for hassle-free settlement of claims in accounts of deceased account-holders, imposing a regulatory cost for entities where the quality of customer service is deficient, compensating customer in case of any injury suffered in RE premises, verification by the audit function about cross-selling and standardisation of ATM interface, among others. The committee also asks REs to adopt a nuanced approach to risk categorisation and not to categorise as high-risk customers with salary income and students. In March, Sucheta Dalal, founder-trustee of
Moneylife Foundation, submitted to the committee key concerns of bank customers, such as harassment over renewal of KYC documents, arbitrary freezing of accounts, poor grievance redress and many others.
Most importantly, she pointed out that the absence of standard operating procedures (SOPs), which allows banks to make up rules and the fact that they go unpunished even after the most brazen callousness in handling customer issues is established.
The Foundation also raises issues like the absence of punishment encourages bad service, the difficulty faced by heirs in recovering unclaimed bank deposits, tech traceability, faceless customer service, physical visits for closing accounts, Lack of SOPs, mandatory public liability and general liability insurance, remedy for documents lost or misplaced by the RE, grievance redress by digital companies and issues with bank lockers.
On 23 May 2022, RBI set up the committee to review customer service standards in REs under the chairmanship of its former deputy governor BP Kanungo.
The Kanungo committee submitted its report to RBI, on which the central bank is seeking comments from stakeholders and the public.
The committee recommends strengthening regulation. "The RBI may consider progressively moving towards 'principle-based' regulation with regard to customer service in the REs. These may be based on well-recognised customer-friendly principles, including, but not limited to, equitable and fair treatment, transparency and disclosures, appropriateness and suitability, data protection and customer confidentiality, right to grievance redress."
Further, it says, "The customer service regulation should be consolidated on the principle of same activity same regulation and apply to all the REs depending upon the activity being undertaken by them, irrespective of the category of the REs."
RBI may put in place a suitable structure of incentives and disincentives to encourage REs to take proactive steps towards enterprise-wide improvements in customer service and impart systemic strength to overall customer protection efforts in the financial sector while imposing a regulatory cost for entities where the quality of customer service is deficient, the committee says.
The committee recommended the reasonableness of charges levied by REs for the services offered. It also suggests a RE-agnostic common portal for all customers for lodging complaints against any entity regulated by RBI.
For hassle-free settlement of claims in accounts of deceased account-holders, in various scenarios, the committee recommends Indian Banks' Association (IBA) update its MOP in line with regulation. Further, it says obtaining nomination in deposit accounts may be made mandatory to facilitate hassle-free settlement of claims in case of death of the account-holder and the process for settling deceased claims may also be made available online.
The Kanungo committee says RE should maintain a centralised database of KYC documents of all customers, linked to a unique customer identifier, for example, the customer information file (CIF), to prevent the need for submitting KYC documents repeatedly for availing multiple facilities from the same RE.
It also recommends compensating the customer in case of any injury suffered while availing services at the premises of the RE due to inadequate or faulty infrastructure. "Bearing the medical expenses, if any, should be a part of the customer policy of the RE," it says.
Taking about cross-selling of third-party products by the sales team of the RE, the committee says it should be subject to verification by the audit function to ensure that there was no mis-selling and all instructions and guidelines concerning the sale of such products were adhered to.
The Kanungo committee also recommends standardisation of ATM interface to ensure a minimum set of functionalities at the ATM by all banks and white label ATM (WLA) operators.
Further, for reporting fraudulent transactions and registering complaints by customers, an online facility should be made available on the Indian cybercrime reporting portal, the committee says.
The committee recommends REs adopt a nuanced approach to risk categorisation of the customers. "For example, salary earners with inflows and outflows consistent with the customer's profile need not necessarily be categorised as high risk, even though they may be high net worth individuals (HNIs). Similarly, students can also be categorised as low-risk."
To address the conflict of interests and to increase the effectiveness of the internal ombudsmen (IO) appointed in the REs, the committee says RBI may nudge IBA to create a fund to directly pay the salary or compensation to the IOs of the banks. "Similar funds can be created by respective self-regulatory organisations (SROs) for other categories of REs. Alternatively, the RBI itself may consider creating the fund. Cost of the above fund, thus created, may be recovered from the REs, in proportion to the complaints against them referred to the IOs."
