Banks and other lending institutions must ensure that having a customer-centric approach is not an “optional” requirement in current times but more of a necessity, Reserve Bank of India (RBI) deputy governor (DG) Swaminathan J said at the Conference on Customer Service held in Mumbai on September 21.
“The predominant source of your (lenders’) liabilities is customer deposits, whose interest we all seek to protect. It is, therefore, imperative to place them at the heart of operations of any bank. In fact, a customer-centric approach is not an optional thing; it is a necessity,” he said.
In his speech, the DG focused on five key aspects for lenders to improve customer service—need for a customer centric approach, addressing root cause of customer complaints, importance of resolution at first point of contact, responsible handling of complaints and combatting cybercrime.
As lenders are commercial entities, there is nothing wrong in being target driven, but they must ensure that employees understand that their primary responsibility is to serve customers’ financial needs, the DG said. Accordingly, there should be clear and transparent incentive structures that reward employees for delivering quality financial advice and services, rather than just making sales.
“Staff should ensure that products are recommended based on the customer’s financial situation, goals, and risk tolerance. Towards this, every financial institution should have a policy for customer appropriateness and product suitability framework,” the DG said, adding that by adhering to such a policy framework in letter and spirit, lenders can greatly reduce the mis-selling complaints, which form a substantial portion of the complaints that RBI witnesses.
The DG also called for a more proactive approach in identifying root causes. For example, lenders should conduct regular analysis of customer feedback, complaints, and suggestions. Root cause analysis will not only allow rectification of individual grievances, he said, but also enhance systemic processes to prevent reoccurrence.
Further, the DG said that RBI has also noticed that some banks have adopted an “innovative approach” to classify certain complaints as queries, which results in understating the problem. This results in a false sense of complacency, he said, and the truth will be out in any case.
“We seek to disincentivise such practices and as a regulator, we will not hesitate to act in case it turns out to be an entity-wide behaviour. I, therefore, request the customer service committees to keep a close watch and guard against such practices,” the DG stressed.
The DG also called for empowering lenders’ customer facing staff in order to resolve issues at the point of first contact. The objective should be to ensure that complaints rarely need to be escalated to the Internal Ombudsman or the Reserve Bank Ombudsman, he says. He added that the feedback RBI has received indicates that the internal ombudsman framework in a few institutions is way below the requirement and adequate importance is not being accorded to this process by the management. “This is another area where I would like the Customer Service Committees of the Board to pay enhanced attention,” he said.
Lastly, the DG called on lenders to further enhance their cybersecurity infrastructure, as it involves not only implementing robust technologies but also building a culture of vigilance amongst employees. Cybersecurity awareness campaigns, regular drills, and collaborative initiatives can fortify lenders’ defences against the ever-evolving threats in the digital realm.