RBI Governor Sounds Alarm On Consumer Complaints, Says 'We Will Not Survive Long'

Citing statistics, he noted that complaints filed under RBI’s Integrated Ombudsman Scheme have grown at a compound annual rate of nearly 50 percent over the past two years, reaching 934,000 in FY24.

Malhotra called upon top executives, including zonal and regional heads, to allocate dedicated time each week—if not daily—to address customer concerns.

Source : PTI

Reserve Bank of India (RBI) Governor Sanjay Malhotra issued a strong message to banks and non-banking financial companies (NBFCs) on Monday. Speaking at the annual conference of the RBI Ombudsmen on Monday, the governor criticised the growing volume of customer complaints and urged institutions to take immediate action to enhance service quality.

He stressed the need for senior leadership, including managing directors (MDs) and chief executive officers (CEOs), to focus on customer grievance redressal at least once a week, reported Business Standard.

“In this age of competition, we will not survive long if we do not provide quality service to our consumers,” he remarked.

Malhotra pointed out that customer grievances have surged at an alarming pace. Citing statistics, he noted that complaints filed under RBI’s Integrated Ombudsman Scheme have grown at a compound annual rate of nearly 50 percent over the past two years, reaching 934,000 in the financial year 2023-24 (FY24). Meanwhile, the number of cases processed by the RBI Ombudsman increased by 25 percent, from approximately 235,000 in 2022-23 to nearly 294,000 in FY24.

The governor also highlighted that 57 percent of maintainable complaints required intervention from RBI Ombudsmen, which he described as an “unsatisfactory situation” needing urgent attention. He emphasised that commercial banks alone received more than 10 million complaints in FY24, warning that this figure could rise further unless corrective steps are taken.

KYC Norms, Digital Frauds Need To Be Prioritised

Highlighting areas that need urgent improvement, Malhotra identified key issues such as know-your-customer (KYC) compliance, digital fraud, mis-selling, and aggressive loan recovery methods. He stressed that once a customer submits KYC documents, they should not be asked to provide them again.

Although the Central KYC Records Registry (CKYCRR) was established to streamline updates across financial institutions, he pointed out that many banks and NBFCs have yet to implement this system properly, leading to unnecessary delays and inconvenience for customers.

The governor also voiced concern over rising digital fraud incidents, noting that unsuspecting customers frequently fall victim to scams. To tackle this challenge, he urged financial institutions to strengthen internal security measures and improve digital financial literacy among consumers.

Strengthening Grievance Redressal Mechanisms

Malhotra called upon top executives, including zonal and regional heads, to allocate dedicated time each week—if not daily—to address customer concerns. He underscored that grievance redressal should not be limited to resolving existing complaints but also involve preventing recurring issues.

“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 asserted.

He urged regulated entities (REs) to reassess and improve their grievance redress mechanisms. While reducing complaints is crucial, he emphasised that having a robust framework in place is equally important. According to him, larger financial entities should introduce at least two levels of grievance redress, allowing unresolved issues to be escalated to higher authorities.

“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,” he explained.

Using AI To Address Grievances

Looking to the future, he suggested that artificial intelligence (AI) could significantly enhance the efficiency of grievance redress systems.

“Integrating AI at every stage—from complaint lodging to closure—can create a seamless, efficient, and data-driven grievance redress system,” he stated. However, he cautioned that AI implementation comes with challenges, including data privacy risks and algorithmic biases. He advised banks to incorporate human oversight, bias mitigation, and data security protocols to ensure fairness and transparency.

Despite the growing reliance on automation, Malhotra emphasised the continued need for human intervention in customer service.

“It is, therefore, critical that REs continue investing in human resources dedicated to customer service and grievance redress. Training staff—especially in behavioral aspects of customer service—is essential,” he concluded.