Money & Banking
Customers Bleeding; RBI Offers Only Band-Aid
The Reserve Bank of India (RBI) is slowly waking up to public anger about rising bank charges, rampant mis-selling of financial products, growing incidents of digital and cyber fraud and poor grievance redress. Customers are especially angry that banks are never penalised and compensation for harassment is very rare. Yet, RBI has responded merely with an expansion of the role of the banking ombudsman (BO) from 1st July. Under the amended scheme, the BO’s pecuniary jurisdiction has doubled from Rs10 lakh to Rs20 lakh. It is also allowed to pay a compensation of up to Rs1 lakh for harassment, mental anguish, loss of time and expenses. RBI has widened the scope of filing an appeal against the BO’s orders. 
 
Unfortunately, this is like applying band-aid to a huge bleeding wound. It starts with RBI’s refusal to even acknowledge the problem or rampant mis-selling and unfair charges. RBI’s press release describes it as “deficiencies arising out of the sale” of mutual funds, insurance, third-party investment products and “non-adherence to RBI instructions with regard to mobile banking and electronic banking services.” As always, the media has lauded this as a step forward; but it is highly inadequate and incomplete. In fact, we would like to know why RBI has been dodging a far simpler solution for nearly three years. 
 
Let us examine why this is too little. First, there was no need to expand the role of the BO, because taking up issues with it is always onerous and, often, fruitless. The BO will only take up a complaint if a consumer has first taken up the issue with the bank branch, escalated it to the grievance redress cell and has not received a satisfactory response even after 30 days. This is time-consuming and depositors are often led on by false assurances from bank officials. If the complaint is time-barred, the BO can again refuse to accept it. Finally, we have come across several reports of the BO closing cases by accepting the bank’s viewpoint, making no attempt to engage with the victim. 
 
We see no evidence of RBI having studied the efficacy of BOs in recent times or having analysed the over 100,000+ complaints that it received in FY15-16 (especially those that are rejected), while framing the new regulation. The numbers are worrisome. Only half the total complaints received in the year were ‘maintainable’ and even out of these, a whopping 31,900 were rejected. Effectively, only 18% were redressed through mutual consent, while a princely 18 received compensation. 
 
Instead of expanding the role of the BO, the Charter of Consumer Rights that the RBI issued in December 2014 should have provided a better, faster, and more comprehensive redress. But RBI needs to give it teeth by fixing costs and penalties for breaching the five basic consumer rights that it identified, namely, right to fair treatment; right to transparency; fair and honest dealing; right to suitability; right to privacy; and right to grievance redress and compensation.
 
Secondly, the increase in pecuniary jurisdiction for the BO is far too little. Cases of mis-selling of insurance products or problems relating to third-party wealth management products are usually for amounts far in excess of Rs20 lakh. The most egregious of these is mis-selling of insurance. Here’s what a Moneylife survey of over 1,100 respondents in May 2015 showed. Over 83% said they were coerced into buying insurance and 68% said this was especially done while negotiating loans. Realistically, to make the BO useful for the consumer, the pecuniary jurisdiction of the BO should have been raised to Rs1 crore, so that issues above this could go straight to the National Consumer Disputes Redressal Commission—the apex consumer court. 
 
Thirdly, not all cases of downright cheating or ‘deficiency’ on the part of banks relate to one single transaction. Consider this. A dubious relationship manager of ICICI Bank’s Pune branch systematically ripped off a number of senior citizens by conning them into buying multiple, single-premium insurance policies as a succession planning exercise where the beneficiaries were the children and grandchildren. In one case, 12 policies sold to an 80-year-old totalled over Rs62 lakh. His brother, 84, was sold several policies adding to over Rs1 crore. An 86-year-old had his signature forged in policy documents. A 77-year-old doctor was sold a single-premium policy of Rs70 lakh and learnt that she was conned; she needed to make another five instalments of Rs70 lakh or lose everything. The Bank is conducting an inquiry and has paid back two of the victims after Moneylife’s intervention.
 
The new pecuniary limits of the BO do not help such victims. It is not clear if they would have to file separate complaints for each instance of cheating or if the 77-year-old doctor’s plea would be entertained. In such cases, the BO should have been allowed to consolidate the cases, even if it breached the pecuniary limits substantially, and considered some on sympathetic grounds. Instead of this confusion, if the Consumer Charter were made effective, ICICI Bank would have had to refund all the victims based on a simple complaint and would have had to compensate them for hardship under the right to compensation. Isn’t this a far better solution? Cases of organised mis-selling like these are a fit case for punishing the bank (as has happened in most of the better-regulated countries) for failing to monitor sales executives, or worse. 
 

In fact, the Consumer Charter would have covered all issues now under the BO’s expanded remit, such as poor grievance redress in case of ATMs failing to dispense cash, multiple debits for ATM and point of sale transactions, fraud involving misuse of credit/debit cards, cloned cards, etc., wrong billing, incorrect charges and fees, delay/failure in fund transfer, unauthorised electronic payments, wrong reporting to credit bureaus and failure to observe RBI guidelines on use of recovery agents. It could also have offered faster and better redress if it were monitored effectively; but that is probably why banks have managed to get RBI to bury the Consumer Charter.
 
The new BO regulations cover issues such as ‘suitability’ or otherwise of products sold and improper or unsuitable sale of third-party products. This requires application of mind and a proper hearing that allows both sides to make their case. It is not clear if RBI officials appointed as BOs have either the knowledge or the skill to fulfil the greater quasi-judicial responsibility given to them. 
 
What about Compensation?
 
The BO can compensate consumers for the cost, hardship and mental agony suffered due to the negligence of banks. But, by limiting the compensation to a niggardly Rs1 lakh, irrespective of the circumstances of the case or extent of harassment, RBI shows callous disregard for consumers even five years after better-regulated countries have changed. Contrast this with the UK where banks have paid out £26.9 billion, so far, to compensate victims of the payment protection insurance scandal. These include Barclays, Lloyds Banking group, HSBC and RBS. In 2013, the Financial Conduct Authority of the UK forced HSBC to compensate customers after a ‘mystery shopping’ exercise by its investigators revealed mis-selling of investment products. 
 
We don’t know when RBI will be under enough pressure from policy-makers or its own public directors (such as Bharat Doshi, N Chandrasekaran, S Mankad, Dr Rajiv Kumar, Ashok Gulati or Manish Sabharwal) to step out of RBI’s ivory tower, understand consumer issues and initiate strong corrective action. It will happen only if people keep up the pressure and signal to the government that they will not allow themselves to be fleeced anymore.

User

COMMENTS

VIVEK SHAH

4 months ago

The customer greivience redressal mechanism must be demerged from the RBI's functions. This cell has to be independently handled by a separate body. It is obvious that currently RBI is focused more on the NPA and the profitability of the banks than towards protecting the customer's interest. RBI is a toothless tiger when it comes to protecting the rights of millions of customers.

REPLY

Pradeep Kumar M Sreedharan

In Reply to VIVEK SHAH 4 months ago

We need a Consumer Commission, in line with Election Commission.
Anything less is unacceptable.

Kshama Jain

4 months ago

I think RBI is not at all concerned about the citizens, they are on the banks' side

Unni Krishnan

4 months ago

RBI should consider the grievances of the poor public rather than the convenience of banks.

PRAKASH D N

4 months ago

Request RBI to review it's decision.

Thomas K John

4 months ago

Request RBI to take appropriate action to safe guard customer interest

Shantikam Hazarika

4 months ago

The BO post is a very coveted post. People canvas for this post like anything. The perks for a retired bureaucrat/politically connected persons are immense. And Banks keep the occupants highly pleased. Of course it is in no one's interest, except the poor consumer, to enhance the scope. Hence, we are destined to suffer.

Pradeep Kumar M Sreedharan

4 months ago

Complaining to Alibaba about the 40 ha ha
Conterfeit notes were discovered by CBI in RBI vaults. The same notes were found distributed to banks.

Mahesh S Bhatt

4 months ago

It happens also in India.Money is one of the most dangerous creations of mankind to make him gloriously UNKIND N MAD. Amen Mahesh

Ramesh Poapt

5 months ago

power corrupts, absolute power corrupt absolutely..

A BANERJEE

5 months ago

A very well written and argued piece by the eminent writer. Banks and their executives think that they are above law. The PSBs, including and especially SBI, are so very anti-customers that one feels like having opened accounts with them. In my case, I have an SB A/c with the SBI, Nungambakkam Br., Chennai, opened when I was transferred to Madras/Chennai in 1990. I have another SB A/c at Delhi with the Kalkaji Br. of SBI. I got my FDs transferred from the Chennai Br. to the Kalkaji Br. some time ago. I got the largest of the FDs (now in the custody of the Kalkaji Br. of SBI) encashed a few months back. I wrote to the Kalkaji Br. requesting for a TDS Certificate for the last FY, followed by several reminders. The Bank in general, and the Kalkaji Br. in particular, does not have t5he culture of responding to emails and the managers and staff of this Bank believes in forcing customers to personally visit them repeatedly and harassing them too.
I sent a copy of my mail to the Nungambakkam Br. also, as the FDs had been transferred by that Br. to the Kalkaji Br. While there was no response from the Kalkaji Br. even after several reminders, the Chennai Br. sent me a mail offering their services in furnishing the requisite TDS certificate. I was naturally happy, though quite amazed too. Meanwhile, the Kalkaji Br. wrote to me that the details of TDS cannot be provided by the Delhi Br. and gave some strange reasons for this. The Chennai Br. sent me a statement of the interest accrued on the FDs, without any mention therein of the TDS therefrom. I have written back to the Chennai Br. about this, but there is no reply as yet and the TDS Certificate has still not been made available to me. As an ex-IRS officer, I am naturally curious to know as to why no tax was deducted at source from the interest shown to have deducted and why the Delhi Br. does not have the responsibility for doing the needful in this matter! I really wonder as to how the largest bank in the country is working.

Subray Kamath

5 months ago

On the one hand, in recent times there has been talk of the finance minister and his officials putting pressure on the RBI to reduce interest rates and the public outcry and politicians on the other side saying it is undermining the independence of the RBI as an institute.
Well, if that is so, RBI should act and think independent. That can only be done and seen, if it were to reprimand and take action against banks that have used wrong means to cajole customers into buying products that they do not need and also charging them high service charges for all and sundry. This is without proper and adequate service being rendered.
The proposed consolidation of the nationalized banks is another case in point. The service of the so-called premier bank SBI has always been poor and with the consolidation, it is bound to get worse. Walk in to any SBI branch and you will what I mean. Except very rare cases, the officers and the staff at the counters behave as if they are doing us a favor and we are transgressing in to their area of freedom.
NPAs that many of these big nationalized banks have generated is of their own doing and the funds handed over without a thorough check and balance. I am sure that most of those at the helm, responsible for giving out large loans, will either retire or go scot free.
In the law of torts, there is something called as vicarious liability. Those at the very topare also responsible as the ones who were directly responsible for these NPAs.
Will the RBI or the government for that matter, initiate action against them?

B. Yerram Raju

5 months ago

It is time that the existing RBI's rule making bosses read and re-read the two Reports on Customer Service: under the Chairmanship of R.K. Talwar and the other under R. Damodaran. The man with nails in hand always searches for a hammer. This is what the RBI's depressing attitude to the bank customers. Government is not concerned although owns 83% of the industry. It is more concerned with mergers and large balance sheets of banks and to create to o big to fail banks. These too big banks look at profit earning windows; officers look at making money through sale of products other than banking. Flush with deposits, they have all down-sized interest rates. Hurt by NPAs they are unable to lend. What for these banks exist? For safe deposit lockers and other miscellany whopping charges for the service plus 18%GST and this is banking in India. Cash economy has come to surface with all digital transactions attracting service charges of huge order. It is time RBI wakes up from slumber lest it will have no time to regret!!

Peter Menon

5 months ago

On the one hand, they screw the public and the old and unprotected. On the other hand, they cozy up with their big shot buddies and multiply NPA's at their customer's cost. There needs to be a pogrom against the unethical bank officers. Long overdue.

RAMU

5 months ago

RBI clearly suffers from conflict of interest. In the process, it is biased in favour of growth or even profiteering of banks. It cannot protect even a wee bit of consumers' interest.

SuchindranathAiyerS

5 months ago

The RBI is just a bond maiden of a rapacious Government. Since HVR Iyengar and counting:

4th July #TweetMorcha to escalate campaign against unfair bank charges with #BankSeBachao as the tag
The campaign against unfair bank charges that was started in March this year by a group of activists, will be escalated further with a unique #TweetMorcha addressing the Prime Minister’s twitter handle @narendramodi on 4th July at 3 pm. 
 
 
This unique #TweetMorcha will bring together people on social media from across the country aggrieved by high bank charges, unfair loan agreements and unsafe digital transactions. Those wanting to join the campaign should tweet the Prime Minister tagging his twitter handle --  @narendramodi -- and air their views with the hashtags #TweetMorcha #BankSeBachao. A core group will launch the campaign in the mini auditorium of Ravindra Natya Mandir at Prabhadevi, Mumbai, on that day to launch the campaign. Mumbaikars are requested to come join the campaign that day. 
 
An online petition on change.org,  started by a group of consumer activists, bank unions and consumer citizens, led by Moneylife Foundation,  got a boost with Mumbai Congress Chief Sanjay Nirupam joining the effort and helping the group take the issue to the Standing Committee of Parliament for finance and supporting the TweetMorcha. 
 
The extent of public anger and frustration about rising bank charges, rampant mis-selling of financial products (especially insurance) and unfair loan agreements is evident from the massive 2,14,000 signatories to a petition titled “RBI Governor: Please Stop Banks Fleecing us Depositors!” on www.change.org  The impact of the petition is evident from a series of statements by the RBI in favour of the consumers, which, however, fall far short of what is required.
 
The change.org petition follows a memorandum sent to the RBI Governor by a group of consumer activists (Moneylife Foundation, All India Bank Depositors Association, Mumbai Grahak Panchayat, Rashtriya Matadata Manch, Police Reforms Watch, Public Concern for Governance Trust), bank unions (All India Bank Employees Association-AIBEA, Central Bank Employees Union-CBEU and New Trade Union Initiative-NTUI), finance experts such as Dhirendra Kumar, Harsh Roongta, RN Bhaskar, Debashis Basu, Yogesh Sapkale, Mahua Ghosh, Advocate Bapoo Malcolm, Shubha Khandekar and others. While the RBI has not bothered to respond so far, the petition has found widespread support from people across the spectrum.
 
 

User

COMMENTS

Ramesh Bajaj

5 months ago

Great, much needed move. I am not familiar with twitter. Is it possible for you to set up a link so that I can participate . In the ' morcha'

REPLY

Sucheta Dalal

In Reply to Ramesh Bajaj 5 months ago

Dear Mr Bajaj. we look forward to your participation. You dont need a link. All you need to do is to open a twitter account. at twitter.com it will take less than a minute. then you choose what you would like to say to the PM by typing @narendramodi and dont forget to use the hashtags "#" sign with the following words without a space #TweetMorcha and #BankSeBachao this will ensure all the tweets and noted and counted. If you have signed a petition with change.org you will get an auto prompt on tuesday Otherwise. please do go to this link and sign my petiton. Earnest request :https://www.change.org/p/governor-rbi-finance-ministry-stop-banks-fleecing-depositors/u/20458223

Dayananda

5 months ago

Inspire of Usurioius loan act credit card dues are charged interest at40% further for same transaction they get another 18% from merchants. Even though this charge is interest and interest on all other cases does not attract service tax but they charge service tax on this charge which is illegal and to boot govt has increased the service tax to 18% from 15%

Moneylife Campaign - 9 Bank Unions back the movement against bank charges
Strengthening the movement against arbitrary bank charges, United Forum of Bank Unions (UFBU), the umbrella organisation of five employee unions and four officer unions of state-run banks in the country, have decided to support hands with several consumer organisations, consumer activists and lakhs of bank customers. 
 
Confirming the decision, CH Venkatachalam, General Secretary, All India Bank Employees Association (AIBEA) and Subhash Sawant from Central Bank Employees Union (CBEU) told Moneylife “...your issue of bank charges has been taken up by all nine bank unions in their decision to call a strike on 22 August 2017."
 
In a press release today, the AIBEA said "that the burden of the corporate NPAs are sought to be put on the shoulders of the common public and banking clientele in the form of hike in fees, charges, penalties, etc. for every type of normal banking services."
 
These unions have over 10 lakh members, including employees and officer working on 27 public sector banks, and 21 old generation private sector banks and eight foreign banks, will participate in the 22nd August strike.
 
As part of its advocacy efforts, Moneylife Foundation has led the effort to fight for customer rights. Despite our efforts, we have seen very little evidence on the ground of concrete action by the regulator. 
 
Moneylife Foundation has been at the forefront of speaking up for bank customers. An online petition launched by us has garnered more than 2.13 lakh signatures. (Sign the Petition). The group, including well known NGOs, trade unions, finance editors and experts, had on 12 May 2017 presented a 1,100 page printout of over 100,000 signatures to an online petition at Change.org to M Veerappa Moily, Chairman of Parliamentary Standing Committee on Finance.   
 
Today's meeting of the unions also deliberated on the issue of their charter of demands submitted to IBA. The meeting felt that the entire process of discussions should be undertaken on a recurring and continuous basis in order to complete the settlement in time. Holding meetings once in a month will not serve the purpose and hence decided to urge upon the IBA to expedite the discussions so that steps can be taken to conclude the final settlement in time.  

The meeting expressed its strong protest on the decision of the IBA to restrict the negotiations on charter of demands of officers' associations upto scale III only and demanded that as hitherto, the discussions and final Joint Note should cover all officers upto Scale VII in as much as that majority of these officers are members of their respective unions and the wage revision exercise which has been a composite one so far, should not be divided now which will create inter-scale conflicts and inequities.  It was decided to pursue the matter with the IBA and if necessary and warranted resort to organisational programmes at the appropriate time.
 
The unions have put up the following demands:
1. Do not privatise PSBs
2. Stop plans of mergers and consolidation of banks
3. Do not write off corporate NPAs
4 Declare Willful Default as criminal offence
5. Implement recommendations of Parliamentary Committee on recovery of NPAs.
6. Ensure accountability of top management for bad loans
7. Withdraw proposed FRDI Bill
8. Abolish Banks Board Bureau
9. Do not pass on the burden of corporate NPAs on bank customers by hiking charges
10. Do not not increase Service Charges in the name of GST
11. Compensate Banks for implementing Government schema like Demonetisation, PMJDY, etc.
12. Settlemetn issues of employees and officers connected with demonetisation scheme.
13. Immediately fill up posts of Employee/Officer Director in Banks
14. Implement Compassionate Appointment Schemes in Banks as per Govt. guidelines.
15. Revise ceiling under Gratuity Act.

User

COMMENTS

SRINIVAS SHENOY

5 months ago

Besides the rightful demands of the bank union, I feel that the bank staff should stress a lot on the loan recovery aspects, adopting innovative methods for the welfare of their organisation, which is the need of the hour.

GLN Prasad

5 months ago

Not even one demand on the sorry plight of the retired employees, who were their own comrades once, and from whom they have collected thousands of rupees as subscription during service. All the demands are just gimmicks for survival and for getting a public sympathy. They never really cared for all this at any time nor they can bring any pressure on management. They are more worried about their existence and power of bargaining.

Deepak Narain

5 months ago

Most of these demands are good and should be considered with an open mind and heart.

A BANERJEE

5 months ago

SBI is the leading anti-customer and most customer-unfriendly Bank in India, which does not care for any basic courtesies expected by senior citizen customers and also for the PM's pet Digital India push, as is clear at least from the behaviour of its Kalkaji (Delhi) branch. The branch never responds to any email and does not care to send the TDS certificates to the account holders which it is legally bound to do. It does not also care for the senior citizens. Why this biggest bank of India cannot send the account statements to its customers through email is not known. As a retired IRS officer, I feel that this leading Bank has failed the customers and the country.

Ramakrishnan R

5 months ago

NOW IT IS OFFICIAL. PRIVATISE PROFITS! SOCIALISE LOSSES (dig a dent on banks' customers - reduce borrowing costs - reduce deposit rates by increasing umpteen number of ways by poking a hole on the purse of the customers both borrowers and depositors)! PARLIAMENT HAS PASSED THE HOLY AND PIOUS LEGISLATION! (BY WHATEVER NAME IT IS CALLED, A ROSE IS A ROSE IS A ROSE! CORPORATE DEBT RESTRUCTURING ! STRATEGIC DEBT RESTRUCTURING! NPA RESTRUCTURING!
vijay ho! Vijay Mallaya ! Tad Vishnoh Paramam Padam ! Attained and surrendered at the lotus feet of Lord of the Lords!in UK!

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