Banks need to pay attention to commitments made to customers

A SURVEY SAYS THERE’S A WIDE GAP BETWEEN THE BANKS’ COMMITMENT AND ACTUAL PERFORMANCE

Indian banks have a long way to go in so far as their commitment to customers’ rights is concerned. The latest survey on banks’ compliance with the ‘Code of Banks’ Commitment to Customers’, drawn up way back in 2006 by the Banking Codes and Standards Board of India (BCSBI), shows that even after a decade, there’s a wide gap between the banks’ commitment and actual performance. In fact the 2017 ‘Code Compliance Rating’ of banks done by the BCSBI shows even a marginal decline in their performance in this regard, compared to the earlier survey.

In addition to the Reserve Bank of India’s instructions on various customer service matters issued from time to time, the BCSBI, as the independent banking industry’s watchdog, has drawn up a code of conduct for fair treatment of customers by banks. Revised from time to time (it’s due for revision again now), the code centres around customers’ rights and sets certain basic minimum standards of banking practices for member banks to follow.

The code basically requires banks to act ‘fairly and reasonably’ in all their dealings with customers, respect their right to information, ensure transparency in services, correct mistakes promptly and compensate customers, redress their grievances quickly and in short, follow fair practices. But obviously, not every bank takes the code seriously. The code, for example, says bank branches display the date of their monthly branch level customer service committee meetings, so that any customer who is interested can attend. I wonder how many bank branches really follow this or even have customer service committees?

In order to assess the performance of banks vis-a-vis the code, BCSBI has been conducting surveys and rating the banks on the basis of five main parameters drawn up by it. These are: information dissemination, transparency, grievance redress, customer centricity and customer feedback. Compared to the survey of 2015, the latest survey showed a marginal decline in compliance under ‘information dissemination’, customer centricity and a sharp decline under ‘transparency’ (contributed mostly by public sector banks). Surprisingly, there was an improvement in respect of grievance redress.

In the 2017 Code Compliance Rating, out of 51 banks surveyed, less than 25 per cent (12 banks) of the banks got a ‘high’ rating, while in 2015, 13 out of 46 banks had got high rating. While 23 banks got ‘above average’ rating in the last survey, in the present one, 29 banks got that rating, but this number included five urban cooperative banks, which were included in the survey for the first time and all scored ‘above average’. Among the banks that secured the highest scoring, ‘high’, were three foreign banks surveyed. Only one (out of 26) public sector bank and eight (out of 17) private banks procured the ‘high’ ranking.

Juxtapose this with the findings of the annual report on the Banking Ombudsman Scheme 2015-2016 and you have the complete picture on how banks blatantly ignore the Code. As per the annual report, complaints pertaining to the banks’ failure to meet commitments, non-observance of the Fair Practices Code and the BCSBI code, constituted the largest category of complaints (33.9 per cent) received by the 15 banking ombudsmen in the country.

There is even more distressing news. While in 2013-14, the percentage of such complaints constituted 26.6%, it went up to 29.2% the next year (2014-15) and jumped to 33.9% in 2015-16.

Referring to this, the RBI report said: ‘Banks need to give adequate attention to meeting the commitments made to customers and also impart appropriate training to their frontline staff on understanding fair practices code as well as the BCSBI code.’ It’s time the banks understood the import of the Code and followed the banking regulator’s advice fully.