As many as 63% of families surveyed cannot access one or more of their bank accounts online because of know-your-customer (KYC) issues, login credentials not working, or because their bank has put their account in dormant status, says LocalCircles. A few days ago, Reserve Bank of India (RBI) governor Sanjay Malhotra minced no words as he stated, "In this age of competition, we will not survive long if we do not provide quality service to our consumers." His comments came against the backdrop of a troubling increase in complaints requiring mediation or intervention by the
RBI Ombudsmen, with nearly 57% of maintainable grievances necessitating formal resolution last year.
A recent survey by the community social media platform revealed a worrying trend in the Indian banking sector, with 63% of families reporting issues accessing their bank accounts online. LocalCircles gathered over 54,000 responses from citizens across 334 districts. The survey highlights a concerning lack of customer-centric service in banking, as 34% of families reported that at least one of their bank accounts was inaccessible online.
The survey findings are significant as RBI has issued revised directives to banks to classify an account as 'inoperative' if there are no customer-induced transactions for over two years. The directive, which will come into effect from 1 April 2025, is applicable if there is no monetary transaction, KYC update, or non-financial transactions such as balance enquiries or requests for chequebooks for two years.
Coming back to the LocalCircles survey, among the affected, 23% cited the need to complete KYC as the primary obstacle, while 22% struggled with malfunctioning login credentials. An additional 11% of respondents reported that their accounts had been placed in dormant status, and 7% were caught in the maze of the DEAF (depositor education and awareness fund) status, where balances were transferred to RBI.
In addition to accessibility issues, many families have voiced dissatisfaction with how banks handle the reactivation of accounts. A staggering 59% of survey participants described their bank's approach as 'bureaucratic and inefficient', often resulting in prolonged delays and frustrating interactions. Only 36% of respondents reported receiving 'quick and efficient' support when visiting their branch in person.
"What should not happen is that the directives by RBI combined with the bureaucratic and inefficient operating model of many banks make it harder for consumers to validate accounts, access them and conduct transactions. Banks will need to put in extra effort on process and transaction efficiency for consumers and unless that becomes a priority, not much is likely to change," LocalCircles says.
As digital banking continues to evolve, there is a pressing need for banks to bridge the gap between modernisation and customer support. Experts call for simplified procedures and greater transparency to prevent consumers from being left in the lurch due to complex or inconsistent requirements.
Last week, speaking at the annual conference of the RBI ombudsmen, governor Malhotra stressed the urgent need for banks and non-banking financial companies (NBFCs) to prioritise customer service. He disclosed that complaints under the Integrated Ombudsman Scheme have surged at a compound average growth rate of nearly 50% per year, reaching 934,000 in 2023-24. Highlighting the severity of the situation, he noted that almost 57% of maintainable complaints last year required formal intervention by RBI ombudsmen.
The RBI governor says, "Customer complaints are not a nuisance – they are in fact opportunities to improve, innovate, and build trust. Handling them well can define your success. Each unresolved grievance is a missed opportunity for regulated entities to reaffirm customer trust and loyalty. It is also a warning signal as repeat complaints are often signs of systemic flaws. Today, complaints often surface on social media even before reaching official channels, highlighting the need for proactive measures."
"Best service is not one in which there is no occasion for grievance redressal but one in which there is no occasion for the customer service department to step in. Systems should work seamlessly and conveniently so that customers do not have to call the branch or the customer service centre or talk to anyone in the bank or NBFC. Systems have to be so user-friendly that customers can rely on self-service rather than being dependent on anyone else," Mr Malhotra added.
With RBI set to introduce revised directives from 1 April 2025—classifying accounts as inoperative after two years of inactivity—it is crucial that banks ensure smooth and accessible reactivation processes. Failing to do so could deepen the divide between efficient banking and real-world challenges faced by millions of customers, LocalCircles says.
CKYC WILL BE UPDATED AND MAINTAINED BY A CENTRAL AGENCY TO INTERLINK ALL BANK/POST OFFICE ACCOUNTS LAND AND REVENUE RECORDS INCLUDING SHARES etc
INDIDUAL IS REQUIRED TO QUOTE ONLY CKYC
THIS WILL IMPROVE financial health of the COUNTARY
I was recently harassed by ICICI Bank for re kyc. Their online kyc thru netbanking and thru their app was not functioning.