RBI Committee on customer care: RBI panel raises alarm on poor customer care

Source: The post is based on the article “RBI panel raises alarm on poor customer care” published in the Live Mint on 6th June 2023

What is the News?

A committee appointed by the Reserve Bank of India (RBI) has issued recommendations to improve customer service standard at banks, non-banking financial companies, and other regulated institutions.

About the RBI Committee on customer care

Aim: To assess the state of customer care services, evaluate the adequacy of existing regulations, and propose measures for improvement.

Chaired by: Deputy Governor B.P. Kanungo.

What are the key issues highlighted by the RBI Committee on customer care?

Fail to meet requirements: The lack of enforcement action against regulated entities failing to meet customer service requirements, despite a comprehensive regulatory framework.

Increasing Ombudsman Scheme case highlights customer dissatisfaction: The current disincentive mechanism through the framework for Strengthening Internal Grievance Redress Mechanism in banks is not functioning effectively. Hence, the number of complaints under RB-IOS (Reserve Bank –Integrated Ombudsman Scheme) is consistently rising.

Absence of uniformity in customer care: There is an absence of uniformity among regulated entities in the classification of complaints. Some entities were categorizing certain complaints as suggestions or queries. The lack of a standardized definition is the root cause of such discrepancies.

Deficient customer service standards: Most organizations were merely redressing individual complaints, since there were no incentives for improvements to ensure better customer service.

What are the recommendations of the RBI Committee on customer care?

Standardise customer care: Customer service regulation should be consolidated on the principle of the same activity and same regulation, and apply to all Regulating Entities (REs) depending upon the activity being undertaken by them, irrespective of the category of the REs.

Establish a clear definition of complaint: RBI has to establish a clear definition of what constitutes a complaint under the Internal Grievance Redress mechanism. This will offer a comprehensive view on the volumes, types, and nature of complaints, and allow an accurate assessment of the state of customer service.

Develop a customer service and protection index: RBI should develop and publish a customer service and protection index. This would rate customer service quality through a single score. The index may cover dimensions like adequacy of regulatory and institutional framework in place, customer experience, efficacy of the grievance redressal, customer education and awareness, etc. This should also incentivise those making systemic upgrades.

Maintain a centralized KYC database: REs should maintain a centralized KYC database of all customers, linked to a unique customer identifier, for instance, a customer information file. This will obviate the need to submit KYC documents repeatedly for availing multiple facilities from the same entity.