Sucheta Dalal :Can competition alone protect the poor investor?
Sucheta Dalal

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Can competition alone protect the poor investor?  

May 10, 2004

All banks operating in India have by now received the initial drafts of the Committee on Procedures and Performance Audit on Public Services (CPPAPS) headed by former central banker S.S.Tarapore; and they know that their decades of taking the customer for granted will soon come to an end. If Tarapore and his committee have their way, then the ordinary depositor or the common person will, for the first time in Indian banking history, have some fundamental rights in the system and his loyalty will no longer be taken for granted.


This arises out of their recognition that de-enfranchised ordinary depositors are at the end of their tether at the rising incidence of higher and higher service costs accompanied by poor customer service and shoddy grievance redressal.


But the centrepiece of the CPPAPS committee recommendations to empower depositors is likely to be its recognition that although market forces play a role in rewarding efficient players and penalising inefficient ones, market forces cannot be the only protector of customer interest. The banks and regulators have to act proactively to protect customers.


The new government, at the highest level, needs to take note of the CPPAPS committee’s long delayed recognition of this fundamental fact, despite the decades spent in developing a regulatory framework for banks. And, without wasting any more time on committees, the core finding of the CPPAPS must be extended to all areas where privatisation has led to a multiplicity of service providers, whose service standards are just as questionable as those of banks, and whose grievance redressal mechanism is as arbitrary and at the mercy of so-called market forces.


Two areas where mounting complaints have lead to serious consumer distress is the telecom sector and to a lesser extent the electricity distribution business. The Telecom Regulatory Authority of India (TRAI) has now begun to interact with consumer groups; but it still won’t listen to individual complaints, or create a mechanism for verifying whether complaints about innumerable and unjust charges imposed on mobile phone users are correct and if complaints are handled expeditiously.


For instance, between May 2 to May 8, Orange subscribers received SMS messages hiking rates for ‘‘all incoming and outgoing calls while roaming’’ by Rs 1.5 more; and Rs 3 more when roaming on the Reliance network. It has also announced a steep hike in ‘‘roaming rates for mobile to mobile STD calls’’. Subscribers were asked to go to its website for more details.


But the tariff information is not easily available on the website either. One presumes that Orange has indeed posted the information before messaging consumers; I certainly didn’t find it. Instead, I saw loads of details for pre-paid customers (who cannot be taken for granted) and on election alerts, games, missed call alerts, music cards, ring tones etc. But not on roaming tariffs.


Doesn’t the service provider need to provide a more detailed explanation of what the hikes mean and how they are likely to impact the user’s monthly bill? As a consumer, all I have is a belated SMS message announcing tariffs that became effective eight days earlier. There is no announcement and no warning. Is this state of affairs what the TRAI calls deregulation? Mobile companies even get away with charging Rs 75 for a ‘detailed’ bill that is never provided. Can I go to the TRAI and complain? No; because TRAI is not accountable to consumers, who is the key stakeholders in the system. Moreover, its ‘forbearance’ terms allow mobile operators to fix their own tariffs, under the false assumption that competition will keep tariffs low. The existence of a mobile operators’ tariff cartel is apparent to all phone users.


Maybe things would work if the TRAI were open to individual suggestions. For instance, B. Shankaranarayan of Pune says in a letter to the TRAI Chairman that consumer complaints against all the new telecom companies, especially mobile operators are ‘‘growing exponentially’’.


He suggests a simple solution to record complaints that is easily facilitated by technology. TRAI, he says, could set up a “message board” on its website, with each telecom companies separately listed for posting complaints. The companies should also be asked to compulsorily include the message board address on their monthly billing statement for consumer information.


Shankaranarayan’s suggestion, if accepted, would serve multiple purposes. It would force companies to treat complaints more seriously when they are posted on the regulator’s website. The message board would be a key source of information on user satisfaction levels for the regulator. And, the list of complaints and the speed of their redressal would be monitored and act as an important tool for comparison of service quality and tariffs.


A similar message board on the State Electricity Regulatory Commission’s websites would work well too, especially since Internet based consumer and activist groups are flooded with complaints against electricity companies.


Coming back to the issue of how consumers get ignored by the regulatory system, a former banker, G.K.Thorvi, writes that one of the earliest committee on bank customer services was set up under R.K.Talwar sometime around 1967. Since then, many committees have examined the issue. Yet, the Tarapore Committee, with its fresh perspective, and meeting in a liberalised environment notes that the mass of depositors are simply not taken into account when formulating the complex regulatory frame work for banks. Consequently, ‘‘the depositor, who is a key stakeholder in the system is shorn off all his rights’’. I also suspect that the rampant levy of high hidden costs by new private and foreign banks and their aggressive marketing to bag the payroll accounts of large companies has brought many consumer problems to a head.


It is important then that problems recognised by the banking regulator through the CPPAPS must be assimilated by other independent regulators, including the Securities and Exchange Board of India (SEBI) and the Department of Company Affairs (DCA). There is no need for each independent regulator to rediscover the truth enunciated by the Tarapore Committee, instead it is time to rectify the situation in all sectors that deals with the ‘‘common person’’.

-- Sucheta Dalal