Customer rights policies for better banking

The objective of the Customer rights policies is to document/enshrine the basic rights of the customers of the Bank as per Reserve Bank of India regulations. Customer Rights Policy recognises the intrinsic rights; a customer gets during and after the termination of his/her banking relationship.  This policy is based on the guiding principles enlisted in the RBI “Master Circular on Customer Service in Banks” circulated vide RBI/2015-16/59/DBR No.Leg.BC.21/ 09.07.006/ 2015-16 dated 1st July, 2015. Further, the Reserve Bank of India (RBI) has a formalised Charter of Customer Rights that outlines customers’ rights. The Charter gives RBI legislative powers to step in and take action against the errant bank. This has been done to safeguard customers’ banking rights at all times. If a customer feels that the bank has violated any of his/her rights, the issues may be brought to the notice of the bank or approached by the customer services division of the Reserve Bank of India.

 Bank customer rights policies typically cover the following rights:

1. Right to fair treatment

The right to fair treatment prohibits banks from discriminating against customers on grounds of gender, age, religion, caste, and physical ability while offering products and services. The financial services provider may, however, have certain special products that are specifically designed for members of a target market group or may use defensible, commercially acceptable economic rationale for discriminating between customers.

2. Right to transparency, fair and honest dealing

The charter requires the language of the bank documents to be simplified transparent and easily understood by the common man. The responsibility of sending out effective communication will rest with banks. Information on the product’s price, customer’s responsibilities, and key risks will have to be disclosed. “Any features that may disadvantage the customer should be made known to him. Important terms and conditions should be brought to the notice of the customer”.

3. Right to suitability

Despite several regulations, complaints related to mis-selling continue to plague the distribution space, particularly in the case of life insurance policies. Lured by higher commissions, sales officials tend to push products without ascertaining their suitability for the customer. With this charter coming into force, such officials might find it difficult to palm off say market-linked insurance products to senior citizens who are looking for stable returns. The charter has now made it mandatory for banks to sell products after keeping in mind customers’ needs, financial circumstances, and understanding.

4. Right to privacy

Banks also have obligations under the Privacy Act 2020, which governs how they collect and store customer information, how customers can access and correct their information, and how personal information can be disclosed.  Banks are duty-bound to keep customers’ personal information confidential, unless the disclosure is required by law or customers have given their consent. “Customers have the right to protection from all kinds of communications, which infringe upon their privacy,” the charter states. Banks cannot pass on your details to telemarketing companies or for cross-selling. “There have been instances where bank officials, based on transaction details, have asked customers to route their investment through them (since banks also act as distributors for mutual funds and insurance companies). This is unethical, said RBI.

5. Right to grievance redressal and compensation

The right to grievance redressal is at the customers’ assistance if the bank fails to adhere to basic norms. The charter makes banks accountable for their own products as well as those of third parties like insurance companies and fund houses. Banks cannot escape from their responsibility once they sell the product. Banks will have to communicate the policy to compensate for mistakes on their part, lapses in conduct, and non-performance or delays. The redressal and compensation policy will have to state customers’ rights when such events occur.

The Reserve Bank of India advised the Indian Banks’ Association (IBA) and the Banking Codes and Standards Board of India (BCSBI) to formulate a ‘Model Customer Rights Policy’ based on the charter’s principles. These measures would ultimately strengthen the customer service framework.

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