RBI Warns Supervisory Action if Banks Fail To Resolve Customer Grievances within Specific Time
Moneylife Digital Team 29 January 2021
The Reserve Bank of India (RBI), while releasing a framework for strengthening grievance redress mechanism, has warned supervisory action against banks that fail to improve their redress mechanism in a time-bound manner. Last month Moneylife had written about how the RBI is winding up its customer services department and also BCSBI (Banking Codes and Standards Board of India). The RBI now appears to be getting serious about better grievance redressal system.
In a notification issued this week, the RBI said “Effective grievance redress should be an integral part of the business strategy of the banks. It is, however, evident from the increasing number of complaints received in the offices of banking ombudsman (OBOs), that greater attention by banks to this area is warranted. More focused attention to customer service and grievance redress will ensure satisfactory customer outcomes and greater customer confidence.”
The RBI circular said: "To further strengthen the customer grievance redress mechanism in banks, it has been decided to put in place a comprehensive framework comprising, enhanced disclosures by banks on customer complaints, recovery of cost of redress from banks for the maintainable complaints received against them in the OBOs in excess of the peer group average, and undertaking intensive review of the grievance redress mechanism and supervisory action against banks that fail to improve their redress mechanism in a time bound manner.”
According to the central bank, disclosures serve as an important tool for market discipline as well as for consumer awareness and protection. It says, “Appropriate disclosures relating to the number and nature of customer complaints and their redress facilitate customers and interested market participants to better differentiate among banks to take an informed decision in availing their products and services.”
At present, redress of complaints under BO Scheme (BOS) is cost-free for banks as well as their customers. Given that the banker-customer relationship is the primary relationship, the main responsibility of customer grievance redress lies with banks, RBI says, adding “to ensure that banks discharge this responsibility effectively, the cost of redress of complaints will be recovered from those banks against whom the maintainable complaints in the OBOs exceed their peer group average.” 
However, grievance redress under BOS for customers will continue to remain cost-free.
To calculate the peer group average, the central bank said every year peer groups of lenders will be created by looking at their asset size as on 31st March of the preceding year. These peer groups would track three parameters:           
a) Average number of maintainable complaints per branch; 
b) Average number of maintainable complaints per 1,000 accounts (total of deposit and credit accounts) held by the bank; 
c) Average number of maintainable digital complaints per 1,000 digital transactions executed through the bank by its customers.
As per the banking regulator, if complaints against a bank exceed the peer group average in one of the three parameters, the OBO would recover 30% of the grievance redressal cost from it. In case of two parameters, 60% of the cost and, in cases where complaints exceed in all three parameters, 100% of the cost would be recovered.
The cost of redress to be recovered will be the average cost of handling a complaint at the OBOs during the year.
This is good news for harried bank customers who are often made to run from pillar to post to get their grievances resolved. Banks will no longer be able to shove complaints under the carpet and get away with it because they will be made to pay if complaints are higher. 
Since there is penalty associated with higher complaints, the banks will now have to provide better customer service so that no complaints are raised and in the case of complaints, they will try to resolve the complaints promptly. It is hoped this will help get the banks fall in line quickly.
For over a decade, Moneylife has been highlighting the lackadaisal attitude of banks in resolving customer complaints.
RBI’s annual report in August 2020 said 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.
2 years ago
In fast changing rules let Bank staff know the rules. Sample:: In accounts of students for receiving direct transfer of amount there should not be requirement of Minimum balance. Money has to come from Govt; why Poor student should be tasked with maintenance of minimum balance? To my horror I found Bank of India ( Ahmadabad) deducting rs 256 as penalty for breaching min balance while amount transferred from Govt is Rs 156 . On strong query with Bank answer it is system operation branch does not know. when rules change by the day u cannot have laggards in branches. No such caveat was conveyed while opening the account
2 years ago
Banks should train and sensitize their own officers and staff to ensure that customers are not made to run in circles. Any undue delay by the bank officials should be viewed seriously and penalty imposed on them for unwarranted delays. Hopefully, the banks will show some regard for its ordinary customers.
Dilip Modi
2 years ago
Why is RBI focusing on the banks alone? Surely any grievance redressal process has to monitor and collect data from both parties. What happens when a bank does not even publish a customer support/care email ID and only by visiting their web site, one can find that a complaint can be lodged online but must be limited to 1000 characters. Oh, some web-based bank systems will not allow you to copy-paste. You must type all again! Try doing this 3 times on line, when each escalating point in a bank tells you that "if you don't accept their resolution, you can escalate" instead of them escalating internally. In other words, they have devised a variety of ways to dissuade you from complaining.

Has anyone in RBI figured out why certain banks keep on changing their complaint reference number as it moves from department to department? It certainly confuses the complainant, and probably will confuse RBI too in arriving at what a peer group average is to set the benchmark!

The final straw that breaks customer's back is the process of Internal banking Ombudsman. To the best of my knowledge, even now during the internal escalation of a complaint, you are not allowed to approach him/her directly, nor allowed to have IBO's contact details. The bank against whom you are complaining is the only one allowed to approach the IBO on your behalf (prosecutor), argue against your complaint (Defendant), carry the IBO order (Court official), and convey the findings in its own summary. In other words, the complainant is not even allowed to see the actual order issued by IBO.

please let me know if there is any other country in the world that practices such a method in its financial Regulatory directives to its banks.
Replied to Dilip Modi comment 2 years ago
It's a norm to remove previous chain of communication in response by Bank. And many times provide the irrelevant response and dilute the complaint by providing several tracking numbers.

It becomes a huge task to connect the dot's and keep maintaining the email Chain by customer.
Dilip Modi
Replied to dummytg comment 2 years ago
Quite so. If all the trailing mail were there under a single reference, how easy it would be to raise a complaint, escalate it? More so, how logical and comprehensible it would be for the regulator/official to adjudicate!
2 years ago
Yesterday i wanted to raise a grievance with Union bank with whom Andhra bank(my original bank)was merged. The website grievance system after filling all details does not upload at all despite several attempts. Their website feedback option also does not upload. What's the point of RBI simply issuing guidelines, warnings etc when there is no inspection of their websites and their various functionalities.
2 years ago
This, along with the imrpovement in the Public Grievances CPGRAMS system (they now have the option of escalating to a Nodal Officer when the response is POOR) should hopefully improve matters. thanks for the efforts.
2 years ago
I had filled a complaint against Paytm Payment Bank in RBI Ombudsman. There was ZERO Status Update for approx 4 months, and after that received one email, in which it was closed based on representation made by Paytm Payment Bank, without any confirmation from my side for the lies provided by paytm. That means, I need to go through the lies of paytm once again with RBI, and wait for further 4 months again?

What's the advantage of RBI to give warning to Bank, if it can not be fair itself.
2 years ago
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