Customer Service to Customer Protection – A changing paradigm

For a layman, in the context of Banks in India, “Customer Service” and “Customer Protection” would mean words with the same meaning and connotation. However, if you see the recent changes in the regulatory regime in the retail banking or digital banking sphere in India, you will find a distinct difference in the meaning of these two words.

Historically, ever since Banking has evolved, the Apex Bank which is the Reserve Bank of India (RBI) has harped on the fact that there should be balance in the approach of Banks while offering banking services and customer service aspects are well protected keeping in mind the interest of the customers. In these recent times, considering the changing regulatory considerations and rising concerns from various sectors of society about the fair treatment of customers, RBI has moved from “Customer Service” to “Customer Protection”.

The million-dollar question is how we could evidence the fact that service is being replaced with the protection of the customer.

RBI had been cautious and has taken measured steps to establish the above fact. Gone are the days, when Banks do not give heed to customers’ banking comfort and do business without recourse to better after-sale services. This is evident as an aftermath of various customer services issues such as the miss-selling of Insurance and Investment products.

Both the words (a) Customer Service & (b) Customer Protection feels to give the same understanding. However, as far as the enforcement of these words is concerned, both give a variant substance. For example, with the recent regulatory change by RBI on Customer Protection – Limited Liability in the case of Unauthorized Electronic Banking Transactions, we get a clue of how the paradigm is changing. Banks are required to provide the modes and mechanisms to the customers to raise alarm instantly to the Bank in case of electronic banking transactions not initiated by the customer. Also, the liability of the customer will be limited, if the customer intimates the Bank on time as also the “Burden of Proof” of the authenticity of the transaction will need to be demonstrated by the Bank.

Furthermore, for all such disputed electronic banking transactions, which are alerted by the customer, Bank is supposed to provide a shadow credit of the amount in dispute to the customer within 10 days of the intimation and resolve the dispute within 90 days of the intimation. Thus, it is evident that it is something beyond customer service. Yes, you are right. This is Customer Protection. Rightly so.

If you do a comparative analysis of complaints received by twenty offices of the Banking Ombudsman during the last three years, you would come to know that there has been a 27% rise in the complaints in the year 2016-17 as compared to the year 2015-16 (Source – Annual Report of BO Scheme, 2016-17). This gives an indication of the possible move of RBI, to create an environment of customer protection that would co-exist with customer service.

Like in the UK, you have principle-based regulations outlining broad principles on Treating Customer Fairly, in India, we have a Charter of Customer Rights which each Bank will have to adopt with the approval of its Board. These rights of the customer would in turn culminate in regulations to create an environment of customer protection.

At the outset, in the coming days, we may see a further change in the outlook from the regulator towards customer protection keeping in mind the changing scenarios and variables such as rising customer complaints.

Abhishek R Sharma

(Views are Personal)

First published on Feb 14, 2018