Dr KC Chakrabarty, while speaking at Moneylife Foundation’s first anniversary function, said that when the regulator becomes stringent, the framework will automatically provide protection for customers
Click here to view pictures
In India, one frequent complaint against banks is that they do not provide effective service. And this is because of the lack of proper laws and technology, says Dr KC Chakrabarty, deputy governor, Reserve Bank of India (RBI).
Speaking at the first anniversary function of Moneylife Foundation on Saturday, he said, "In a business organisation it becomes difficult to demand customer service because there are legal restraints in many matters. Unless the necessary legislations are in place, customers cannot avail of all the desired facilities."
Dr Chakrabarty gave the example of ATM and signature frauds, in which cases customers are expected to prove their innocence under existing rules. He said customers have to be made aware of the importance of following certain best practices in a technology-driven scenario and an attempt must be made to put the onus of proving the carelessness or compromise on the banks, rather than less savvy customers.
The RBI has commissioned a survey of customers using ATMs and based on the findings it is trying to bring in a legislation, which would place the onus on the bank to prevent fraudulent withdrawals, the deputy governor said.
He also talked about credit defaults where, in many cases, ignorant customers become defaulters and are penalised even during the inquiry. "For a bank you are a bad customer because you have failed to clear your dues, and as long as your innocence is not proved, you are deemed guilty. We cannot do anything about that. The only advice that I can give people is to talk to their banks honestly."
The RBI's deputy governor said there is a need for a self-regulatory forum which would address such issues. He said that when the regulator becomes stringent, the framework will automatically provide for customer protection.
"In order to improve customer service, the customer base has to be increased," Dr Chakrabarty said. "Banks should widen their reach, specially in the rural areas. And if they can successfully exploit opportunities and technological challenges then every citizen will have a bank account in the next five years."
However, he explained that a technological interface will not have the advantages of face-to-face interaction. Thus, financial statements, which could be simplified or customised to have more details, will be available only in a standardised format. "The very non-discriminatory nature of technology becomes a drawback at times," he said. He gave the example of the ATM machines, which, due to its limited storage capacity, could only accommodate certain denominations of notes in limited quantities.
Problems also arise because of the non-uniform nature of the software various banks are using, which makes certain options available to customers of some banks while leaving others out. This becomes very pronounced in case of core banking. "Unfortunately, the RBI does not have a mandate regarding softwares. When the RBI regulations were founded there were no computers, so these digital norms were not included. But we have to think along these lines, no doubt," Dr Chakrabarty said.
(Also read: Dr KC Chakrabarty says customers should demand better service from banks)
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
Other wise all ATM related issues would not have been on cold storage and private banks enjoying "free" money for any number of days.
RBI has done many good things but has not followed them and left it on Banks to act as they wish.