Even as reports pour in about banks and financial entities ending the last financial year with stellar performances, the question that arises in the minds of ordinary customers is: well, what’s in it for me?
Will it lead to better, more friendly service at the counter? Will my updated passbook capture all entries clearly with adequate details? Will the neighbourhood ATM be neat, up and running when I need it the most ? Will banks intimate me when there is an increase in interest rates so I can modify my fixed deposit plans?
Furthermore, are the poor in the country able to walk into a private bank branch and demand opening a Jan Dhan Yojana account as a matter of right ? Or why doesn’t the gold loan company inform borrowers in advance, the loan is going to be at “blade” (cut-throat) rates of interest, beyond the initial “teaser” period ?
For crores of customers across the country these and similar everyday problems are what matter. For banks/finance companies too, as acknowledged by the top bosses themselves, these are existential questions because sustainability of their current excellent show will depend a great deal on providing enhanced customer services.
While in most other areas like underwriting practices, digital products, risk management and capital generation, Indian banks and NBFCs have attained global standards, customer services/experience leaves room for betterment. Generally, the perception is that ordinary customers (not the large deposit/salary-account holders and large corporate borrowers) should get a better deal/experience.
It is in this context that the thrust of the just-published report of the Kanungo committee for “review of customer service standards in RBI regulated entities” acquires importance. It has been more than a decade since action was initiated on the basis of the last report of a committee on customer service in banks (2010) which was headed by former SEBI Chairman M Damodaran. Reflecting the great shift in the nature and complexities of the Indian financial sector, the RBI constituted this panel last year under former Deputy Governor BP Kanungo to review customer service to cover not merely banks but in all regulated entities (REs).
The report is comprehensive and pragmatic. It makes 36 key recommendations. If there is one key recommendation which is the leitmotif of the panel, it is this advice to RBI: Dismantle the current rules-based approach to customer service, make it principle-based but “enforce” strictly the powers of the regulator under the RBI Act. In other words, give up micro management but wield the stick mercilessly when warranted in the interest of customer protection after laying down broad expectations.
The Damodaran committee resulted in a rules-based Master Circular on Customer Service in banks last revised by the RBI in 2015 which contains instructions like “ Banks should give constant attention to ensure entry of correct and legible particulars in the pass books and statement of accounts” or “All the customers entering the banking hall before the close of business hours should be attended to”. The RBI also issued a charter of customer “rights” in 2014. But most of these homilies have remained on paper as they did not have “enforceability”.
Charter of customer rights
Therefore, the committee which includes development banking veterans like Anil Kumar Sharma aptly suggests: “The Reserve Bank may consider making the Charter of Customer Rights enforceable after reviewing and updating it…and extending it to NBFCs also”. It adds that it is time the regulator shifted the focus of its lens to enforcement and “empowerment” of the RBI Ombudsmen and the RBI’s department of Consumer Education and Protection Department to initiate corrective action.
The existing structure for customer complaints redress has at best led only to resolution of individual complaints. But as the country moves towards greater inclusion (nearly 50 crore new customers having been included through the PM’s Jan Dhan Yojana campaign) there is need, as the report states “…to improve the enterprise-wide customer service, impart systemic strength to overall customer protection efforts in the financial sector while imposing a regulatory cost (sic) for entities where the quality of customer service is deficient.”
After evaluating methodologies followed by the World Bank, the OECD and other developed geography regulations, the report highlights five unexceptionable broad principles/pillars on which the medium-to-long-term customer service architecture in India should be built: Equitable and Fair Treatment, Transparency and Disclosures, Appropriateness and Suitability, Data Protection/Customer Confidentiality and Right to Grievance Redressal.
How will the RBI ensure that REs including banks measure up to the new scheme of things? The panel says that Reserve Bank may develop and publish a “Customer Service and Protection Index” with a view to capture, at the system level, the quality/standards of customer service and extent of customer protection in the REs through a single score. This will require in-depth ideation and some more consultations as this score will have to reflect equivalence for all REs
Adoption of the new approach towards ensuring “enforceable” customer service norms, protection of their rights and monitoring of performance of the REs on the basis of an index, if executed in the right spirit, will make the “aam grahak” the king that he/she should be.
The writer is a commentator on banking and finance