"The RBI could have learnt from insurance regulator IRDA (Insurance Regulatory and Development Authority) brought out a separate regulation for protection of policyholders several years back. The RBI has taken just baby steps to protect the customers," S.Saroja, co-ordinator, Citizen consumer and Civic Action Group (CAG) told IANS.
The CAG is a city based consumer action group.
"There is no separate regulation for protection of customers of financial service providers (FSP) or at least the customers of banks and non-banking finance companies (NBFCs). People have recourse only to the Consumer Protection Act," a senior employee of a public sector bank told IANS.
The RBI Aug 22 came out with its draft charter on customer rights and has called for comments by Sep 22.
According to RBI, the five basic rights of a customer are: fair treatment, transparency, fair and honest dealings, product suitability, privacy and grievance redress and compensation.
"The basic rights mentioned by RBI are really very basic. These are taken for granted in an open market economy. Further, the draft charter is of a general nature. The only positive feature is that the RBI has now started talking about compensation to be paid for deficiency in service," Saroja said.
Spelling out the five rights of customers the RBI has said that the FSPs should not threaten their customers with physical harm or exert influence that is outside the normal and reasonable business practice.
The FSPs should not engage in behaviour that would reasonably be construed as unwarranted harassment.
As per the draft charter, FSPs should not discriminate unfairly against any customer on grounds such as gender, age, religion, caste and physical ability.
"The financial services provider may, however, have certain special products which are specifically designed for members of a target market group or may use defensible, commercially acceptable economic rationale for discriminating between customers," the draft states.
According to RBI, customers should approach the available internal resolution/grievance redressal mechanism before approaching alternate fora.
The alternate forums are the Banking Ombudsman (for complaints against banks) and consumer courts.
As per RBI's latest annual report, the Banking Ombudsman gets around 70,000 complaints from banking customers.
To save the customers from difficult legal language, the RBI states that FSPs should provide customers with product terms and conditions in an easily understandable simple language.
They should also specify the key risks associated with the product and also the features that may be disadvantageous for a customer.
As per the draft, FSPs should also advise customers on their rights and obligations embedded in laws or regulations, as well as the need to report any critical incidents that they encounter, suspect or discover. The central bank has also suggested a common industry-supported portal to provide access to similar products or to enable the customer compare products and prices.
To curb mis-selling of financial products at the field level, the draft charter has also proposed that the service provider should have a board-approved policy on assessing suitability of products for clients prior to a sale.
The FSPs should examine the structure of its fees/service charges/penalties to ensure that they are reasonable.
To resolve customer complaints, the draft charter has proposed that the FSPs set up grievance redressal mechanisms with timelines for resolving issues.
The name of the nodal officer for redressing customer grievance should be properly displayed and also place in the public domain the compensation policy for delays/ lapses in conducting /settling customer transactions within the stipulated time and in accordance with the agreed terms of contract.
The RBI, on the protection of customer privacy, has proposed that customer's personal information should be treated as confidential and not shared with others unless it is authorised by the customer or compelled by law.
According to CAG's Saroja, a proper regulation specifying the penalties for defective service is the need of the hour as banks generally resort to delaying tactics or pass off their responsibility.
She cited a case where a customer's cheque was passed by a public sector bank despite him giving a stop payment letter in advance and getting an acknowledgement.
The bank is not refunding the money as per its own rules, she added.