Damodaran to head RBI panel on improving customer services

The Reserve Bank of India (RBI) is moving to improve customer service at banks. The central bank has set up a committee that will have the mandate to look into interest rates and bank fees and charges.

The committee, headed by former Securities and Exchange Board of India (Sebi) chairman Meleveetil Damodaran, will look into the issue of services offered by banks to retail and small borrowers, including pensioners, and suggest a mechanism to expedite grievance redressal.

In its annual policy statement for 2010-11, RBI said the issue of treating customers fairly was assuming critical importance. As a result, RBI wanted to re-visit the issue of fair treatment to customers, including on interest rates, and wanted a committee to review the prevailing practices.

The Damodaran committee will look into the structure and efficacy of the grievance redressal mechanism that is currently practiced by banks, and suggest measures for expeditious resolution of complaints. The panel will also examine international experiences in this regard.

Apart from Damodran, other members of the committee include M S Sundara Rajan, former chairman and managing director of Indian Bank, S Gopalakrishnan, former chairman and managing director of Vijaya Bank, and M V Nair, chairman of the Indian Banks’ Association and chairman and managing director of Union Bank of India. Kaza Sudhakar, RBI chief general manager in-charge of the customer services department, will be the member secretary. The committee is expected to have its first meeting this month.

The banking ombudsman office of RBI has been receiving several complaints from customers regarding excessive interest rates charged by banks on certain products. Excessive charges by banks are likely to be a key focus of the committee. The banking regulator has emphasised that banks are privileged institutions and banking is a special utility public service.

In 2006, RBI had introduced the Code of Bank’s Commitment to Customers.

In the annual policy, the central bank said commercial banks’ internal structure needed to be made functionally effective and scaled up to attend to not only basic customer needs but also the special needs of disadvantaged groups such as pensioners and small borrowers, including farmers.

RBI has also asked banks to devote exclusive time to discuss customer service in their board meetings at least once in every six months.