Summary on report of the Committee for Review of Customer Service Standards in RBI Regulated Entities

Reserve Bank of India (RBI) has released the report of the Committee for Review of Customer Service Standards in RBI Regulated Entities.

Committee for Review of Customer Service Standards in RBI Regulated Entities

Announcement regarding setting-up of the Committee for Review of Customer Service Standards in RBI Regulated Entities was made by RBI in its bi-monthly Monetary Policy Review Statement dated April 08, 2022. 

The Committee was constituted on May 23, 2022 under the chairmanship of Shri B P Kanungo, former Deputy Governor, RBI, to examine and review the state of customer service and internal grievance redress in the Regulated Entities (REs) along with the adequacy of extant customer service regulation and suggest measures to bring about improvements, keeping in view the revolutionary transformation underway on account of the rising customer base of the REs, advent of innumerable digital products and services, emergence of new technology platforms and service providers for service delivery as also the rising volumes of digital transactions riding on innovations in payment systems.

Which were the previous Committees on Customer Service?

The important committees on customer service set up by RBI / Government of India over the years include –

• Talwar Committee on Customer Service (1975)
• Goiporia Committee (1990)
• Tarapore Committee on Procedures and Performance Audit on Public Services (CPPAPS, 2004)
• Damodaran Committee on Customer Service (2010)

What are the important initiatives taken by RBI to address customer protection in REs?

• Guidelines on customer service: RBI has issued, from time to time, detailed guidelines to the REs on various aspects of customer service, including institutional set-up, policies on customer service, financial inclusion, deposit accounts, levy of service charges, disclosure of information, facilities for persons with disabilities, nomination facility, etc.
• Introduction of Ombudsman Schemes: RBI introduced the Banking Ombudsman Scheme (BOS) in the banking sector in 1995. Over the years, the scheme was amended and expanded to include Regional Rural Banks (RRBs) and scheduled Primary (Urban) Co-operative Banks (UCBs). Subsequently, separate Ombudsman Schemes were launched for Non Banking Financial Companies (NBFCs) in 2018 and Non-bank Payment System Participants in 2019. In 2021, the above three schemes were integrated into a new scheme - the Reserve Bank Integrated Ombudsman Scheme (RB - IOS), 2021. The Scheme was also extended to Non -scheduled UCBs with deposit base of ₹50 crore and above and later to Credit Information Companies (CICs). The RB - IOS is jurisdiction neutral, adopts “one nation one ombudsman” approach and is complemented by a Centralised Receipt and Processing Centre (CRPC) set up for receipt of non-portal complaints and their initial processing. The CRPC also hosts a Contact Centre with 24x7x365 Interactive Voice Response System (IVRS). Customer Care executives are available for any clarifications / information etc. between 8:00 AM to 10:00 PM in Hindi and English and between 9:30 AM to 5:30 PM in 10 regional languages2. Complaints from customers of REs not covered under RB-IOS are attended to by the Consumer Education and Protection Cells (CEPCs) of RBI.
• Launch of Complaint Management System (CMS): The CMS was setup in 2019 as a 24x7 on-line, end-to-end automated, one-stop solution for lodging and redress of customer complaints including receipt, processing and communication of resolution. It also provides for tracking of complaints and for giving feedback by the customer.
• Department for Customer Protection and Education: In order to ensure better focus on customer protection, customer service and grievance redress, and to administer the BOS, a new department viz., ‘Customer Service Department’ (CSD) was set up on July 1, 2006. CSD was renamed as ‘Consumer Education and Protection Department’ (CEPD) as a part of the organizational restructuring in RBI in 2014. As on date, CEPD oversees the operations of 23 RBI Ombudsmen offices spread across the country and the CEPCs in 30 Regional Offices / Sub-offices of the Bank set up in 2015-16 to deal with complaints falling outside the ambit of BOS. In 2019, CEPD also became the focal department dealing with regulation relating to customer protection.
• Charter of Customer Rights (CoCR): The CoCR was issued by RBI on December 03, 2014 as an overarching principle-based guidance for banks on ‘five’ basic rights of bank customers enunciated therein, viz., (i) Right to Fair Treatment; (ii) Right to Transparency, Fair and Honest Dealing; (iii) Right to Suitability; (iv) Right to Privacy; and, (v) Right to Grievance Redress and Compensation.
• Limiting the liability of customers in fraudulent electronic transactions: RBI issued specific regulation in July 2017 for limiting the customer liability in unauthorised electronic transactions resulting in debits to their accounts. The liability has been set according to the type of account held and the time taken by the customer to report the transaction to the RE.
• Harmonisation of Turn Around Time (TAT) for failed digital transactions: Observing that a large number of complaints emanate on account of unsuccessful transactions, RBI introduced in September 2019, a framework for bringing uniformity in processing of the failed digital transactions put through authorized payment systems.
• On-line Dispute Resolution: For resolving customer disputes and grievances pertaining to digital payments, RBI mandated, in August 2020, the authorized Payment System Operators to introduce On-line Dispute Resolution systems using a system-driven and rule-based mechanism with zero or minimal manual intervention.
• Introduction of Internal Ombudsman (IO) mechanism: In line with the recommendations of the Damodaran Committee, in April 2015, RBI instructed all Public Sector Banks (PSBs), select Private Sector Banks (Pvt.SBs) and Foreign Banks (FBs) to appoint Chief Customer Service Officers (CCSOs) (also known as Internal Ombudsmen (IO)). In September 2018, the IO mechanism was extended to all Scheduled Commercial Banks (excluding RRBs) with more than 10 banking units in India. It has since been made applicable to all deposit taking Non Banking Financial Companies (NBFCs-D) with more than 10 branches, non-deposit taking NBFCs (NBFC-NDs) with retail customer interface and asset size of ₹5,000 crore or more, Non-bank Payment System Participants (PSPs) with more than one crore Prepaid Payment Instruments (PPIs) outstanding and to all CICs.
• Framework for Strengthening the Internal Grievance Redress (IGR) Mechanism in banks: With a view to strengthen and improve the efficacy of the IGR mechanism of banks, a comprehensive framework was put in place by RBI with effect from January 2021. It comprises of four pillars, viz., (i) enhanced disclosures by the banks on customer complaints; (ii) recovery of cost of redress of maintainable complaints from the banks against whom the number of complaints received in the Offices of RBI Ombudsmen (ORBIOs) are in excess of their peer group average; (iii) intensive review of the grievance redress mechanism; and, (iv) regulatory and supervisory action against banks identified as having persistent issues in their IGR mechanism.

What are the major recommendations of the Committee?

Strengthening Regulation

• RBI may consider progressively moving towards “principle-based” regulation with regard to customer service in the REs. These may be based on well -recognised customer - friendly principles, including, but not limited to, Equitable and Fair Treatment, Transparency and Disclosures, Appropriateness and Suitability, Data Protection / Customer Confidentiality, Right to Grievance Redress, etc.
• RBI may put in place a suitable structure of incentives and disincentives to encourage REs to take proactive steps towards enterprise-wide improvements in customer service and impart systemic strength to overall customer protection efforts in the financial sector while imposing a regulatory cost for entities where the quality of customer service is deficient. 
• RBI may consider making the Charter of Customer Rights enforceable after reviewing and updating it. RBI may consider extending the Charter to Non Banking Financial Companies (NBFCs) also. 
• The customer service regulation should be consolidated on the principle of same activity same regulation and apply to all the REs depending upon the activity being undertaken by them, irrespective of the category of the REs. 
• With a view to ensure that there is uniformity in classifying, recording and reporting of complaints by the REs, RBI should lay down a definition of a complaint under the IGR mechanism which should also capture the complaints which are outside the purview of RB-IOS. An indicative definition could be: “Any reference received formally through electronic or paper mode flagging a “deficiency in service”, as defined in RB-IOS, pertaining to all the activities which the RE undertakes and services it offers.”
• The RBI Ombudsmen (RBIOs) should be empowered, based on the facts or a set of similar complaints, to direct the RE concerned to review and undertake suitable corrective action in all such cases and confirm compliance to RBI. Being the focal department for Customer Service, Consumer Education and Protection Department (CEPD), may also be empowered to direct all REs to initiate corrective action in such cases, if the deficiency in service, in its view, is widely prevalent. 
• RBI may develop and publish a “Customer Service and Protection Index” with a view to capture, at the system level, the quality / standards of customer service and extent of customer protection in the REs through a single score. The Index may cover dimensions like adequacy of regulatory and institutional framework in place, customer experience, efficacy of grievance redress, under both IGR and AGR, extent of customer education and awareness, etc. 
• RBI should assess the quality of customer service through periodic and regular thematic studies across the REs to ensure better compliance to the customer service guidelines. The findings should feed suitably into the framework to improve IGR and the proposed ratings of REs. 
• RBI, during the supervisory process, should take a view on the reasonableness of charges levied by REs for the services offered. 
• In order to address the conflict of interests, and to increase the effectiveness of the Internal Ombudsmen (IO) appointed in the REs, RBI may nudge the Indian Banks’ Association (IBA) to create a fund to directly pay the salary / compensation to the IOs of the banks. Similar funds can be created by respective Self-Regulatory Organisations (SROs) for other categories of REs. Alternatively, RBI itself may consider creating the fund. Cost of the above fund, thus created, may be recovered from the REs, in proportion to the complaints against them referred to the IOs. 
• An RE - agnostic common portal for lodging complaints may be set up by RBI so that the customers of any RE can lodge complaints on a single platform. The portal may allocate the complaints to respective REs, enable facility for tracking of the complaints by the complainant and for automatic escalation of rejected complaints to the IOs. Going forward, RBI may also consider integrating this platform with its Complaint Management System (CMS) portal to provide for seamless transfer and movement of complaints and data. 

Improving customer service in REs

• Indian Banks’ Association (IBA) may update its Model Operating Procedure (MOP), in line with regulation, for hassle-free settlement of claims in accounts of the deceased account holders, in various scenarios. The MOP may provide for the documents required to be submitted by the claimant. In case nomination exists, the proceeds may be released immediately, upon submission of the required documents.
• Obtaining nomination in deposit accounts may be made mandatory to facilitate hassle-free settlement of claims in case of death of the account holder. Several existing accounts do not have nominations at present. The REs should be asked to obtain nominations in all such cases within a reasonable time period, say three years.
• To obviate the need for visits to the branches / RE premises, by the nominee / heirs, the process for settling deceased claims may also be made available on-line. The on-line facility may provide for submission of all the required documents and their verification. A system of generating digital reference number upon submission of the claim and supportive documents may be made available. The claims may be settled within a reasonable time period, say 30 days from the date of submission of all necessary documents. The timeframe should also apply when the claims are physically submitted. Beyond 30 days, the REs may be required to pay interest at a rate, say two percent higher than the rate at which the deceased person’s deposit was held. 
• While the REs should take necessary steps to periodically update KYC, it must be ensured that operations in the account are not stopped.
• The RE should maintain a centralised database of Know Your Customer (KYC) documents of all customers, linked to a unique customer identifier, say the Customer Information File (CIF), obviating the need for submitting KYC documents repeatedly for availing multiple facilities from the same RE. Whenever KYC documents are updated by the customer, the same should be reflected for all other facilities availed by the customer from the RE. 
• The REs may adopt a nuanced approach for risk categorization of the customers. For example, salary earners with inflows and outflows consistent with the customer’s profile need not necessarily be categorised as high risk, even though they may be “high net worth” individuals. Similarly, students can also be categorized as low - risk.
• The responsibility for obtaining and renewing the insurance of the primary asset may be an unequivocal responsibility of one of the parties to the agreement, viz., the borrower or the RE, and clearly indicated in the Key Facts Statement / Most Important Terms and Conditions document. 
• RBI may consider stipulating a time limit for the REs to return the property documents to the borrower from the date of closure of the loan account, failing which a penalty / compensation linked to the extent of delay should automatically be paid by the RE to the borrower.
• In case of loss of property documents, the RE should not only be obligated to assist in obtaining certified registered copies of documents at their cost but also compensate the customer adequately, keeping in view the time taken to arrange the alternate copies of the documents. 
• REs may provide an option for the relatives of the senior citizens to pay upfront for the door-step services as well as other such conveniences, if any, to be availed by their elders.
• The pensioners should be able to submit Life Certificate (LC) at any branch of the bank in which they maintain their pension account. Moreover, they should be allowed to submit LC in any month of their choice to avoid rush in a particular month. Subsequent LCs can be submitted in the same month at annual intervals.
• Compensating the customer in case of any injury suffered while availing services at the premises of the RE, due to inadequate / faulty infrastructure, and bearing the medical expenses, if any, should be a part of customer policy of the RE. The REs should take adequate insurance cover for such eventualities, and the customer and staff should be made aware of the same. 
• Cross selling of third - party products by the sales team of the RE should be subject to verification by the audit function to ensure that there was no mis-selling and all instructions / guidelines with respect to sale of such products were adhered to.
• Till the recommendation for a common complaint portal is put in place, the REs should have a system to enable the complainant to track the progress in processing of the complaint. The expected time for resolution of the complaint should invariably be communicated to the complainant. If the Turn Around Time (TAT) for resolution is exceeded, the same should be communicated to the complainant, indicating reasons for the delay. 
• Customer-facing staff and officers should undergo mandatory training in soft skills to reduce instances of misbehaviour by the errant staff / officers. Adequate knowledge and in-depth understanding of the internal guidelines and the regulatory instructions must be an essential requirement for posting employees in IGR-related positions. 

Leveraging Technology for better service delivery

• REs may use contextual data as an integral part of their Customer Service Strategy. They should use Customer Relationship Management (CRM) technology to collect customer-related information to create a detailed profile of the customer. These can be stored within a central repository in the CRM, enabling more informed decisions such as developing targeted customer awareness campaigns, upselling, and offering ancillary products.
• Leveraging Conversational Artificial Intelligence (AI), REs should integrate and personalize ChatBots into mobile apps or websites to answer frequently asked questions and get answers anytime, anywhere. ChatBots may also be provided in multiple languages for vernacular customer base. 
• REs should look at designing a frictionless journey using Straight Through Processing (STP). They may expand digitisation of branches with paperless journeys and self-help kiosks, enabling customers to carry out faster transactions. 
• Video based Customer Identification Process (V - CIP), an alternate method of customer identification with facial recognition and customer due diligence by an authorised official of the RE by undertaking seamless, secure, live, informed-consent based audio-visual interaction with the customer to obtain identification information required for Customer Due Diligence (CDD) purpose, may be increasingly used. 
• There is a need for standardisation of ATM interface and ensure a minimum set of functionalities at the ATM by all banks / White Label ATM (WLA) operators. For meeting the needs of physically challenged, senior citizens and those who are not tech-savvy, etc., extra care may be provided by deploying ‘text to speech’ software, ChatBots, multi-language supporting software.
• Proper messages should be displayed in respect of unsuccessful OFF - US ATM transactions, so that the customer can identify the exact reason why she is not able to undertake transaction / ascertain the status of the transaction.
• REs may design and deploy safer means of second factor authentication. In this regard, biometric sensors on smartphones such as face / fingerprint / iris scanners can replace physical signatures to make physical presence no longer obligatory. Such integration can also help senior citizens avail banking services with greater ease. Further, such phone-based scanners can augment the OTP based authentication system as an additional factor of authentication and help in reducing frauds.
• REs may provide alerts to customers during “teachable moments”. For example, warnings against sharing of credentials.
• On-line facility be made available on the Indian Cybercrime Reporting Portal for registering complaints by members of public in respect of fraudulent transactions. The complaint should trigger an automated alert mail from the victim’s bank to beneficiary bank / card issuer / merchants for blocking the flow of funds. The beneficiary bank should immediately block equivalent amount in the account till detailed verification of the reported transaction in the complaint is completed. In case of merchants, sale / dispatch of merchandise should be kept on hold. All these may be implemented as STP, to the extent possible.
• The Call Centre of REs may be designed with a dedicated IVRS flow, sharing the important ‘do’s and don’ts’ with the customer, based on the customer profile / queries, including provision of in-house financial advisors for complex queries or sophisticated customers. An automated call back feature in Call Centre, when a call is dropped mid-way, need to be provided. Option to speak to the customer care executive should be part of all menu options. 

References

Reserve Bank of India. (2022, May 23). 'RBI Constitutes Committee for Review of Customer Service Standards in RBI Regulated Entities'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=53750

Reserve Bank of India. (2023, June 05). 'Report of the Committee for Review of Customer Service Standards in RBI Regulated Entities'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=55790

Reserve Bank of India. (2023, June 05). 'Report of the Committee for Review of Customer Service Standards in RBI Regulated Entities'. Retrieved from https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/REPORTCUSTOMERSERVICE0DC064A6613C40AB8343B94EF50DFA13.PDF

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