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'In this age of competition, we will not survive long if we do not provide quality service to our consumers.'
Reserve Bank of India Governor Sanjay Malhotra came down heavily on regulated entities like banks and non-banking financial companies (NBFCs) for the spike in customer complaints in recent years, urging them to improve services and strengthen grievance redress in a time-bound manner.
He said that senior executives, including chief executive officers (MDs), should spend time on the issue at least once a week.
"In this age of competition, we will not survive long if we do not provide quality service to our consumers," Malhotra said in a speech on Monday at the annual conference of the RBI Ombudsmen.
Commenting that the high number of customer grievances remains a serious concern, Malhotra cited data showing that complaints received under RBI's Integrated Ombudsman Scheme grew at a compound average rate of almost 50 per cent per year over the past two years, reaching 934,000 in 2023-24 (FY24).
The number of complaints processed by the office of the RBI Ombudsman increased by 25 per cent, from about 235,000 in 2022-23 to almost 294,000 in 2023-24.
"Not only are a large number of complaints getting escalated, but a large proportion -- nearly 57 per cent of maintainable complaints last year -- required mediation or formal intervention by the RBI Ombudsmen.
"You would all agree that this is a highly unsatisfactory situation and needs our urgent attention," he said.
He further noted that in FY24, the 95 scheduled commercial banks alone received over 10 million complaints from their customers.
"If we take into account the complaints received by other RBI-regulated entities (REs), the number would be even higher."
He warned that the 10 million complaints could grow further with a rapidly expanding customer base and an increasing range of products if banks do not take corrective action.
Malhotra 'strongly' urged managing directors, CEOs, zonal and regional managers, and branch managers to dedicate time every week -- if not daily -- to grievance redress.
"This is a must. All great CEOs find time to do it. We too must keep some time in our schedules to improve customer service and grievance redress," he said, emphasising that the goal should not only be to resolve complaints but also to ensure similar issues do not recur.
He also asked REs to review their grievance redress systems.
"Improving systems to reduce grievances is important, but setting up a robust grievance redress system is equally crucial for all REs."
He suggested that large REs should have at least two levels of grievance redress, with unresolved issues escalating from a lower to a higher level.
"The highest level should be at a fairly senior rank to ensure that requests are not rejected without being examined by a functionary empowered to make consumer-friendly decisions," he said.
According to Malhotra, some of the major areas requiring improvement include know-your-customer (KYC) norms, digital frauds, mis-selling, and aggressive recovery practices.
Speaking specifically on KYC, he said banks must ensure that once a customer has submitted documents to a financial institution, they are not asked to provide the same documents again.
He said that once a customer updates their details with one RE of any financial sector regulator, the information is recorded in the Central KYC Records Registry (CKYCRR) and other REs are notified of the update.
However, he pointed out that most banks and NBFCs have not enabled CKYCRR in their branches or business outlets, causing avoidable inconvenience to customers.
"This should be facilitated at the earliest. It is in everyone's best interest."
He also raised concerns about digital fraud, saying that unsuspecting customers continue to fall prey to scammers.
"To combat this menace, REs need to not only put in place robust internal controls but also enhance digital financial literacy," he said.
Looking ahead, Malhotra said artificial intelligence (AI) has the potential to revolutionise grievance redress.
"Integrating AI at every stage -- from complaint lodging to closure -- can create a seamless, efficient, and data-driven grievance redress system."
At the same time, he cautioned banks and NBFCs to be mindful of the challenges and risks associated with AI adoption.
"There are concerns about data privacy, algorithmic bias, and the complexity of AI-driven models... Human oversight, bias mitigation, and data privacy protections must be built into AI systems to ensure transparent and consistent outcomes," he said.
Finally, he stressed the importance of maintaining the human element in an increasingly data-driven, automated world.
"It is, therefore, critical that REs continue investing in human resources dedicated to customer service and grievance redress.
"Training staff -- especially in behavioural aspects of customer service -- is essential," he added.
Feature Presentation: Ashish Narsale/Rediff.com
