Are we really pampering the customer of banks, particularly public sector banks (PSBs)? This is the question we are likely to raise when we see yet another " Report of the Committee on Customer Service in Banks" submitted by M. Damodaran, former Chairman of SEBI last month. There was the Talwar committee on customer service in banks appointed in 1975, the Goiporia Committee appointed in 1990; the Tarapore Committee appointed in 2004, made recommendations which led to the formation of Board level Committees for monitoring customer service in banks. Are we treating the bank customer as king? Not in reality, alas! The Damodaran Committee appointed by Reserve Bank of India in May 2010, aroused particular interest because the first among its six terms of reference was the following: " To review the existing system of attending to customer service in banks approach, attitude and fair treatment to customers from retail, small and pensioners segment". After perusing through this scholarly Report of some 150 pages one is disappointed that this specific issue has not been adequately addressed. Let there be no misunderstanding. It is a scholarly Report and the Committee has done its homework. It has sought guidance from " international best practices". The United Nations Guidelines for consumer protection, the Financial Services Authority, U. K.' s ( FSA) fairness commitment to be made by banks, the Community Reinvestment Act ( CRA) of U. S. A. which prohibits discrimination by banks against low and moderate income neighborhoods, all these were analysed by the Committee to derive policy inputs. The Committee has made excellent recommendations for streamlining Grievance Redressal System in banks, Banking Ombudsman Scheme, Banking Technology and Role of Boards of Banks in customer Service.
The Committee deserves to be congratulated on the high quality of the Report. This article seeks to highlight the fact that the Committee has failed to address adequately the problems faced by the small borrower the aam admi precisely what the terms of reference mentioned above required.
Glancing through the recommendations, one gets the impression that most bank customers are familiar with mobile banking, and receiving and sending SMS: if a bank wants to make an account inoperative, banks must intimate the customer by SMS; not maintaining the minimum balance should be intimated by SMS; small discounts should be offered to customers to promote electronic payments; provision to apply for small retail loan should be available in bank's portal and Internet Banking; and so on. No doubt your vegetable vendor may be using mobile phone today: but is he capable of sending and receiving SMSes? The perception of banking business by Reserve Bank today is reflected in the following statement of a Senior Officer: " Assets with banks are maintained more in digitized rather than physical form, transactions are carried out over technology- enabled platforms/ applications and communications are over electronic modes ..... There are newer products and channels of delivery. Networked environment has enabled delivery of banking services at the door step of the customer. Anywhere and anytime banking with core banking and newer delivery channels viz, ATM online banking and mobile banking etc. have provided convenience of banking to the customer and an increasing number of people rely upon the convenience and ease of inter net banking services, in their business as well as daily life". ( Secured Online Banking and Customer Convenience G. Padmanabhan, RBI Bulletin August 2011). It is such a perception of high profile banking which colours most of the recommendations of the Damodaran Committee. Are we focusing on elite banking or high profile banking, at the cost of core banking? One begins to wonder. Let us discuss the following three core banking issues.
First KC ( Know your Customer) Norms. Dr. S. S. Tarapore the veteran Central Banker, has been carrying on a one- man campaign to expose how many public sector banks ( PSBs) are using this instrument to shoo away the small customer from accessing banking services. He has put into public domain several concrete cases to demonstrate that small customers are prevented from opening accounts on flimsy grounds: authenticating residential address or even spelling mistakes in their names or localities in which they reside. The victims include domestic help, drivers or a labourers working with a construction firm. In this sense, Dr. Tarapore has bitterly argued that KC has become a synonym for " Kill your Customer". One does appreciate the security concerns but the managers at the branch level should be discerning enough to discriminate between bona fide cases and suspicious cases. The Damodaran Committee does refer to reforming " attitudinal aspects" and " rude Relationship Managers" but does not offer any concrete recommendations to redress them. It does, however, recommends that " self- attested photograph and address proof should be treated as sufficient kyc to open no frills account". In cities like Mumbai where 40 per cent of the population lives in slums or semi- slums, it may be difficult to produce documents re: residence. The point is bank managers should be flexible in appraising such documents. Financial inclusion campaigns will be meaningful only if mangers adopt a helpful attitude towards opening accounts. Secondly, on the positive side, take financial inclusion. Under this campaign, some 75 million no- frills bank accounts have been opened. Unfortunately, about 85 per cent of these accounts are not operational and the average deposit per account is Rs. 11 because the account holder's are not involved in any economic activities. What purpose on earth such " dead" or " near dead" accounts serve? Recently RBI has pulled up banks for paying lip service to financial inclusion and asked them to activate these accounts. Is this issue not part of customer service? Thirdly, in the not- too- distant pastsome public sector banks played a critical role in agricultural development. They appointed their own agricultural officers and provided extension services. This extension- linked credit was a great success. Today, with the Government deemphasing the role of the extension worker, there is a gap which could be usefully filled by banks. Agricultural growth is necessary not only for food security but also for overall growth of the economy. The main point to drive home is that when we talk of customer services of banks in India, we should grow out of the " international banking practices" syndrome. India- specific issues should receive equal emphasis Serving ( HNIs) high networth individuals or high profile bank customer is indeed banks' legitimate business. But this should not overshadow the core and traditional banking business, including serving and nourishing the small borrowers. Our banking culture should be so shaped that it blends the dual functions.
FPJ
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