RBI to fund code body for 5 years

The Reserve Bank of India has decided to fund the operations of the Codes and Standards Board of India (CSBI) for the first five years.

The board, to be set up by the Indian Banks' Association (IBA), would function as an autonomous institution to address customer grievances, said K Unnikrishnan, senior vice-president, IBA.

The board would be formally set up by March 2006 prior to the announcement of the annual monetary policy statement.

Fifty per cent of board members would be from outside the banking fraternity and all its board members would be appointed by the RBI. Key functions of the board would be to look into formulation of fair practices for banking activities.

Unnikrishnan informed that the RBI would be chiefly involved in the establishment of the board to lend credibility to the institution and there would be a managing committee put in place by the regulator.

The committee would take the form of a registered society and will be chaired by a chief executive officer and have a board comprising five members. Each member bank would have to sign a covenant with the board and there will be resident relationship managers who would also look into press reports on banks.

He said apart from published press filings, the board would also initiate action based on customer complaints. The issues addressed include discrimination carried out by the bank across customer classes, unfair dealings or not having mentioned the pre-payment charge in the loan agreement.

Penalty enforced against erring banks would not be monetary in nature as the board proposes to name the errant banks in its annual reports. Penalising could also involve derecognising the bank from the board.

Each of the member banks would have to pay annual fees based on their business volumes, as affiliation charges. The annual expenditure of the board would exceed Rs 2 crore, Unnikrishnan said.

After the initial five years, the board would create a corpus of funds using the affiliation charges and could even deploy these funds towards creation of customer awareness.