Needed, real inclusion

India’s poor as well as the middle class are quite happy with the banking system. If they have any complaints, these are resolved quickly and efficiently. This is the impression one gets from reading the Reserve Bank of India’s latest annual report on the banking ombudsman scheme. The report states that the scheme — a free grievance redressal mechanism for small banking clients — handled as many as 82,052 complaints in 2013-14 and disposed of 96 per cent of them in a month. But delve into the details and the flaws in the scheme become evident.  To start with, as much as 39 per cent of the complaints were lodged by customers from Delhi, Mumbai and Chennai. And a vast majority — 71 per cent — emanated from metro and urban centres. Given that rural and semi-urban areas house two-thirds of bank branches, their participation in the grievance redressal system is disproportionately small. Since there is no evidence to suggest that rural customers enjoy superior services compared to their more demanding urban peers, low complaint numbers are probably a result of customers being either unaware of the ombudsman scheme or having no easy access to it. The nature of complaints shows that the key pain points for banking customers are not tussles with loan recovery agents (just 0.4 per cent) or levy of charges (5.9 per cent), but those relating to credit/debit cards (24 per cent) and unfair banking practices (26.6 per cent). Customers had a litany of woes relating to plastic — unsolicited issue of cards, unauthorised bundling of insurance policies, loan offers over phone, skimming and fraudulent debits. They also complained about unfair practices relating to mis-selling of third party products and tall promises made by banking staff. This suggests that though banking personnel are supposed to adhere to a code of ‘fair practices’ and assess customer suitability before selling products, these rules are observed more in the breach. A final concern is that an inordinate number (31 per cent) of grievances were rejected by the ombudsmen because they fell outside the specific ‘grounds’ for complaints listed under the scheme. The redressal mechanism must dispense with a narrow list-based approach.

The findings in the report offer takeaways for both the Centre and the RBI. As the Centre pushes to extend banking services to ever larger numbers of the poor and the disadvantaged, it must not abdicate on its role in providing the supporting infrastructure and staff to handhold new banking clients and educate them about their basic financial rights and entitlements. As the RBI prepares to redraft customer protection rules for the banking sector, it may like to expand the scope of the ombudsman scheme to take a more principles-based approach. Taking a serious view of fair practice violations by banks and their staff as well as laying down stiffer penalties could result in a far better customer experience.

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