Moving towards better customer service in banks

Entry of new players into banking will create new benchmarks for quality standards in customer service

The quality of customer service in banks witnessed a metamorphosis after adoption of state of the art technology, more significantly the Core Banking Solutions (CBS) that manifested anywhere and anytime banking. Another offshoot of it is the widespread offer of virtual banking services by many banks. It also led to proliferation of technology-led alternate delivery channels such as internet banking, ATMs, Point of Sale (POS) terminals, mobile banking, cash dispensers/bulk note accepters, etc. As part of financial inclusion, many banks have also provided handheld devices for use by banking correspondents (BCs) in rural areas.

These efforts were further supplemented by transmitting statements of accounts by emails, facilitating remittances through RTGS/ NEFT and attending enquiry deals through VOIP. Increased security protocols through double authentication and instant pin generation through mobile devices are also some more facilities that customers enjoy. Receiving instant SMS about debits and credits in the accounts is a great comfort to customers. Hence, there is conspicuous improvement in customer service.

As against the current high-tech banking environment, imagine customers standing in queue before a bank teller who used to meddle with heavy manual ledgers sweating in the midst of piles of cheques and papers, writing in various registers and building records for the safety of funds.

Compared to such systems, banks have now come a long way. Customers having global mobility, trading relations with many of the overseas partners experience a variety of banking needs. Besides the vanilla products, they also need well planned range of products and services to manage Forex risks. Hence, banks may have to go a long way to align their services in line with the customer needs.

While the unstinted commitment of banks to improve the quality of customer service to meet the increasing customer aspirations is one aspect, the greater facilitation comes from the regulators and other agencies that are integral to the ecosystem.

One of the facilitator to induce banks to improve customer service is the scheme of Banking Ombudsman, which has been functioning for quite some time but does not necessarily look into systemic issues with a view to enforcing a prescribed quality of service. Ombudsman provides a case to case solution to banks and customers.

Going beyond the case in point and understanding its spirit of decision for banks is advisory. Ideally, such a function should be performed by a Self-Regulatory Organization (SRO) but in view of the existing framework of the banking sector in India a new mechanism was desired to address the issue. Appreciating such a need, RBI in April 2005 announced setting up of the Banking Codes and Standards Board of India (BCSBI) to ensure that a comprehensive code of conduct for fair treatment of customers was evolved.

BCSBI in collaboration with the Indian Banks' Association (IBA), evolved two codes - Code of Bank’s Commitment to Customers and the Code of Bank’s Commitment to Micro and Small Enterprises - which set minimum standards of banking practices for member banks to follow when they are dealing with individual customers and MSMEs.

The central objective of these codes is promoting good banking practices, setting minimum standards, increasing transparency, achieving higher operating standards and above all, promoting a cordial banker-customer relationship. Accordingly, many banks have brought out Citizen Charter, documenting the standards of customer service. Transparency, disclosure and standard of Governance have improved now. In addition, many banks have begun appointing an outside expert to operate as ‘Internal Ombudsman’ who is meant to sort out customer grievances before they go to Banking Ombudsman. Such additional institution can speed up customer grievances redressal mechanism.

While the ecosystem is so assiduously toned up, recently in the Monetary Policy of RBI, the service charges levied for not maintaining minimum balances in the savings accounts have been removed. This measure will mitigate the apprehensions of many low value account holders to open deposit accounts. No customer wants his balance to shrink for not maintaining minimum balance.

However, it will be a tough fight for banks to sustain such a measure with surging low value accounts occupying precious digital space in the hard disc. The viability of such savings accounts will have to be worked out on a portfolio basis. As suggested by RBI, banks will have to examine the possibility of reducing the scope of services for such accounts.

Besides, the recent grant of ‘in-principle licenses’ for new private banks to the two applicants - IDFC and Bandhan - should be a welcome move. Definitely, entry of new players will create new benchmarks for quality of customer service which we have seen with the debut of new private banks after 1993. RBI also made it clear that it will work towards giving licenses more regularly. It will also set out categories of differentiated bank licenses that will allow wider pool of entrants into banking.

More sector specific banks can emerge in future offering cost efficient services. These arrays of developments will not only further create more formidable ecosystem but can also bring about better value to consumers. Thus, more collaborative efforts of all stake holders can improve the value chain and further raise the bar of quality of customer service in banks.

The writer is General Manager (Strategic Planning), Bank of Baroda, Mumbai