Reserve Bank of India (RBI) Governor Sanjay Malhotra has a good reason to worry about the quality of customer service at Indian banks. The number of complaints under the RBI’s Integrated Ombudsman Scheme has increased at a compound annual growth rate of 50% over the past two years. Worse, 57% of the maintainable complaints last year required mediation or formal intervention by the RBI ombudsmen. No wonder, the governor had to remind bankers at a recent event that it’s not fair to treat customer complaints as a nuisance. The number of complaints could actually be much higher because there is a large section of people who don’t have the wherewithal or aren’t even aware of the processes to make complaints — something that the regulator, along with the industry, needs to address urgently. In fact, one simply has to browse through social media to see the large number of complaints against leading banks. These include repeated demand for know your customer (KYC) documents, and of course, mis-selling of products. And, as the RBI governor rightly pointed out, though all changes in address gets updated in the Central KYC Registry, most banks and non-banking financial companies (NBFCs) have not enabled the same in their branches, leading to further harassment of customers.
As far as mis-selling goes, it is not just the RBI; even the insurance regulator and the finance minister have warned the industry during the past year. Former Insurance Regulatory and Development Authority of India chairperson Debasish Panda said a few months back that banks are a very useful channel, but a lot of ills had crept into the system. “You have to give the option to the customer. No mis-selling, no force-selling…,” he had added. In the race to add customers, especially through the online route, many seem to have lost the plot. More customers also mean more grievances — something that the financial sector needs to take into account. What is worrying is the reduction in the number of employees in public sector banks. While the government claims that 95% of the sanctioned clerical and subordinate positions have been filled, employee unions say banks are relying more on temporary workforce due to a manifold rise in workload. According to data, the clerical workforce between 2013 and 2024 shrank by 150,000. Private sector banks score here, as the number of employees has risen from 170,000 to 846,000 between 2011 and 2024.
There is no doubt that the workload of the banking sector has risen significantly, especially due to the government’s two grand projects in the past decade — demonetisation and the Jan Dhan Yojana, which has a whopping 530 million account holders. Currently, the sector is grappling with re-KYC of accounts that were opened in 2014-2015. The race to add customers and increase balance sheet sizes has also led to non-adherence to RBI regulations. Even leading banks and NBFCs have erred and received a rap on the knuckles from the banking regulator. At a time when the government and the central bank are working overtime to increase financial inclusion — a good example being the proliferation in the number of Jan Dhan accounts and recent usage of central bank digital currency for government programmes — the banking industry as well as NBFCs and the fintech industry have to treat the customer as a stakeholder, and their complaints as catalysts for improvement. Service quality, after all, is increasingly becoming a key differentiator.