RBI report makes some sound recommendations on improving customer satisfaction

It’s not just that the changes impact customer satisfaction only marginally, but that these are best left to banks - account closures, updating of passbooks, gold loan processes and even risk categorisation of customers for KYC, to name only a few.

The JD Power US Retail Banking Satisfaction Study 2022 of banks in the US discovered that the customer’s definition of service had changed – it was no longer about being fast, efficient or convenient, but about how good the bank was in supporting the customer during challenging times which for her meant digital transformation, complexity and inflation. Perhaps the Reserve Bank of India (RBI) also wanted its expert committee on customer service to find out whether existing RBI guidelines (and there are many) were good enough in today’s rapidly digitised and complex financial landscape. This change is visible in Indian banking too according to the report of an expert committee chaired by former deputy governor BP Kanungo. Of the approximately 10 million complaints lodged every year, operations in accounts and loans accounted for about 38 percent, but the share of technology-related issues (internet, mobile banking, cards, ATMs) at 46 percent has been striking, though not completely unexpected given the rapid changes in technology and digital infrastructure.

The RBI’s Charter of Customer Rights (CoCR) issued in December 2014 forms the overarching principle-based guidance framework for banks with the ‘five’ basic rights of bank customers enunciated in it, which are - (i) Right to Fair Treatment, Right to Transparency, Fair and Honest Dealing, Right to Suitability, Right to Privacy, and Right to Grievance Redress and Compensation. The report, however, feels that this charter should be made enforceable to be effective. On regulation, it further feels that there should be consolidation on the principle of same-activity same-regulation applicable to all regulated entities (REs), dependent on activity and not the category of the RE.

A Complex Picture

The customer service framework in India represents a complex picture. At the bottom of the pyramid is the internal ombudsman (IO) at the bank level who presides over the internal grievance redress (IGR) process; the RBI administers Integrated Ombudsman Scheme, 2021 (RB-IOS), itself a consolidation of three separate ombudsman schemes; and there is also the RBI’s own complaint window (CMS) but which is currently used only for redressal of individual complaints. According to the report, the IGR did not even have a standard definition of a complaint, unlike the RB-IOS. Further, the fact that the RB-IOS was redressing individual complaints, but without leading to any system-wide changes or improvements meant that these complaints could keep recurring, which was a major lacuna in the RB-IOS process.

With this in mind, the Committee suggests that the RBI set up a new RE-agnostic common portal for complaints whereby customers of any RE could lodge complaints on a common platform that would allocate, track and escalate rejected complaints to the IOs. It eventually wants this new portal to be also integrated with the RBI’s own CMS.

The report recommends the use of incentives to REs to induce enterprise-wide improvements and at the same punish deficiencies monetarily. By compensating the IO through a separate fund than from the bank, the problem of conflict of interest within the bank could be resolved. The suggestion for RBI to review the reasonableness of service charges levied by REs is also bound to be cheered by customers.

Risk Of Micromanagement

But the report also tends to get into micromanagement in some areas. Elsewhere in the report, it actually makes a pitch for principle-based regulation. It’s not just that these changes impact customer satisfaction only marginally, but that these are best left to banks - account closures, updating of passbooks, gold loan processes and even risk categorisation of customers for KYC, to name only a few. The problems with nominations and repetitive KYC are well known but again problems that banks should be finding solutions to. The issue of cross-selling, often ending in misselling, is however a real issue which should engage the issue of the RBI as it is the source of many complaints.

The suggestion to make originating sales accountable is sound but implementation could be challenging. The overall sense one gets with process-level recommendations is that these are not service improvement offerings but activities the banks should already be doing. Finally, on the recommendations for the use of technology to improve service, some of them such as video-based customer identification, biometrics and chatbots could already be in use in a limited way. The standardisation of ATM interfaces with a set of minimum functionalities is another long-felt need. Some of the tech solutions for fighting fraud — such as the automatic blacking out of mobile application screens when shared and the online filing of cyber-crime complaints by customers on the Cybercrime Reporting Portal integrated with bank systems — are worth considering in the context of increasing cybercrime and digital fraud-related complaints.

SA Raghu is a columnist who writes on economics, banking and finance. Views are personal, and do not represent the stand of this publication.