In a strong message to Indian lenders, the Reserve Bank of India’s deputy governor SS Mundra said the RBI in its current supervisory cycle will focus on mis-sellling of third party products, instances of violation of KYC guidelines and imposition of additional service charges by the banks. “While the banks have been granted autonomy in fixing the minimum average balance or charging for premier services, it should not be used as an excuse to deny services to the common man. This is what we have observed in some of the institutions. It is moving in that direction,” Mundra said on Tuesday.
He was speaking at the annual Principal Code Compliance Officers (PCCO) conference organised by the Banking Codes and Standards Board of India (BCSBI) in Mumbai. While greater competition would help to create a more level playing field for the customers, a lot of the checks and balances should stem from the self-discipline of the lenders, he said.
You might also want to see this:
“If a bank is offering premier services, I don’t see anything wrong for them to charge for it. But it should be reasonable and it should not be designed to keep some customers away. That would be our concern, rather than how much is being charged because that is not the job of the regulator,” Mundra said. Indian banks have come under immense pressure in the last couple of years due to rising non-performing assets, and the pain is likely to continue till in the current fiscal. In a note published on Tuesday, S&P Global Ratings said it sees the banking sector’s total stressed assets increasing to 13-15% of total loans by the end of March 2018.
The deputy governor was also critical of the customer complaint redressal system in the banking sector, and said it suffers from certain structural inconsistencies. A continuous rise in the number of complaints to the banking ombudsman office is a pointer to the fact that the institution of Internal Banking Ombudsman (IBO) has not been very effective, or has not been empowered enough by the respective management, and it needs to be corrected without further delay, he added.
For the first time since the inception of the banking ombudsman scheme in 1995, the number of complaints has exceeded one lakh in 2015-16 (July to June). In the current cycle, the number has exceeded one lakh as of May. “It would be appropriate for the banks to invest in a technology platform which does not merely aggregate and track the complaints, but also undertakes the root-cause analysis of various complaints, thereby providing proactive preventive action,” Mundra said.
He also said the business correspondents (BCs) employed by lenders should be brought under greater scrutiny. The banks would have to take ownership of the BCs employed by them and put in place appropriate grievance redressal mechanism for cases involving them, he added.
“The BCs are very much a part of the banks’ customer service delivery system and with the new policy, they are going to become more prominent. I think it is high time to improve the entire banking correspondent network from the perspective of customer service, grievance redressal and all other things that are required to empower a customer,” Mundra said.