Customer Service Committee Recommendations

Kanungo CSC Report: 

Some Critical Issues 

The Committee for 'Review of Customer Service Standards in RBI Regulated Entities'  (REs) headed by Shri Kanungo, former Deputy Governor, Reserve Bank of India (RBI) submitted its report to RBI on 24th April 2023. While most  of the recommendations show the way how RBI should regulate and how the REs should develop the customer service  as a enterprise-wide culture, some are reinforcing instructions already there. But there are some critical 'live' issues, that were merely outlined and left to the regulator to define and fine tune. I would like to detail, four such issues:

Critical issues that need improvement:

1. Nomination: The committee has recommended that nomination in deposit accounts may be made mandatory (optional now in the hands of depositors) and nomination in all deposit accounts should be completed in 3 years. In this regard nomination in deposit accounts was brought in 1985, when banks were not computerised and any nomination given in an operating account (SB) was extended to other deposit accounts, since there was a face to face interaction with the customers for doing these transactions. After computerisation, fixed deposits can now be made online by transferring funds from savings accounts. Renewal of fixed deposits are also automated in the system and are also effected by customers online. However,  the nomination given for savings account,  do not get translated to other accounts in the above type of transactions. I suggested that nomination given at the time of opening the account should be linked to the CIF, which links all the accounts of a customer, instead of individual accounts. I got a reply from the bank concerned that nomination, as per the act, has to be given for each account individually and it cannot be linked to CIF. I suggest, once again,  that nomination shall be linked to CIF of a customer to cover all his deposit accounts. in the beginning itself. This will reduce considerably the number of  deposit accounts, not having nomination at present.

2. Cross-selling by the sales team: The committee merely commented that verification of cross-selling for the mis-selling aspect should be added and become part of audit function. One major cross selling issue that cropped up recently was that some of the YES Bank staff sold their AT1 Bonds in the guise that they are guaranteed and are part of deposits of the bank. No final conclusion is, of course, drawn. But the committee could have brought in some restriction or definition for mis-selling, as prevention is better than curing later on. For example, in bancassurance products sold to loan customers, the position to influence is presumptive in the case of a branch manager or credit officer. So to avoid any complaints later on, the functionaries, who hold positions of influence, could have been made referral points and not selling points. Again the insurances taken, where renewal is not taking place in thhe 2nd or 3rd year, could have been made the starting point for mis-sell aspect verification, during audit.

3. Levy of charges: The committee left it to RBI to take a view on the reasonableness of charges during its supervision process of REs. The committee might have made an attempt to 

i. Compare the charges between PSBs and private banks or atleast among  major banks without looking into the owneeship aspect.

ii. Satisfy itself that the charges levied were explained at the time of opening the account and acknowledgment obtained that they were explained. Easy course would be to print major relevant charges in a separate sheet of the opening form, with a font size of 12/14 and obtain acknowledgment after serving original to the customer.

4. Data protection: Most of the points made by the committee deals with matters like how to enhance target customers during campaigns, centralise data at one point for effective use for other products, etc. Customer protection due to digitalisation of bank accounts is covered well with suggestions for a second factor of authentication and providing online registration of complaints, when cyberfraud takes place like hacking, etc.. However, the privacy aspect as to whether the customer was made aware that the RE will be selectively sharing his profile details with others is not covered fully. I always wondered how just after opening one account, I could receive a dozen phone calls soliciting health and life insurance, mutual fund, etc. and my e-mail is also flooded with promotion of different financial products. I could not remember a single instance where a financial player advised me that he/she will be sharing my profile details within the organisation or outside (It is quite possible that it would have been covered elsewhere in the many pages I signed while opening an accountl). Is it not the right of a customer to expect that 

(a) he is made aware of, which type of his profile details will be shared and with whom within/outside the group/organisation and 

(b) subsequently the list of names of organisations with which sharing has taken place is shared with him.

The suggestions, which I found are laudable, are given in annexure.

Regards.

V. Viswanathan 

26th June 2023.

ANNEXURE

Laudable Suggestions

1. Customer Rights shall be enforceable:

RBI should move towards "principle based" regulation towards customer service in REs. The five rights of customer outlined in Charter of Customer Rights - equitable and fair treatment, transparency and disclosures, appropriateness and suitability, data protection/ customer confidentiality and right to grievance redress (RGR) - should be reviewed, updated and be made enforceable.

2. Incentivise Good Culture and penalise deficiency:  REs should be incentivised for initiating enterprise-wide improvements in customer service and where 'the  quality of service is deficient, regulatory costs should be imposed. 

3. Define Cusomer Complaint: As there is a tendency in REs to intrepret a complaint as suggestion or feed back, a clear definition of complaint under internal grievance redressal mechanism (IGR) is a must. Suggested definition - "Any reference received formally thro electronic or paper mode flogging 'deficiency of service' in matters covered by RBI-IOS is a customer complaint"

4. Develop and publish Customer Service and Protection Index: The quality/ standards of customer service and customer protection in each RE should be evaluated with reference to "Customer Service and Protection Index" that should be developed and published by RBI.

5. Empower RBI Ombudsmen (RBIOs): Whenever repeated complaints of the same nature occur in a RE, RBIOs should be empowered to direct the RE concerned, to review the processes and undertake corrective actions, so that the said nature of complaint is eliminated/ minimised.

6. IBA (Indian Banks Association) should pay salary to Internal  Ombudsmen (IOs): To avoid conflict of interest and improve effectiveness of IOs, IBA should create a fund to pay the salary/ compensate IOs in lieu of the present system of REs paying the (IOs). Cost of the fund may be recovered from REs in proportion to complaints against them referred to IOs.

7. Fix a time period for settling claims in the accounts of  deceased: In addition to making the facility online, the claims in deceased persons'  accounts should be settled in 30 days (online/ paper mode). Beyond 30 days, REs should pay interest at 2% above the rate at which the deposit of the deceased person was held.

8. Review the present system of KYC: KYC documents obtained should be linked to CIF so that customer need not go thro the process for opening/availing another facility with the same RE. Risk categorisation especially "high" risk profile categorisation needs a review.  

9. Loans: (i) Responsibilty of insuring an asset taken as security for a loan should be clearly mentioned in the principal document (like Is whether it is lender or is it borrower?) (ii) Set time limit for returning documents and fix compensation for delay/loss of documents and (iii) Highlight the major terms of sanction in the first page of sanction letter

10. Fraud: Develop and deploy safer means of second factor of authentication and make it mandatory. Since Cybercrime frauds are on the increase, online facility should be made available for registering complaints of fradulent transactions. Beneficiary account to be blocked immediately and dispatch of merchandise to be kept on hold.

Instructions Reiterated

A. Life Certicate: Pensioners to submit LC in any branch of the bank concerned, to submit any month prior to the month of regular submission, generation of digital acknowledgments, whenever digital  LC is submitted online.

B. Improving soft skills of customer facing staff and officers 

C. Door step services forcsenior citizens and dedicated phone numbers for addressing their grievances.