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).
 
You may also want to read…
 
 
 
 
 
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    COMMENTS

    SACHIN PANGARKAR

    3 years ago

    Not only this even the nhb circular regarding credit rating of customer and there been no difference in rate of interest forold as well as new customer for same credit rating has not been implemented enabling the housing finance company to charge customers to reduce the spread

    sohan modak

    3 years ago

    Giving teeth to the consumers would mean RBI baboos needing dental prosthesis !

    SuchindranathAiyerS

    3 years ago


    The RBI is like any Indian Government Department or Court. Designed to extort from the hapless citizen. Indian Commercial Banking is Caesar's wife.

    B. Yerram Raju

    3 years ago

    RBI officials as Directors of PSBs enjoy the munificence of Banks in a number of ways and they can't afford to hurt the IBA and the Banks they represent. It's time they read Talwar's and Damodaran's recommendations on Customer Service and faithfully act on them. Banking Ombudsman has no jurisdiction on credit issues and the reach to him takes a lag of minimum of 45 days after the complaint originated to get a listing and hearing and solution takes another week or fortnight. Of course most Banking Ombudsman react fast and redress the grievance.

    Mahesh S Bhatt

    3 years ago

    Govt wants huge funds to be given to stressed companies...there seem to be some 'favourites'.

    A mere 50 companies account for 71 percent of the loans owed by the stressed companies. (owing Rs 20,000 crore each, on average)
    The top 10 companies on an average owe Rs 40,000 crore each.
    K C Chakrabarty in one of his recent interviews...

    "Now over Rs 6,00,000 crore is the NPA now. If you include Rs 4,00,000 crore write-off, then I will say Rs 10 lakh crore is the real NPA. Public money has gone. To whom it has gone, nobody knows."
    So, almost Rs 10 TRILLION of tax-payer's money has already been wasted by the government-run banks... Amen Mahesh

    Anand Vaidya

    3 years ago

    I don't think the fat cats in RBI (or any ministry) will bother about silly issues such as consumer rights & charter and fair treatment etc. They have more important topics to discuss such as cricket, increments, bonuses, Davos trips etc...

    Maybe the only way is to exert pressure on politicians to clean up zombie RBI.

    REPLY

    Pradeep Kumar M Sreedharan

    In Reply to Anand Vaidya 3 years ago

    True, absolutely

    Arun Adalja

    3 years ago

    rbi never responds to customer and they always take side of banks and banks are taking advantage by doing manmani.retail customers are at mercy of regulatories which are sleeping all the time.

    UK bans credit and debit card fees, says report
    The days of paying a hefty fee simply for paying by credit or debit card will soon be over, as the UK government has announced plans to ban card surcharges in that country, says a report from Which?.
     
    According to the report, the new ban, which will take effect from 13 January 2018, will mean retailers and traders are no longer allowed to charge you for using your credit or debit card when making a purchase. The same will apply to government services – such as local authorities and the DVLA. The government is implementing a new set of rules on payments written in the EU, meaning that surcharges will be scrapped in all member states next year, too, the report says.
     
    How much do card fees cost you? 
    Under the current system, many retailers in UK charge consumers to pay with a credit or debit card, both in person and online. “Usually, you will notice this fee as a 2% to 3% surcharge on your bill when you go to enter your card details. Since April 2012, the government has outlawed retailers from charging fees that are ‘excessive’. But many consumers still face surcharges of up to 3% on some transactions – a substantial amount, especially on big purchases,” the report says. 
     
    The report from Which? Says, “This has been difficult to police, as it falls under the remit of Trading Standards to enforce. If you have been charged an excessive fee, you may be able to challenge it – find out how. Under the new ban, retailers will no longer be allowed to charge customers any fees for using a card to make payment. This will apply to transactions on any credit or debit card, including Visa, MasterCard and American Express. The government is introducing this ban thanks to a new European Union law, the Payment Services Directive II.” 
     
    Victory for Which? 
    Which? has been urging the government to address excessive card fees since March 2011, when it submitted a super-complaint to the Office of Fair Trading (OFT).
     
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    COMMENTS

    Vivek Silla

    3 years ago

    This is a very good move to encourage electronic payments, while avoiding hard cash. In addition to being a convenient payment method for the customers, it also minimizes several known perils of hard cash to a significant extent. It is high time that Indian government comes up with such a law to align with and support Modi government's digital economy dream. Such a law would have been best to have been released during the same time of demonetization, nevertheless it is not too late. Government of India should take a serious look into this issue. The merchants may however play with the system by providing cash discounts to those paying by cash. Sufficient checks and balances should be put in place to avoid penalizing individuals who pay by card.

    A BANERJEE

    3 years ago

    Why can't this be replicated in India?

    Government introduces Banking Regulation Bill
    Finance Minister Arun Jaitley on Monday introduced a bill under which the Centre may authorise the Reserve Bank of India to direct banks to initiate recovery proceedings against loan defaulters.
     
    The Banking Regulation (Amendment) Bill will replace an ordinance that earlier enabled this. 
     
    The recovery proceedings would be under the Insolvency and Bankruptcy Code, 2016 that provides for a time-bound process to resolve defaults.
     
    Trinamool Congress member Saugata Roy opposed the introduction of the Bill. "It is a desperate step by a desperate government," Roy said.
     
    "The same RBI is being authorised to regulate banks which has till date not been able to give (the total) amount of money deposited in banks after demonetisation," Roy said.
     
    He demanded the bill to be sent to a parliamentary committee.
     
    Jaitley responded saying that the objections raised by Roy had nothing to do with the introduction of the bill.
     
    "The issues raised by him can be discussed when the bill comes up for discussion," the Minister said, after which it was introduced in the House.
     
     
    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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