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Timely move to improve customer services in banks

The banking services code cannot be dismissed as old wine in new bottle

A FLURRY of initiatives in the critical area of customer service in the banking industry has, quite appropriately, brought the subject centrestage. On July 1 this year, the Reserve Bank of India set up a Customer Service Department that will coordinate and centralise with itself activities hitherto undertaken by several departments.

Earlier, following the recommendations of a high level committee, the Banking Codes and Standards Bureau of India (BCSBI) had been set up as a collaborative effort of the RBI and commercial banks. Its primary task was to prepare benchmarks for banking services. Towards that end, soon after inception, the Bureau has evolved a Code of Banks' Commitment to Customers.

It is not obligatory for banks to observe the Code but many have said they would be doing so anyway. It is expected that soon its coverage will be universal. On its part, the BCSBI will provide an independent review of and feedback on banks' adherence to the self-prescribed standards set under the code. (The code is available on www.bcsbi.org.in. Individual banks will make it available to their customers)

Of all recent initiatives for better customer service in the financial sector, formulation of the code is claimed to be the most significant. But, customer service benchmarks, which are what the code is about, cannot be startlingly new. Even the obviously convenient format of presenting customer service yardsticks as one document — a code — is not original. Nor are its commitments.

Not entirely new

Whether explicitly stated or not, banks are bound by the laws of the land as well as time-tested practices. Many banks already have citizen's charters and fair practices codes, whose sum and substance are basically identical to what has now been codified.

Pertinently too, redress through the banking ombudsman scheme — it has undergone changes to bring in latter-day banking practices such as ATM and credit card usage — will still be available. The code makes an explicit mention of the ombudsman's role.

The code ought to be viewed as an updated version of what leading banks have been. espousing in the area of customer service for long. Even the stated objectives of the code — to promote good and fair banking practices by setting minimum standards, increased transparency, promoting fair and cordial relations between the customer and the bank — are something which bank customers have been promised by banks. Bank branches have displayed details of general consumer interest such as rates on deposits and advances, time norms to encash or issue a draft, the person to whom complaints of tardy service can be addressed and so on.

In drawing up a code, the BCSBI has struck a balance between regulation and voluntary self-regulation. There is also recognition that the emerging competition in the financial sector (since the 1990s) has not by itself ensured a fair deal for all customers. On the contrary, some banks have been excluding some customers in the name of profitability. Not coincidentally, the RBI has recently been asking them to follow "inclusive" practices. The code may not directly address the problem of exclusion but seeks to give a better deal to existing bank customers.

There is naturally plenty of emphasis on credit cards, Internet banking and other practices that have become popular. These are areas where the authorities have expressed apprehension either because they have grown too fast (example, credit card usage) or are susceptible to frauds (breach of internet security).

In any case, customers need to be educated so that they become aware of the pitfalls in selecting a particular product. The Code of Banks' Commitment for Individual Customers is a welcome attempt at bringing up-to-date all recent initiatives on customer service.

As banks get down to the business of measuring up to the benchmarks they will surely encounter practical problems. Only the promised review of the code (within three years) will throw light on how far it has served its purpose.

C. R. L. NARASIMHAN

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