RBI sets out enhanced norms to improve grievance redress mechanism at bank

Suggested keywords: disclosures, customer complaints, cost-recovery framework, grievance redress mechanism, banks

Enhanced disclosures on customer complaints and operationalisation of a cost-recovery framework have been prescribed by the Reserve Bank of India (RBI) to strengthen and improve the efficacy of the grievance redress mechanism of banks.

Further, the central bank will undertake intensive review of the grievance redress mechanism of banks having persisting issues in their redress mechanism .

Based on the review, a remedial action plan will be formulated and formally communicated to banks for implementation within a specific time frame.

In case no improvement is observed in the grievance redress mechanism within the prescribed timelines despite the measures undertaken, the bank(s) will be subjected to corrective actions through appropriate regulatory and supervisory measures, RBI said in a notification to all Scheduled Commercial Banks (excluding Regional Rural Banks).

Granular disclosures

Granular disclosures on complaints and grievance redress include providing summary information on complaints received by the bank from customers and from the Offices of Banking Ombudsman (OBOs), and top five grounds of complaints received by the bank from customers.

“Disclosures serve as an important tool for market discipline as well as for consumer awareness and protection.

“Appropriate disclosures relating to the number and nature of customer complaints and their redress facilitate customers and interested market participants to better differentiate among banks to take an informed decision in availing their products and services,” the notification said.

Cost-recovery framework

RBI said it will operationalise the cost-recovery framework for banks, whereby the cost of redress of maintainable complaints will be recovered from the banks against whom the number of complaints received in OBOs are in excess of their peer group averages.

For this, peer groups based on the asset size of banks as on March 31 of the previous year, will be identified.

Peer group averages of maintainable complaints received in OBOs would be computed on three parameters — average number of maintainable complaints per branch, average number of maintainable complaints per 1,000 accounts (total of deposit and credit accounts) held by the bank, and average number of maintainable digital complaints per 1,000 digital transactions executed through the bank by its customers.

The cost of redress to be recovered in this respect will be the average cost of handling a complaint at the OBOs during the year.

Intensive review

RBI will undertake, as part of its supervisory mechanism, annual assessments of customer service and grievance redress in banks, based on the data and information available through the Complaint Management System, and other sources and interactions.

Banks identified as having persisting issues in grievance redress will be subjected to an intensive review of their grievance redress mechanism to better identify the underlying systemic issues and initiate corrective measures.

The intensive review will include, but not be limited to, areas such as adequacy of customer service and customer grievance redress-related policies, functioning of the Customer Service Committee of the Board, level of involvement of the top management in customer service and customer grievance-related issues, and effectiveness of the grievance redress mechanism of banks.

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