Customer service in Banks – Redressal of complaints: Recent RBI guidelines

I am not amused by the recent directions issued by the Reserve Bank of India vide its communication dated RBI/2020-21/87 CEPD.CO.PRD. Cir. No.01/13.01.013/2020-21 dated January 27, 2021, titled ‘RBI releases framework for strengthening the grievance redress mechanism in banks’ with the following objective.

“It has been decided to put in place a comprehensive framework comprising of, inter-alia, enhanced disclosures by banks on customer complaints, recovery of the cost of redress from banks for the maintainable complaints received against them in OBOs in excess of the peer group average, and undertaking an intensive review of the grievance redress mechanism and supervisory action against banks that fail to improve their redress mechanism in a time-bound manner. Details of the framework are provided in the annex.” (OBOs) indicate Offices of Banking Ombudsman.

Let us understand the details from the following website.

https://taxguru.in/rbi/rbi-framework-strengthening-grievance-redress-mechanism-banks.html

It is important to understand the directions of RBI which directly link the responsibility of providing good customer service on banks only.

• The framework for strengthening grievance redress mechanism in banks will have the following major components:
• Enhanced disclosures on complaints

Avoiding disclosures of customer complaints has benefitted the banks from close supervision by regulatory authorities or by you, me or anyone as a customer.

What are the disclosures regarding grievance redressal by banks as of date?

• Let me give the details as under in terms of Para 16.4 of the Master Circular on ‘Customer Service in Banks’ dated July 01, 2015. The disclosures are summary in nature and comprise the following:

Customer complaints received by the banks for the previous year as well as the current year separately in a comparative form, horizontally.

 (a) No. of complaints pending at the beginning of the year

 (b) No. of complaints received during the year

 (c) No. of complaints redressed during the year

 (d) No. of complaints pending at the end of the year

Awards passed by the Ombudsman for the previous year as well as the current year separately in a comparative form, horizontally have also to be given.

(a) No. of unimplemented Awards at the beginning of the year

 (b) No. of Awards passed by the Banking Ombudsmen during the year

 (c) No. of Awards implemented during the year

 (d) No. of unimplemented Awards at the end of the year.

However, we have been informed that these disclosures have been replaced by new disclosures which are intended to provide to the customers of banks and members of the public greater insight into the volume and nature of complaints received by the banks from their customers and the complaints received by banks from the OBOs, as also the quality and turnaround time of redressal.

You are inclined to ask about the enhanced disclosures to be made by banks on complaints and grievance redressal?

Summary information on complaints received by the bank from customers and from the OBOs.

Complaints received by the bank from its customers

1. Number of complaints pending at beginning of the year

2. Number of complaints received during the year

3. Number of complaints disposed of during the year

 3.1 Of which, number of complaints rejected by the bank

4. Number of complaints pending at the end of the year

Maintainable complaints received by the bank from OBOs

5. Number of maintainable complaints received by the bank from OBOs

 5.1. Of 5, the number of complaints resolved in favor of the bank by BOs

5.2 Of 5, number of complaints resolved through conciliation/mediation/advisories issued by Bos

 5.3 Of 5, number of complaints resolved after passing of Awards by BOs against the bank

6. A number of Awards unimplemented within the stipulated time (other than those appealed) (Note: Maintainable complaints refer to complaints on the grounds specifically mentioned in BO Scheme 2006 and covered within the ambit of the Scheme.)

Further, the following information has also to be provided.

Top five grounds of complaints received by the bank from customers under grounds 1-5 for the present year as well as the previous year with details as under:

• Grounds of complaints, (i.e., complaints relating to), grounds 1-5.
• Number of complaints pending at the beginning of the year
• Number of complaints received during the year
• % increase/ decrease in the number of complaints received over the previous year
• Number of complaints pending at the end of the year

 The master list for identifying the grounds of complaints is provided as under:

1. ATM/Debit Cards 2. Credit Cards 3. Internet/Mobile/Electronic Banking

4. Account opening/difficulty in operation of accounts 5. Mis-selling/Para-banking 6. Recovery Agents/Direct Sales Agents

7. Pension and facilities for senior citizens/differently-abled 8. Loans and advances 9. Levy of charges without prior notice/excessive charges/foreclosure charges

10.Cheques/drafts/bills 11. Non-observance of Fair Practices Code 12. Exchange of coins, issuance/acceptance of small denomination notes and coins

13. Bank Guarantees/Letter of Credit and documentary credits 14. Staff behavior

 15. Facilities for customers visiting the branch/adherence to prescribed working hours by the branch, etc. 16. Others.

The list of complaints under various heads is self-explanatory since, on the basis of general complaints received over a period of time, they have been compiled.

Let us look at various other information on fixing up the responsibility of banks by RBI which were never practiced earlier since the banks were expected to take up the complaints seriously and fix them on a time-bound program. Unfortunately, with the massive growth of customers and the introduction of computerization, the customer service has shown a decline causing the customers to suffer or write to RBI which is helpless with the increase in workload and not in tune with its regulatory role.

However, as a retired banker, I am surprised to hear that with a view to ensuring 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 as detailed in para below. However, grievance redress under BOS for customers will continue to remain cost-free, as per current practice.

How will one understand the peer group of banks since it has never been applied earlier?

The two of the following paras throw a lot of information which I reproduce below for clearer understanding without comprising in my words.

“To operationalize the cost-recovery framework for banks, peer groups based on the asset size of banks as on March 31 of the previous year will be identified, and peer group averages of maintainable complaints received in OBOs would be computed on the following three parameters:

• the average number of maintainable complaints per branch;
• the average number of maintainable complaints per 1,000 accounts (total of deposit and credit accounts) held by the bank; and
• the average number of maintainable digital complaints per 1,000 digital transactions executed through the bank by its customers.”

What is the cost of redressing complaints to be recovered from banks?

Para 7 on page 7 enlightens us as under:

“The cost of redressing complaints in excess of the peer group average will be recovered from the banks as follows:

• excess in any one parameter – 30% of the cost of redressing a complaint (in the OBO) for the number of complaints in excess of the peer group average;
• excess in any two parameters – 60% of the cost of redressing a complaint about the number of complaints exceeding the peer group average in the parameter with the higher excess;
• excess in all the three parameters – 100% of the cost of redressing a complaint about the number of complaints exceeding the peer group average in the parameter with the highest excess.

The cost of redress to be recovered in this respect will be the average cost of handling a complaint at the OBOs during the year.

What will be the role of RBI as the regulatory authority in complaints redressal?

The Complaint Management System and other sources and interactions will enable RBI to identify those banks having issues in complaints redressal with the following grounds:

i. Adequacy of the customer service and customer grievance redress related policies.

ii. The functioning of the Customer Service Committee of the Board.

iii. Level of involvement of the Top Management in customer service and customer grievance related issues.

iv. Effectiveness of the grievance redress mechanism of banks.

Banks failing to take necessary steps will be subjected to corrective actions through appropriate regulatory and supervisory measures of RBI.

Our observations

Previously, the banks directly received the complaints through their concerned division dealing with customer service and used to take immediate steps to attend to the requirements of its customers. Unfortunately, the services rendered tend to be poor in view of the massive improvement in business and also due to the vast increase of non-performing assets which consume more time and less importance to deposit or other types of customers. The introduction of the cost of non- redressal of complaints by RBI would force the banks to account for their delay and explain how they fail to discharge their duties.

Ultimately, customers who are mostly small will be happy to learn about the new developments which would improve customer service. Also, those bank personnel who fail to give customer service should be advised to improve or subject to punishments as per service rules. Yes, as advised by Mahatma Gandhiji, the customer is not a disruption but the essence of a business and if one fails, someone else will provide the same. All banks that are too big to fail should also face the same cost like anyone else for failing to offer basic customer service.

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