Banks Investing Hugely In Customer Acquisition But Need To Focus On Resolving Grievances: RBI DG

Reserve Bank Deputy Governor M Rajeshwar Rao on Thursday chided banks for overlooking customer grievance redressal, asking boards and top management to look into the issue.

Addressing the Fibac summit organised by lobby groupings Ficci and IBA, Rao wondered how a sector which otherwise prides itself as a "service industry" can conduct itself in such a way.

"While banks are hugely invested in forging new and innovative ways of customer acquisition, very little thought seems to be going on improving the customer grievance redress mechanisms," Rao said.

The DG said there is a need for a "cultural and attitudinal" change among banks to pay attention to such aspects of the business, underlining that an efficient, prompt and cost-effective grievance redress mechanism is essential.

Asking the top leadership and boards of banks to look into the aspect, Rao said, "Unfortunately, it appears that the efforts of the banks to provide timely solutions to customer grievances have not kept pace with the explosion in technology and products".

He said the banks also need to ensure that their employees to treat senior citizens, people with special needs, those who are technologically challenged or someone who may need help otherwise with "special care and empathy".

Reminding that an empathetic approach can help banks win customers, he said the banking industry regulator will be taking up such aspects "more vigorously" in its interactions with the lenders.

Rao said the banks also need to serve the needs of Gen Z consumers and listed down a slew of changes, which he sees taking place in the system, including some very radical ones.

"It is likely that the era of exclusiveness in providing banking services by banks is over. With the Banking-as-a-Service (BaaS) model making steady and silent inroads, the banks have to operate as a part of the larger ecosystem with a good number and varieties of non-bank players in the mix," he said, pointing out that some initial changes towards this are already visible.

Banks will have to transition from a sectoral approach to an ecosystem approach, he said, adding markets are likely to become the central point for intermediation where lenders may become one among the host of other entities interacting in the marketplace.

The lenders may have to shift from isolated service provisions to hyper-personalised embedded banking, he noted.

It is possible that customer preferences in future may shift from passive saving products like a fixed deposit to more esoteric and market-linked investment products, he said, adding that providing a super app having multiple products may become the norm.

In the remarks that come days after an incident at UCO Bank, he asked lenders to focus on fortifying cybersecurity and prevention of cyber frauds as well.

Misselling has emerged in a digital avatar called Dark Patterns now, which are design interfaces and tactics used to trick users into desired behaviour like availing high-cost short-term consumer credit masquerading as an instant loan, Rao said.

There are fraudulent apps, breaches of privacy and deep fakes as well, he added.

As the business undergoes a shift, the regulator may have to relook at the risk management frameworks, especially for liquidity and market risk, he said.