Rbi Email ID
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PRESS RELATIONS DIVISION, Central Office, Post Box 406, Mumbai 400001 Phone: 2266 0502 Fax: 2266 0358, 2270 3279 RESERVE BANK OF INDIA RBI On Internet: http://www.rbi.org.in Email: [email protected] March 7, 2004 Give Highest Priority to Customer Service: RBI Governor exhorts Bankers Banks should give the highest priority to customer service and reduce their transaction cost as well as procedural inconveniences to the customers as a matter of priority. Banks should also be prepared in terms of systems and skills to meet the global challenge; capital adequacy for this purpose was less of a concern at this stage. Dr. Y.V. Reddy, Governor exhorted bankers on these lines at a meeting held at the Reserve Bank of India on saturday. The Reserve Bank meets Chief executives of select banks every six months in order to share ideas and concerns of mutual interest. Chairmen and Managing Directors of all public sector banks and chief executives of some select private Indian and foreign banks were present at the meeting. Smt. K.J. Udeshi, Deputy Governor, Smt. S. Gopinath, Smt. Usha Thorat, Shri A.V. Sardesai, Executive Directors and other senior officials of the Reserve Bank of India were also present. The Governor informed the banks that the Reserve Bank has appointed a Standing Advisory Committee under Shri S S Tarapore, former Deputy Governor of the Reserve Bank, to advise the central bank on auditing of its procedures and practices with a view to making them simpler from the viewpoint of enabling banks to render better customer service. The Reserve Bank had advised banks to set up ad-hoc committees on similar lines at their level to look into their own procedures and practices. The Governor urged banks to ensure that the ad hoc committees set up in banks also keep in mind the objectives of customer service of international standard and reduction of transaction costs. The Governor pointed out that the Reserve Bank was considering the suggestion of appointing relationship managers in banks on a pilot basis to deal with any queries and to coordinate with the Reserve Bank and others. It was also considering developing a mailbox concept to store the clarifications given by the Reserve Bank to individual banks so that other banks could also access those clarifications. The Governor further urged banks to evolve their loans and investment policies with more initiative and on an interactive basis so that there was transparency, particularly in the area of interest rates. Interest rates charged by banks to their borrowers should be based on individual credit risk assessment rather than deal with them on a category-wise basis. "The Reserve Bank could move out of prescription if banks have transparent loan and investment policies ", he stated. Elaborating on the Governor's comments, Deputy Governor, Smt. K.J. Udeshi stated that the Reserve Bank would like at least the bigger and internationally active banks to seriously consider investing in technology and developing skills to meet the challenges of the new Basel Accord. Smt. Udeshi then outlined the sequencing of issues to be addressed by the ad-hoc committees on customer service. Banks should first take up a review of their procedures for individual transactions in foreign exchange so as to streamline the documentation and reducing
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Transcript of Rbi Email ID
PRESS RELATIONS DIVISION, Central Office, Post Box 406,Mumbai 400001Phone: 2266 0502 Fax: 2266 0358, 2270 3279
RESERVE BANK OFINDIARBI On Internet:http://www.rbi.org.inEmail: [email protected]
March 7, 2004
Give Highest Priority to Customer Service:RBI Governor exhorts Bankers
Banks should give the highest priority to customer service and reduce their transactioncost as well as procedural inconveniences to the customers as a matter of priority. Banks shouldalso be prepared in terms of systems and skills to meet the global challenge; capital adequacy forthis purpose was less of a concern at this stage. Dr. Y.V. Reddy, Governor exhorted bankers onthese lines at a meeting held at the Reserve Bank of India on saturday. The Reserve Bank meetsChief executives of select banks every six months in order to share ideas and concerns of mutualinterest.
Chairmen and Managing Directors of all public sector banks and chief executives ofsome select private Indian and foreign banks were present at the meeting. Smt. K.J. Udeshi,Deputy Governor, Smt. S. Gopinath, Smt. Usha Thorat, Shri A.V. Sardesai, Executive Directorsand other senior officials of the Reserve Bank of India were also present.
The Governor informed the banks that the Reserve Bank has appointed a StandingAdvisory Committee under Shri S S Tarapore, former Deputy Governor of the Reserve Bank, toadvise the central bank on auditing of its procedures and practices with a view to making themsimpler from the viewpoint of enabling banks to render better customer service. The ReserveBank had advised banks to set up ad-hoc committees on similar lines at their level to look intotheir own procedures and practices. The Governor urged banks to ensure that the ad hoccommittees set up in banks also keep in mind the objectives of customer service of internationalstandard and reduction of transaction costs.
The Governor pointed out that the Reserve Bank was considering the suggestion of appointingrelationship managers in banks on a pilot basis to deal with any queries and to coordinate withthe Reserve Bank and others. It was also considering developing a mailbox concept to store theclarifications given by the Reserve Bank to individual banks so that other banks could also accessthose clarifications.
The Governor further urged banks to evolve their loans and investment policies with moreinitiative and on an interactive basis so that there was transparency, particularly in the area ofinterest rates. Interest rates charged by banks to their borrowers should be based on individualcredit risk assessment rather than deal with them on a category-wise basis. "The Reserve Bankcould move out of prescription if banks have transparent loan and investment policies ", hestated.
Elaborating on the Governor's comments, Deputy Governor, Smt. K.J. Udeshi stated thatthe Reserve Bank would like at least the bigger and internationally active banks to seriouslyconsider investing in technology and developing skills to meet the challenges of the new BaselAccord. Smt. Udeshi then outlined the sequencing of issues to be addressed by the ad-hoccommittees on customer service. Banks should first take up a review of their procedures forindividual transactions in foreign exchange so as to streamline the documentation and reducing
the hassles for them. Streamlining the procedures for Government transactions should be theirnext concern after which they could take up regulations relating to public deposits and currencyrelated issues. The ad hoc committees of banks should submit feedback reports to the ReserveBank, she directed. The Deputy Governor exhorted bankers to give continuous publicity to fairpractices adopted by them from the viewpoint of lender's liability. They should also adopt fairpractices in areas other than lending, she added and pointed out that sharing of data ofcustomers with associates was an area of concern for the Reserve Bank. She also expresseddispleasure at banks which offered to sell their products through lottery like schemes.
The Deputy Governor asked banks to be prepared for tighter provisioning norms and complyingwith Anti Money Laundering rules to be prescribed by the Financial Intelligence Unit (FIU) set upby the Government. The rules when put in place would require banks to monitor and reportexceptional transactions. She urged banks to put in place mechanism to capture suchtransactions. She also urged bankers to work on a robust record retention programme and totrain their staff on "Know Your Customer" principles so that they could easily identify exceptionaltransactions. She underlined the need for risk profiling of customers in this context.
Among the other issues discussed with banks were: accelerated building up of investmentfluctuation reserves, sharing information with Credit Information Bureau of India Ltd. andexercising caution while processing of documents in housing finance and personal loan relatedapplications. Concerns relating to housekeeping and internal controls, frauds and continued focuson reduction of non-performing assets were also discussed.
Drawing the bankers' attention to the non-achievement of targets in the areas of loans to SmallScale Industries, Kisan Credit Cards and Prime Minister's Rozgar Yojana, the Deputy Governorurged the bankers to change their mindsets for this set of borrowers and added that banks shoulduse their discretion while insisting on collaterals and lend at reasonable rates of interest to smallborrowers, especially the agriculturists and SMEs. These were the emerging areas for banklending once the top-end borrowers were able to directly access funds from the market, shepointed out. She also urged them to develop branch level expertise on dealing with foreignexchange matters especially relating to individuals.
Alpana KillawalaChief General Manager
Press Release: 2003-2004/1061
