Sucheta Dalal :What you donR17;t see is what you get
Sucheta Dalal

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What you don’t see is what you get  

May 8, 2006

Senior officials of the Reserve Bank of India (RBI) have been encouraging bank consumer groups to send complaints directly to Governor Y. V. Reddy and it is our experience that his office promptly acknowledges and forwards these complaints. Usually, banks quickly respond to the RBI and help resolve the problem.


At another level, the RBI has also worked through its customer services committee to fix some basics. For instance, delays in crediting cheques to customer accounts, dumping unsolicited credit cards or loans on customers, activating credit cards without specific approval, warning banks to follow Know Your Customer (KYC) rules and not forwarding credit information to CIBIL (Credit Information Bureau of India Ltd.) without informing customers are some important steps.


However, it would be clear to the Governor’s office that banks come up with new schemes and tricks to shave off a few basis points of additional income from customers, faster than the RBI can clamp down on such practices. This is done through inadequate disclosures and hyped-up schemes.


Such dubious practices are rampant in developed markets and experts tell us that the idea is to debit small sums from customer accounts in the hope that he/she will not notice or find individual debits too tiny to complain about. Usually, banks will quickly reverse charges and avoid controversy when a customer complains, but ever so often, incompetent handling throws these issues into the public domain.


Consumer Voice, a Delhi-based consumer group, says that two leading private banks collected a hefty Rs 150 crore by from consumer accounts for failure to maintain minimum balance in the last year alone. It will be interesting to compare this with the penalty (if any) paid by banks to customers for failing to credit cheques or wire transfers in time.


Indian banks are notorious for delaying credit of international wire transfers. Usually, they allege lack of clarity in customer account details. I, and many of my friends, share this experience and even the best Indian banks require intervention at the highest management level for a customer to get her own money. Further proof came from Uma Iyer from New York who wrote to say that when she tried to send a wire transfer to India from New York, the bank discouraged her saying, ‘‘Indian banks are not good at keeping track of money’’.


Her sister living in Germany learnt it the hard way. She wired money to Indian Bank in Chennai which never reached the recipient. Despite the bank’s unhelpful attitude she discovered that it was credited to somebody’s Kolkata account. She finally asked her bank to pull back her money to the German account, but that too has not worked, because the Indian bank did not cooperate.


I sent this complaint to the RBI Governor, but it is not clear if that worked either. Recently a foreign bank bundled a Royal Sundaram insurance policy with its credit card. While informing the customer that the premium will be debited to the credit card account, it set up a separate loan account to debit the monthly premium (without specific authorisation) and created records to the effect that the customer had ‘‘agreed to pay the annual premium through Equated Monthly Installments (EMIs)’’ (this too had no specific okay from the client).


Having done that, the bank (a common complaint about most credit card issuers) omits to send the credit card statements in time and collects late payment fees from the customer. This is collected separately on the card and on the insurance account with service charges being billed separately at three per cent. None of this was clearly explained to the customer while opening the account.


In fact conversion to EMIs is a practice that the RBI needs to clamp down on with great speed. In the last month alone, I have received at least six complaints about banks tying up with shopping malls, gymnasiums or other service providers to automatically convert payments into EMIs. Invariably, the customer is told that there will be no interest cost attached to the EMIs. Often these payments are converted to EMIs without the customer’s permission and if a customer protests, it is blamed on the merchant establishment and quickly reversed.


In all such transactions, banks collect a service charge of 3%, but this is rarely ever brought to the attention of the consumer. Even in the bank documentation, it is mentioned in fine print. Since the amounts are small, customers rarely notice the charge or take the trouble of lodging a protest. Yet, the complaints have been wide spread enough to nudge the RBI to direct banks to print it in a 12 point Arial font to ensure readability.


It doesn’t stop at that. Another complaint I have forwarded to the central bank pertains to Citibank’s “fly for sure” scheme which lured customers to spend through credit cards on the promise of free air tickets on a certain minimum spend. What they don’t say is that you will not necessarily get a destination of your choice and probably have no intention of flying to the destination that the bank offers ‘for free’.


For instance, one complainant says that instead of tickets to Guwahati, which was his destination of choice, the bank was offering him to Chennai (the second choice), with the condition that a return ticket was available only three weeks later! Or Trivandrum (third choice) where the return was available only two weeks later. Also, instead of a ticket in June, the bank was offering one at the end of July.


To make matters worse, the chirpy DSA agent turned rude and surly when the customer expressed anger at the meaningless offers. Obviously, the practice of hiding charges, holding back credits and hyped up promotions will not end unless the RBI imposes exemplary punishments on banks and forces them to honour their commitments and also pay hefty damages for harassing customers.


-- Sucheta Dalal