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Time to end culture of exclusion

Banks chasing the well-heeled

THE CURRENT focus on customer service in commercial banks is to be understood in its proper context. A number of significant points have been raised by the Annual Monetary and Credit Policy statement for 2005-06 but all these seek to address systemic issues rather than individual cases. This, of course, is what a policy document of that type should be doing.

It is well known that there have been a number of high level reports /committee recommendations dealing with customer service issues at a micro level. The Banking Ombudsman is a mechanism for redressing individual grievances. The accent on systemic issues does not in any way minimise the need for adequate customer service at the unit or branch level. In a sense both approaches look at the same set of problems but from different directions. Both have the same goal of giving the "ordinary'' banking customer his due.

It is trite to say that both the smaller of the depositors and the smaller of the borrowers should receive adequate customer service. The reality, however, as even several official committees including a recent one headed by S. S. Tarapore have found, is different.

Small customers ignored

For a variety of reasons policy initiatives have so far sidestepped some of the genuine concerns of depositors. It is not that the smaller borrowers are getting a better deal: even the credit policy has acknowledged a deeply disquieting trend of large corporates taking money from the banking system only at sub-PLR rates. Hence, given the emphasis in the liberalisation era on profitability, banks admit — though not publicly — that they are forced to charge the smaller accounts much more than is warranted by considerations of risk.

Liberalisation of the financial sector has also brought in competition which in many ways has enhanced standards of customer service. Yet there are glaring deficiencies: in practice, as banks, including those in the public sector, devote more attention to the well heeled customer, they are abandoning a role that had made Indian banking proud in the post-nationalisation era. Whatever be the faults of government banking, excluding sections of the community was not one of them.

Today the problem has become so acute that even the credit policy has discussed in detail the phenomenon of fairly large and vulnerable sections of the society being ignored by the mainline financial system. "There are legitimate concerns in regard to the banking practices that tend to exclude rather than attract vast sections of population, in particular, pensioners, self-employed and those employed in the unorganised sector,'' it says.

Such concerns are valid in a milieu in which banks chase the well -heeled, fashioning value added products that automatically raise the threshold limits for depositors (and borrowers). There are many examples: the rule requiring a high minimum balance for savings bank account holders is one such. Depositors, even of a long standing, feel aggrieved when banks ask them to keep more money with them. This often happens at the time when their income stream is drying up.

In a sense, increased use of technology and the resultant costs may have made banks choosy with regard to their clientele. Some banks, however, deny this by pointing out that with technology they are able to reach many more customers than they could with their normal branch network. In any case, there is no option for banks but to recover the costs

Some "convenience'' devices such as ATMs are charged to all customers of a bank, not necessarily those who use them. The issue of banks' consciously or otherwise following a policy of exclusion is complex. Reconciling the requirement of spreading the banking habit with other compulsions (such as profitability) is a difficult task. But it has to be addressed. The RBI points out that banks have been provided with several privileges such as the wherewithal to seek public deposits on a highly leveraged basis. Hence, they should provide services to all sections of the society on an equitable basis.

C. R. L. Narasimhan

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