Moneylife Campaign: RBI has no intention to give teeth to the Consumer Charter and impose penalty on banks
Moneylife Foundation, as a part of its campaign against arbitrary bank charges, had written to the Reserve Bank of India (RBI) to issue a Master Circular or Notification with regard to its Charter of Customer Rights issued in 2014, with clear timelines for redressal and escalation of complaints and penalties or interest and compensation for negligent service, mis-selling of products and harassment of customers.
On receiving a rather bland response, we filed an application under the Right to Information (RTI) Act seeking details of the discussions, if any, on our memorandum. The RBI’s response indicates that a detailed discussion was held at multiple levels, including the Executive Director (ED). However, RBI decided not to give teeth to the consumer charter.
“No penalty in envisaged on banks in the Charter (of Customer Rights) as these are designed as overarching principals of Consumer Protection to be imbibed by banks in their Customer Service Policy,” says a note by PJ Mathkar, Assistant General Manager (AGM), RBI. He further says that the Consumer charter was “formulated jointly by the Indian Banks Association and the Banking Codes and Standards Board of India (BCSBI)”.
Mr Mathkar is probably unaware that the RBI also consulted NGOs such as Moneylife Foundation and the All India Bank Depositors Association (AIBDA) and probably others. Does this suggest that the NGO viewpoint was ignored in the final formulation?
According to Mr Mathkar’s note, the issues raised by Moneylife are “generally covered under extant regulatory guidelines and compliance to these by banks is monitored by supervisory process by the RBI”. However, the large number of complaints about gross mis-selling of insurance and other third party products does not indicate that this is working. In fact, the RBI also has no process of receiving and acting on complaints forwarded by NGOs, after appeals to the bank or the Banking Ombudsman (BO) have failed.
Mr Mathkar’s note further says, "We had conducted incognito visits to bank branches involved in selling of third party products across the country. Specific visits were undertaken to branches in semi-urban and rural areas across the country to assess the issues relating to mis-selling prevalent in those areas. Report of these visits confirmed the prevalence of certain unfair practices in sale of third party products by banks”.
Still the Reserve Bank prefers to keep mum on the issue of levying penalty upon banks and bank employees involved in such malpractices. Worse, the changes made in the Banking Ombudsman rules are not good enough to tackle the issue, which suggests that the RBI is not aware of the gravity of complaints and is unwilling to engage with customers to get first hand reports. (Read: Customers Bleeding; RBI Offers Only Band-Aid
Further to this, the file noting on Mr Mathkar’s note says, “The request relating to prescribing timelines for redressal/ escalation and imposing penalty etc. at this stage would not be a desirable proposition. As regards to aspect of mis-selling of products and services, we have since included their aspects as specific grounds of complaint in the amended BO scheme, which will come into force from 1 July 2017. In view of the above, we may, if approved, acknowledge receipt of this letter and advise the organisation that RBI is seized of the issues and has been initiating concerted actions on relevant issues.”
Another file noting states, “…we write to Ms (Sucheta) Dalal and Mr (Debashis) Basu explaining… initiatives taken like introducing internal ombudsman in banks, Consumer Education and Protection (CEP) Cell for BO complaints, prepared amendment of the BO Scheme including the introduction of mis-selling of financial products as a ground for complaint under the Scheme, opening of new BO office to increase accessibility to the public and introduction of Charter of Consumer Rights in the Customer Delivery Policies of bank.”
However, the letter we received does not mention any of this. The letter sent by R Satish, Deputy General Manager (RBI), on 26 April 2017 states, “As you may be aware that Reserve Bank has been undertaking proactive initiatives in the sphere of consumer protection and is examining the aspects indicated in your referred letter. We are grateful for the valuable feedback/ suggestions provided to us.”
The Charter of Customer Rights issued by RBI 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.
Interestingly 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, 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.
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
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