Opinion - Editorials   

Providing consumers a real choice

The Reserve Bank of India has recently released a code of banks' commitment to individual customers. A collaborative effort by the RBI, the Indian Banks' Association, and the recently set-up Banking Codes and Standards Board of India (BCSBI), it provides a framework for a minimum standard of banking services customers can legitimately expect. Although adherence is not compulsory, the commercial banks are expected to honour it. Leading banks have for quite some time been following a number of these practices. But in the absence of a code or external standard, they were not benchmarked against the best. The code integrates the finer points of time-tested bank supervision with self-regulation in the area of customer service. The major premise of financial sector reform — that competition drives banks to spruce up their customer service standards — has not withstood scrutiny. Some of the new, aggressively marketed products and services — credit cards and personal loans for instance — can do with much more transparency. A common complaint of credit card users relates to the usurious rate some banks charge on the outstandings. Often the fine print of the credit card application form conceals more than it reveals.

In fact in the reform era there is a much stronger case for banks and financial intermediaries to bind themselves to a formal code of customer service. Deregulation and the entry of new players have expanded the range of banking services. It is equally true that many of the traditional clients have been given a raw deal. Individual bank boards now determine practically all categories of interest rates and bank charges. Banks have made a beeline for value-added products and concentrated on niche banking. Sadly, as the RBI has been emphasising recently, even public sector banks need to be reminded to follow inclusive practices. In the end, real choice for the consumer depends to a great extent on transparency — on the availability of complete information about the product or service on offer.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

A sporting hero of our times
Providing consumers a real choice
Politics of packages & the packaging of politics
Resilience is good, but amnesia is fatal
Keeping the G8's promises to the poor
A shadow on the peace process
Corrections and Clarifications
Can a crowd really edit our daily paper?
Response to terror
Resilient Mumbaikar
Condemnable

Copyright © 2006, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu