Customer service at banks in India has come a long way since the days when accountholders had to spend a large part of the day for routine banking transactions like cash withdrawal. In yet another step towards making banking more customerfriendly, the Reserve Bank of India had last year constituted a committee to study customer service in banks and suggest ways to improve it.
The committee submitted its report last week, detailing the issues faced by customers and the possible remedial measures for such grievances. It may take a while for these suggestions to be implemented, but you can bank on the current redressal system to make yourself heard. Here's a look at some of the issues concerning depositors and borrowers as highlighted by the committee, and the course of action you can adopt to tackle them in the existing framework.
Accounts and deposits
Minimum balance requirements : Many customers fail to maintain the minimum balance stipulated by banks and realise this only after banks debit charges from their accounts for breaching the limit. The RBI committee has recommended that banks alert customers through SMS, email or letter immediately when the account balance falls below the required minimum also inform them about the applicable penal charges for not adhering to the requirement. As of now, you need to monitor your balance constantly to avoid such charges.
"As per the BCSBI (Banking Codes and Standards Board of India) code, banks are obligated to mention the penalty chargeable in case of non-maintenance of minimum balance in their schedule of fees and charges," says VN Kulkarni, chief counsellor with the Bank of India-backed Abhay Credit Counselling Centre.
Renewing term deposits : The report advises banks to not automatically renew maturing deposits without notifying the depositors. "Such notices should be sent to customers preferably in the electronic form to enable them to decide the renewal term. Further, the banks should not auto-renew the deposit accounts without the customer's consent in writing," notes the report.
"This rule is already in force, but some banks do not follow it," says Madan Mohan, chief counsellor, Disha Financial Counselling, an ICICI Bank-supported credit counselling centre. "We intimate customers - at least those who have provided their cell numbers - about a week before the FD's maturity," says R K Bansal, executive director, IDBI Bank. Auto-renewal may also happen if you have given your consent while starting the FD. Therefore, make sure you choose carefully the option on the FD application form.
Loans
Loan disbursal : The RBI report states that banks should inform borrowers upfront about the time schedule for disposal of loan applications. Also, banks should take responsibility for not disposing of the application within the time limit. A personal or unsecured loan can take anywhere between 1 and 5days to be approved. In the case of a housing loan, the processing of application can take 10 to 20 days because of the sheer size of the amount. Any delay in the disbursal of loans can have other implications.
Loan disbursal : The RBI report states that banks should inform borrowers upfront about the time schedule for disposal of loan applications. Also, banks should take responsibility for not disposing of the application within the time limit. A personal or unsecured loan can take anywhere between 1 and 5days to be approved. In the case of a housing loan, the processing of application can take 10 to 20 days because of the sheer size of the amount. Any delay in the disbursal of loans can have other implications.
Typically, an individual borrows due to an urgent liquidity need, which is mostly met by unsecured loans. If the individual is borrowing to buy a house, he/she has to stick to the payment schedule. Otherwise the builder slaps a penalty, which can go up to 21%.
Loan statements: The RBI panel suggests banks issue loan statements to borrowers periodically. These statements should include details of loan disbursed, demands and repayments effected along with the interest and details of charges. "In such long-tenure loans, which span over 120 to 180 months, a borrower often tends to overlook if any cheque has been delayed or bounced for some reason," Harsh Roongta, chief executive officer, Apnapaisa.com, says.
"Then a bank/HFC slaps some penalty. If the borrower does not pay these additional charges, the bank/HFC terms him/her a defaulter even if the principal and the interest component of the loan has been paid regularly." A statement would help a borrower keep track of such slippage.
Loan closure : Another crucial recommendation made in the report is on title deeds, which have to be returned to customers within 15 days after a home loan has been closed. In case of delay or loss of documents, the boards of banks should put in place a suitable compensatory policy to compensate the customer, the report states. "It's a time-consuming exercise to arrange for the duplicate title of deeds," says Roongta. The report also says banks should go easy on prepayment penalties for customers who switch to lenders offering lower interest rates.
Credit information reports
Such reports have been a bone of contention between borrowers and banks. While banks point to their right to report information on defaults to the credit information companies (like CIBIL, Equifax and Experian), borrowers often complain that the information does not reflect the correct picture. The report suggests that in case of any adverse remark in credit report, the bank should inform the borrower for clarification so that errors, if any, can be corrected.
It also recommends distinguishing between the various types of settlements. "The report seeks to differentiate between waivers granted to defaulters under a compromise settlement, where a part of the outstanding amount is written off and minor write-offs where, say, only the penal charges are waived off," says Madan Mohan. At present, the only redressal channel for an aggrieved borrower is informing the credit information company, which can raise the issue with the lender concerned and rectify the error, if the latter admits to it.
Relationship management
Wealth management services offered by banks have been in news in the recent past due to the malpractices of some wealth managers. The RBI panel's report has recommended that banks follow the "four-eyes" principle, which allows customers to look beyond their dedicated relationship manager. "We have implemented a matrixed engagement grid that provides customers with back up staff contacts - that of service managers and line managers of the main relationship manager," said HSBC in an official statement.
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