The Report of the Committee for Review of Customer Service Standards in RBI Regulated Entities was released by RBI on June 5. Besides the Chairman, BP Kanungo, there were six members in the committee. The report has made a comprehensive and in-depth survey of customer service standards in regulated entities (REs).

Although customer service has always been paramount for banks and the RBI, yet such expert committee reports have been rather irregular. If such committees are constituted every five years, REs will get to know their duties towards customers from a medium-term perspective and prepare accordingly. This, however, doesn’t rule out the intermittent problem-solving measures to be taken by both the RBI and REs.

As the report acknowledges, the Indian financial landscape has undergone a metamorphosis. When computerisation of banks was initiated in the 1980s, it was believed that it would free a lot of physical space as well as staff at bank branches, and this would ultimately enable banks to deliver enhanced customer service. However, as the report rightly observes, over time, the volume of customers (tech-savvy and others) and business (traditional and new) has witnessed a quantum leap, aided by, among other things, financial inclusion programmes.

Owing to mergers of several public sector banks, a lot of their branches have been consolidated, leading to pressure on the consolidated outlets. As against this, banks have not commensurably augmented their physical space and manpower due to their preoccupation with cost control, NPA (non-performing asset) trimming and profit generation.

Financial transactions or discussions with customers necessitate some privacy. However, even today, banks, including their technology kiosks housing ATM, cash dispenser, passbook printing machine, cheque deposit machine, etc., are crowded as before. The behaviour of staff, especially the front-line ones, has definitely improved with most of the younger lot conversant with Hindi, English and one local language. But to make a bigger impact, further improvement is necessary.

As the report recommends, the front-line staff need training in soft skills. The question is: Do all banks have adequate training establishments and competent trainers? A few big banks may have, but not the smaller ones. Posting in training establishments is still considered non-lucrative. How many banks provide online training to their staff (example, e-learning courses) and how many avail of it need to be assessed.

Relief for pensioners

The report is right in giving freedom to pensioners to submit their life certificates. This will ease a lot of pressure on banks as also pensioners. A ‘deadline’ used to be a dead-weight on both. Likewise, the report is sympathetic to differently-abled customers, an area where banks have hitherto taken only baby steps. Indian banks must learn from the technological interventions that US banks are making in this regard.

The report points out that the sums in ‘pre-paid instruments’ are equivalent to deposits and has recommended deposit insurance for these. By the same logic, should ‘float’ deposits not qualify for insurance for the ‘float’ period? What about the deposit-taking NBFCs? In fact, the Deposit Insurance System (DIS) in India needs an overhaul, which is long-pending. A customer-friendly DIS supports financial stability.

The report has given a detailed roadmap for banks to be technologically capable so that they can serve the future generation satisfactorily and productively. This necessitates technological capacity building by banks, requiring huge investments. Hopefully, going ahead, banks will generate enough profit (like in 2022-23) to help commit such investments.

Also, for customers, not only financial literacy but also digital literacy has become important. The ₹62,225-crore Depositor Education and Awareness Fund of RBI must be actively used for this.

The report has flagged mis-selling of third-party products by banks. Mis-selling is a global phenomenon. One of the most significant, empirically observed factors is pressure from CXOs on the sales force to achieve targets ( the Wells Fargo ‘misconduct’ of 2016 in pursuance of its ‘Good to Gr8’ strategy is a case in point).

In the Indian context, mis-selling is driven by routinely posting unskilled personnel as sales agents and their lack of comprehensive product knowledge, especially while simultaneously handling both banking and cross-selling; no customer discipline on agents; financial innumeracy about non-bank products which are more complex than banking products; and poor grievance redress systems. Efforts must be made to ameliorate these.

In order to implement a “principle-based” approach to customer service with the goal of financial stability, Indian banks have to create capacity on all fronts, in tandem: physical space, (skilled) manpower, user-friendly technology, and customer care and protection.

This would need investments on an on-going basis. Various surveys and experience suggest that specialised outlets such as personal banking branches, foreign business branches and SME branches deliver customer service more efficiently than the all-in-one traditional branches.

The RBI’s 2014 Report of the Committee on Capacity Building in Banks and Non-Banks has become outdated. Therefore, in order that the Kanungo committee report achieves its objectives, another committee on capacity building should follow, quickly.

Das is a former senior economist of SBI. Views are personal