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A code for bank service
July, 14th 2006

Codifying customer service standards for banks in the reform era.

The Banking Codes and Standards Board of India (BCSBI) has within a short time of its inception collaborated with banks and the Reserve Bank of India to formulate a new Code of Bank's Commitment to Customers. The Code is not binding on individual banks but they are expected to adhere to it anyway. The BCSBI has been given the task of evaluating and overseeing the Code and providing the RBI independent feedback. Drawing important lessons from the experiences of the UK and other developed countries in the area of customer service, the Code combines the best features of self-regulation with the benchmarks that are more common to regulation. In India there is a long tradition of both.

In an earlier controlled regime, regulators had much say in determining the standards of customer service in banks. Both deposit and lending rates were fixed and banks had little discretion even in levying miscellaneous charges such as guarantee commissions and for issue of drafts. Customer service in such a context was narrowly interpreted in terms of providing access and extending the services to as many as possible. This was certainly true during the great wave of branch expansion following nationalisation in 1969. Customer service was certainly not neglected, but banks depended on the RBI and the government for the yardsticks. Banks were not in competition with one another.

There was very little non-price competition. Partly because of the absence of technology, value addition was generally out of the question and, most significantly, profitability was not an overriding goal. Yet, banks were emphasising customer service in a number of familiar ways: Customer service meets, redressing complaints and by motivating counter staff. Since banking products and services were the same, individual banks could promise their customers no more than time-schedules to, say, encash cheques or have drafts issued.

The Code ought to be viewed as an evolution of these earlier practices. It will surprise no one that the Code incorporates many promises and commitments that banks have for long been making to their customers. Apart from the provision of regulatory oversight and codification of standards of service, new is the recognition that the major premise of financial sector reform newly unleashed competition enhancing customer service standards is not valid uniformly or always. In the reform era some segments of customers have been excluded from banking services, which increasingly target the well-heeled depositor and the big borrower. The RBI's recent advocacy of `inclusive banking' goes hand-in-hand with its promise of better customer service. New benchmarks for customer service, including those meant to alleviate concerns relating to comparatively recent products such as Internet banking and increased use of credit cards are necessary and find explicit mention in the new Code.

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