“Do you know that RBI is winding up its customer services department and also BCSBI (Banking Codes and Standards Board of India)?” asked a rather agitated former bank chairman who was instrumental in the creation of BCSBI along with the late SS Tarapore.
The dissolution of BCSBI, a well-meaning but deeply flawed organisation, was long overdue. Announced in the Reserve Bank of India (RBI) annual report, in August 2020, it went largely unnoticed due to the disruption caused by the COVID pandemic. The winding up of RBI’s customer services department is what interest us more.
RBI’s annual report in August says that the CEPD (consumer education and protection department) will now look at grievance redress; do a root-cause analysis of complaints; review the banking ombudsman scheme, consider extending the internal ombudsman concept to non-banking finance companies; review its consumer education cells and set up an interactive voice response system (IVRS) for online support to the complainants.
I have it on very good authority that RBI is serious about better grievance redress system. There is already some indication of which way the wind is blowing. On 2nd December, the powerful HDFC Bank was, finally, whacked with stiff punishment for the frequent outages in its Internet and mobile banking and payment utilities over the past two years. The Bank has been told to temporarily stop all business-generating tech applications and sourcing of new credit cards until its systems are fixed.
Given the ferocious rate at which the Bank works at getting new businesses, this is a far stiffer punishment than a mere fine. HDFC Bank is India’s most valuable bank and the action sends a powerful signal to other banks, including public sector banks (PSBs), which are notorious for systemic issues. In December, RBI governor Shaktikanta Das said that RBI planned to institute a “disincentive-cum-incentive framework to encourage banks to improve their grievance redress mechanism.” This also sounds encouraging. But an institutional mechanism works only when there is a clear-headed understanding of pain points along with intent to work for customers, rather than banks. I would submit that RBI has been tinkering with institutional mechanisms for well over a decade, at great cost, and repeatedly failed because it does not engage with customers for feedback; most of its interactions are with banks or data submitted by banks and various government-sponsored consumer helplines. The latter is useful but limited.
RBI has even gone so far as to take the stand that customers cannot use litigation as a ‘weapon to challenge financial or economic decisions’, such as levy of surcharge on credit and debit cards, in a public interest litigation (PIL) filed in the Delhi High Court.
Consider these examples of how institutional mechanisms haven’t worked.
BCSBI: Set up in 2006 due to mounting consumer complaints, BCSBI is a classic example of how good intention disconnected from ground reality will end up in a disaster. In fact, our cover story in 2017, titled “Your Friendly Bankster” had categorically suggested that it should be shut down. Housed in a sprawling office, fully funded by RBI (initially) and headed by a retired deputy governor (later funded by Indian Banks Association and headed by a retired public sector bank chief), BSCBI was never likely to be an ‘independent watchdog’ for consumers or ever bark at its masters. So, the organisation spent time on pointless codes and customer surveys. That it is being dissolved and not morphed into yet another white elephant (like Planning Commission into NITI Aayog) itself deserves kudos.
Consumer Charter and Internal Ombudsman: In December 2014, under governor Raghuram Rajan, RBI first created a framework for consumer protection which ought to have been BCSBI’s first task. It was a consultative process that identified five basic rights of bank customers as: right to fair treatment; right to transparency, fair and honest dealing; right to suitability; right to privacy; and right to grievance redress and compensation. Unfortunately, these have ended up like commandments with no consequences for violation. Expectedly, banks simply ignore them. The charter itself, under pressure from banks, had dropped the right to non-discriminatory treatment, which is why the unfair practice of offering lower interest to new borrowers, while harassing existing ones on reduction of floating rate interest continues, despite our PIL in the Supreme Court in this regard.
The Present: On 18th December, RBI board “reviewed RBI’s customer education initiatives and resolution of customer complaints.” It will be interesting to know what material was presented to the board and how it was presented.
In the past three years, the functioning of the banking ombudsman’s office has, indeed, improved. From a rejection rate of over 57% of cases as non-maintainable just three years ago, it is down to 29% and the number of cases settled through mutual settlement is also at a high of 70%. But the awards against banks, at 0.11% or just 98 out of over 1.94 lakh complaints, seems abysmally low. More importantly, at Moneylife Foundation, our not-for-profit financial literacy organisation, we have found that awareness about the banking ombudsman’s office and its online redress mechanism is itself low.
Now here is an idea. RBI governor Shaktikanta Das is a rare bureaucrat and central bank governor who is on Twitter. Last week, he tweeted that RBI’(@RBI) twitter account has over one million followers. But this account is a mere broadcast channel. There is no evidence that it monitors feedback. As a first step to better grievance redress and customer services, it would be nice if RBI were more active on Twitter.
The late Sushma Swaraj had won hearts by doing it effectively for Indians abroad. The Mumbai police, Mumbai municipal corporation and many others have been doing it well too. Why not RBI? Just the fact that RBI is watching will ensure that all banks respond seriously to grievances on social media, instead of posting automated responses through bots.
I experimented with this idea, by sending the tweet below on 22nd December, asking people to highlight customer service issues that agitated them the most.
So folks, request feedback. What according to you are the customer services issues at Banks that agitate you the most? Mis-selling, high charges, tech failures, poor service? What else? Request RT please . Earnestly request serious answers on topic! #BankChargespic.twitter.com/zRVKbgvcuT
The number one complaint is mis-selling of products, mainly insurance. It often boils down to coercion and extortion and ought to be punishable. Bankers themselves complain about being forced to mis-sell in order to meet corporate targets. RBI has been silent to this egregious loot of depositors.
Cheating borrowers on interest charges and on conversion to lower rates is another widespread complaint.
Technological glitches and poor user experience of their websites and apps is a problem across the system. A root-cause analysis would go back to software giants who have written the core banking software. One recurring complaint that can be easily fixed by prescribing standard templates is that of ‘incomprehensible’ e-statements with inadequate information.
Harassment of know-your-customer (KYC) updates and the unilateral powers granted to banks to freeze customer accounts causing enormous pain and hardship.
Usurious and unfair charges for services, poor treatment of senior citizens, especially pensioners, frequent outages (especially at PSBs), harassment while closing bank accounts and credit cards, levy of cheque return charges on the receiver who is not at fault, are issues that cause great anger.
Although RBI had cracked down on banks issuing credit cards without customers having specifically asked for them, the feedback indicates that this mischief has started again and needs to be fixed with stringent penalties.
If RBI interacts with actual users, via social media and technology, it can dramatically improve customer services and fair treatment of borrowers. The good news is that RBI has agreed to look at the feedback and there is hope that it will take up such an exercise on its own and give us better banking services.