Moneycontrol Pro Panorama | Banking on the customer

What does it say about our banks and other financial institutions?

Dear Reader,

When was the last time you stepped into a bank branch for a service? If you had to think far back or pre-pandemic, you are not alone. In fact, this question itself has become redundant over the past decade. All the financial services we need, we carry it in our pocket with the mobile phone becoming the new branch.

Innovation and technological advancement have been the most disruptive in the financial services space. In just a span of a decade, we have moved from cash transactions to almost completely online payments through QR code scanning, swiping credit cards and using select social media channels to transfer money (such as popular messaging application Whatsapp). Sophisticated financial transactions now involve AI and money disguised as digital tokens called cryptocurrencies.

On any given day, trillions of transactions zip through fibre optic and data cable lines across phones and into bank accounts. It is superbly convenient and fast, but like every other convenient thing, it also has a flip side. A simple financial transaction that usually involves not more than 3-4 parties now is incredibly complex involving a string of counterparties that the customer does not need to interact with. The customer is only exposed to this flip side in case of a problem or a glitch in the digital banking matrix.

In FY25, there were roughly 1.3 million complaints to the Reserve Bank of India through its ombudsman scheme where the central bank offers redressal to aggrieved customers who did not find adequate resolution from the service provider. The year-on-year increase in such complaints was 13 percent. Our Chart of the Day details how customer dissatisfaction has risen, along with digital advancement in banking. A 34 percent compounded annual growth rate in complaints to the ombudsman over the past five years should be a concern because it coincides with the surge in digital banking transactions.

The cornerstone of financial innovation is to make customer service quick, convenient, and hassle-free. India’s financial tech infrastructure has been upheld as one of the best in the world, especially when it comes to quick and convenient transactions.

That said, customer redressal is poor and aggrieved financial service users have to run from pillar to post even today to get resolution. The RBI’s redressal must be lauded, though, as its disposal rates have continued to be high.

But what does it say about our banks and other financial institutions? Note that the ombudsman scheme deals with complaints when the customer cannot find resolution with the bank. That means the actual volume of complaints at the service provider level is many times more than what comes to the RBI.

This casts a shadow on India’s financial institutions. As online frauds surge and digital arrests become commonplace, India’s banks must be made to adhere to a high standard of redressal. The banking regulator, on its part, has been busy with campaigns to increase financial awareness and literacy among Indians. This year, the RBI spelled out guidelines for bank loans, know-your-customer processes, prescribed uniform turnaround time for small business loans of up to Rs 25 lakh, increased disclosure frequencies of credit information companies and also pressed banks to do better in many interactions with the top management.

Indeed, in a recent meet with banks, the RBI is said to have asked lenders to provide all basic services at every branch and not just the home branch for customer’s convenience. The regulator has instructed that the focus must be to reduce grievance.

As digital channels such as Unified Payment Interface (UPI) demonstrate the technological capacity of Indian financial service providers, they must also make digital banking more secure with enough guardrails in place to safeguard customers.

2025 was dominated by the adoption of cutting-edge technology such as AI in financial services. The new year must put customer service back at the centre of financial services. That should lower the surge in complaints seen in recent years.

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