Sucheta Dalal :The customer orientation mantra
Sucheta Dalal

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The customer orientation mantra  

Feb 12, 2007

As someone who also wears the consumer activist hat, I welcome Reserve Bank of India's (RBI) crackdown on capricious rules, one-sided contracts and the callousness of banks and finance companies towards consumers.

Over the last couple of years, RBI has significantly levelled the playing field for bank customers. This was indeed necessary. After the euphoria at being wooed by new private banks offering smart, automated services and a plethora of credit options and facilities, bank consumers went through a harrowing phase of grappling with myriad new charges and complicated billing systems, leading to innumerable disputes. In addition, there were the incessant telemarketing calls at all times of the day and night.

Thanks to RBI’s actions, grievance redressal is taken far more seriously at the bank level. RBI has also ensured that promises to customers are kept, no matter what the cost. Reporting defaulters to the credit information bureau is also fairer. Banks cannot declare individuals as defaulters in every dispute and permanently block their access to credit without informing the customer. Another initiative was to ask banks to create ‘Do not call’ lists and post them on the home page of their website to ensure that customers are not harassed with marketing calls. More importantly, it has identified banks that have the largest number of customer complaints and persuaded them to work closely with the National Consumer Helpline to create a fast track for grievance redressal.

A consequence of this activism is a perceptible improvement in customer handling, a drastic reduction in marketing call harassment and hopefully, overtime, the de-clogging of offices of the banking ombudsman around the country. Having said that, one now gets the impression that the pendulum may be swinging the other way. This could be because the voices of certain small but organised groups tend to represent the large majority. One is not arguing that the concerns of small segments be ignored, only that they must not be mistaken for the majority view and form the basis of framing broad policy.

One example that I have discussed earlier is RBI’s diktat that banks much issue passbooks to all customers. This is contrary to the operational design of several modern banks, which prefer to invest in technology solutions. They actively discourage customers from visiting the branch for routine transactions that are easily handled by Automated Teller Machines (ATMs). Instead of making passbooks mandatory, they could have been provided on demand to those who want them. The RBI order has imposed enormous costs, especially on new banks for infrastructure, staff and training to provide the facility. When some foreign banks impose a charge Rs 100 for transactions through the branch, it is safe to bet that they will find ways to reject the business of customers who are likely to demand pass books. Moreover, many customers are indeed satisfied with mini statements available from ATM machines, and monthly or quarterly statements sent by post. The rapid growth of Net banking suggests that a growing mass of people is also ready to dispense with the physical statement and monitor all their banking transactions over the Internet.

We learn that the RBI itself is beginning to realise the impracticality of its order and is willing to accept compromise solutions where banks create a passbook facility for those who demand it, but do not need to mail them to everyone. Further, it has accepted a different passbook design, which allows newer entries to be printed out separately and attached to an existing physical folder that looks like a good old-fashioned passbook.

Yes, we want the best consumer protection possible, but in a dynamic economic environment, the central bank must also be careful not to burden its banks with unreasonable restrictions
But RBI is not the only one issuing fatwas to banks; the Banking Codes and Standards Board of India (BCSBI) has told banks that they would have to get ‘positive’ consent from every single one of their own costumers, to be able to market products and services to them.

This is clearly another well-meaning, misguided and expensive rule imposed on banks. If followed in letter and spirit, it means that when your bank launches a special scheme or hikes interest on deposits, it cannot send you a mailer offering you a special offer or service, unless you have specifically consented to receive such a missive.

On checking with several banks, I found that few believe that BCSBI is really serious about enforcing such an extreme and expensive ruling. We learn that only UTI is all set to rollout a complex programme to seek positive consent from each customer and maintain a database of refusals. This effort will carry a steep price tag of Rs 10 crore. The programme, branded Sampark, is already on the bank’s website with a banner saying, “It is not like we don’t have your number, we just respect your privacy. But we will be talking to you soon, for which we want your permission.” One must mention that UTI Bank is not happy spending that money either, but it has been told by the BCSBI that there is no question of backing down from the rule.

If UTI Bank’s expense is a hefty Rs 10 crore, how much higher would be the cost and implementation logistics for a State Bank of India with 90 million customers and ICICI Bank with 20 million customers?

Yes, we want the best consumer protection possible, but in a dynamic economic environment, the central bank must also be careful not to burden all the banks with unreasonable restrictions that carry high costs for benefits that are limited at best.

-- Sucheta Dalal