RBI Governor Calls For Stronger Grievance Redress Systems In Banks And NBFCs

New Delhi, Mar 18 (KNN) Reserve Bank of India Governor Sanjay Malhotra has issued a strong appeal to banks and non-banking financial companies to address the alarming increase in customer complaints, emphasising that quality service is essential for survival in today's competitive environment.

Speaking at the annual conference of RBI Ombudsmen on Monday, Malhotra highlighted concerning statistics showing that complaints under the RBI's Integrated Ombudsman Scheme grew at a compound average rate of nearly 50 percent annually over the past two years, reaching 934,000 in 2023-24.

The number of complaints processed by the RBI Ombudsman increased by 25 percent, from approximately 235,000 in 2022-23 to almost 294,000 in 2023-24.

Malhotra expressed particular concern that nearly 57 percent of maintainable complaints last year required mediation or formal intervention by RBI Ombudsmen, calling this ‘a highly unsatisfactory situation’ demanding urgent attention.

He noted that in FY24, the 95 scheduled commercial banks alone received over 10 million customer complaints, a figure that could grow substantially with an expanding customer base and product range if corrective action is not taken.

The Governor strongly urged senior executives, including managing directors and CEOs, to dedicate time weekly, if not daily, to grievance redress, stating that ‘all great CEOs find time to do it.’ He emphasized that the goal should not merely be resolving complaints but ensuring similar issues do not recur.

Malhotra called on regulated entities to review their grievance redress systems, suggesting that large institutions should have at least two levels of grievance redress, with unresolved issues escalating from lower to higher levels. He recommended that the highest level should be at a senior rank to ensure proper examination of complaints.

The Governor identified several areas requiring improvement, including know-your-customer norms, digital fraud prevention, addressing mis-selling practices, and reforming aggressive recovery methods. On KYC specifically, he urged banks to ensure customers are not repeatedly asked to provide the same documents, pointing out that most banks and NBFCs have not enabled the Central KYC Records Registry in their branches, causing unnecessary inconvenience to customers.

Looking to the future, Malhotra highlighted artificial intelligence's potential to revolutionize grievance redress by creating seamless, efficient, and data-driven systems.

However, he cautioned about associated challenges including data privacy concerns, algorithmic bias, and the complexity of AI-driven models, stressing the need for human oversight and bias mitigation.

Despite increasing automation, the Governor emphasized the importance of maintaining the human element in customer service, urging regulated entities to continue investing in human resources dedicated to customer service and grievance redress, with particular focus on training staff in behavioural aspects of customer service.

(KNN Bureau)