Economics Prelims cum Mains

Govt. banks must boost monitoring, training systems’

The news
• The article is about Banking Codes and Standards Board of India (BCSBI) and its role in banking sector.

News summary:
About BCSBI:

• Banking Codes and Standards Board of India (BCSBI) was set up in February 2006 as a collaborative effort by the Reserve Bank of India (RBI), the Indian Banks’ Association (IBA) and banks to define benchmarks for banking services.
• BCSBI is an independent and autonomous institution to monitor and ensure that the Banking Codes and Standards adopted by the banks are adhered to in true spirit while delivering their services

BCSBI codes:
• BCSBI had evolved two codes — the Code of Bank’s Commitment to Customers and the Code of Bank’s Commitment to Micro and Small Enterprises.
• The codes are a commitment of member-banks to their individual and micro and small enterprise customers, representing the best practices voluntarily agreed to by them.
• Similarly, Code of Bank’s Commitment to Customers is in essence a charter of rights of the individual customers.
• Besides, one of the objectives of the code is to encourage market forces, through competition, to achieve higher operating standards.

RBI regulatory norms vs BCSBI codes:
• Reserve Bank of India (RBI) issues regulatory instructions to banks on various matters, including customer service.
• While the BCSBI codes are a voluntarily declared commitment, as a self-regulation, of member-banks to their customers explaining how they will deal with their customers in their day-to-day operations.
• The codes complement regulatory guidelines. They do not replace or supersede regulatory guidelines.

Awareness about codes:
• Primary objective of BCSBI is awareness about codes i.e. creating awareness about Code is creating awareness about their rights and about what their banks have committed to them.
• Also for better implementation of code in its true spirit and effectively, it is necessary that both, the bank staff as service provider and the bank customers as service receiver, need to be aware of it.

Different initiatives to create awareness:
• Organising customer meets at different parts of country and also participating in customer awareness programmes organized by Banking Ombudsman Offices of RBI as also by member banks.
• Publishing quarterly newsletter “Customer Matters”, to educate and disseminate information/decisions of the Banking Ombudsmen and regulatory developments.
• BCSBI has prepared a pictorial booklet to make them aware about some of the basic but important code provisions from their view point.
• BCSBI has advised member-banks to conduct a minimum of 15 customer awareness meetings in a year to update customer on their rights and understanding the grievance redressal mechanism.

Monitoring of implementation of codes:
• BCSBI periodically, conducts visits to branches of member banks and verifies compliance of some of the important code provisions.
• The parameters are grouped into five broad segments i.e. Information Dissemination, Transparency, Customer Centricity, Grievance Redressal and Customer feedback.
• The output of branch visits is used to derive a bank-wise indicator of level of Code compliance for which BCSBI has developed a rating model with technical assistance from CRISIL.
• It was found that overall Code compliance in private banks was somewhat better than public sector banks.
• As BCSBI is not a grievance redressal body so it take up cases which involve a systemic issue or non-adherence to the codes and suggest member banks for measures to improve on the service or product.

The areas of improvement:
• Further improvement needed in the implementation of the parameters grouped into the segment of Information dissemination and Transparency.
• The banks, particularly public sector banks, need to strengthen their monitoring and training systems coupled with an element of accountability.

Recent improvements in service:
• Over a period, with the improvement in the implementation of the codes, there has been some improvement in quality of customer service in banks.
• Furthermore, electronic banking has enabled the customer to transact with ease and at his convenience.
• Banks are using the telecom systems and engaging with their customers through SMS alerts/ messaging with regards to transaction details and important changes in the terms and conditions related to their accounts.

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