MUMBAI: Stating that customer complaints reaching the RBI Ombudsman have soared by 50% annually in the past two years to sniff at a 1-million-mark, Reserve Bank governor Sanjay Malhotra has asked banks and non-banks to improve the quality of services as well as to strengthen their grievance redressal mechanisms in a timely manner, saying “in this age of competition you will not survive for long if you don’t provide quality service.”
The governor said senior executives, including chief executives, should spend time on the issue at least once a week.
“In this age of competition, we will not survive long if we do not provide quality service to our consumers,” Malhotra told the annual conference of the RBI Ombudsmen here on Monday.
Stating that the high number of customer grievances is a serious concern, Malhotra reeled out data showing that customer complaints received under the RBI’s Integrated Ombudsman Scheme has grown at a compound average rate of almost 50% during the past two years, reaching 9,34,000 in FY24. The number of complaints processed by the office of the RBI Ombudsman rose 25% from about 2,35,000 in FY23 to almost 2,94,000 in FY24, he said.
“Not only are a large number of complaints getting escalated, but a large proportion—nearly 57% of maintainable complaints last year—required mediation or formal intervention by the Ombudsmen. You would all agree that this is a highly unsatisfactory situation and needs our urgent attention,” the governor said.
He further noted that in FY24, the 95 scheduled commercial banks alone received over 10 million complaints from their customers. “If we take into account the complaints received by other RBI-regulated entities, the number would be even higher.”
He warned that the 10 million complaints could grow further with a rapidly expanding customer base and an increasing range of products if banks do not take corrective action.
He asked chief executives, zonal and regional managers, and branch managers of banks to dedicate time every week, if not daily, to grievance redress.
“This is a must. All great CEOs find time to do it. We too must keep some time in our schedules to improve customer service and grievance redress,” he said, emphasising that the goal should not only be to resolve complaints but also to ensure similar issues do not recur.
Asking regulated entities to review their grievance redressal mechanisms, Malhotra said, “improving systems to reduce grievances is important, but setting up a robust grievance redress system is equally crucial for all regulated entities.”
Suggesting that large regulated entities should have at least two levels of grievance redressal, with unresolved issues escalating from a lower to a higher level, he said, “the highest level should be at a fairly senior rank to ensure that requests are not rejected without being examined by a functionary empowered to make consumer-friendly decisions.”
According to Malhotra, some of the major areas requiring improvement include know-your-customer (KYC) norms, digital frauds, mis-selling, and aggressive recovery practices.
Speaking specifically on KYC, he said banks must ensure that once a customer has submitted documents, they should not be asked to provide the same documents again.
“Once a customer updates her details with one regulated entity of any financial sector regulator, the information is recorded in the Central KYC Records Registry (CKYCRR) and other regulated entities are notified of the update.
However, he pointed out that most banks and non-banks have not enabled CKYCRR in their branches or business outlets, causing avoidable inconvenience to customers. “This should be facilitated at the earliest. It is in everyone’s best interest.”
Flagging digital fraud, he said unsuspecting customers continue to fall prey to scammers. “To combat this menace, regulated entities must only put in place robust internal controls but also enhance digital financial literacy,” he said.
Looking ahead, Malhotra said artificial intelligence has the potential to revolutionise grievance redress. “Integrating AI at every stage—from complaint lodging to closure—can create a seamless, efficient, and data-driven grievance redress system.”
At the same time, he cautioned lenders to be mindful of the challenges and risks associated with AI adoption. “There are concerns about data privacy, algorithmic bias, and the complexity of AI-driven models…Human oversight, bias mitigation, and data privacy protections must be built into AI systems to ensure transparent and consistent outcomes,” he said.
He also stressed on the importance of maintaining the human element in an increasingly data-driven, automated world. “It is, therefore, critical that regulated entities continue investing in human resources dedicated to customer service and grievance redress. Training staff—especially in behavioural aspects of customer service—is essential,” the governor said concluding his speech, which was shared by the RBI late last night.