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RBI’s Mission Visit to Banque de France

led by

Deputy Governor Dr KC Chakrabarty

(Members - Dr. (Smt) Deepali Pant Joshi, Dr. K Balu, Shri Suddhasattva Ghosh,

Shri Sanjeev Prakash, Shri Shankar Suman)

Presentation on

Financial Education

&

Customer Protection

by Dr. Deepali Pant JoshiExecutive Director

http://images.google.com/imgres?imgurl=http://www.rediff.com/business/1999/oct/29rbi2.jpg&imgrefurl=http://www.rediff.com/business/1999/oct/29cred7.htm&h=82&w=83&sz=7&hl=en&start=13&um=1&tbnid=BMjcBo8lw8WVLM:&tbnh=74&tbnw=75&prev=/images?q=Reserve+Bank+of+India+emblem&um=1&hl=en&rlz=1T4GGIG_enIN236IN236&sa=N

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Bonjour Mesdames et Messieurs.C’est un honneur pour nous d’etre ici pourpartager avec vous l’experience indienne de laprotection des clients. Nous avons beaucoup aapprendre de votre experiences Merci!

(Good Morning ladies and gentlemen.It is an honor for us to be here to share with

you the Indian experience of customerprotection. We have much to learn from yourexperiences. Thanks )

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Recognition of Asymmetry of informationbetween Customer and Service Providers

Financial disintermediation increasingcompetition among banks and other financialservice providers

Aggressive marketing of Para-bankingactivities– card, insurance, portfoliomanagement, advisory services

Increase in the depth of markets, new financialservices, providers need for financial education(FE)


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Empower clients with knowledge of – Product features / processes/precautions

Regulatory stipulations

Bank commitments - Standards and codes

Recourse to internal and external redressmechanisms etc.


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Geographical area –7th in the world Population –2nd highest in the world–1.2 billion

35 States, 659 districts, 600 thousand Villages

Multilingual and multiethnic society

Low level of General Literacy

Large number of Financially excluded people


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Low Demand- More than quarter of population below poverty line.

about 50 per cent population until 2007-08, did nothave a deposit account,

less than 15 percent had availed credit from banks,

less than 10 per cent had insurance of any kind.Inadequate Supply Response

30000 branches for half a million villages

one branch for 16000 persons.

To bridge the demand-supply gap – Financialeducation and financial services must be madeavailable


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Institutional Framework

Partnership with other stakeholders

Financial Literacy Centres

Lead District Managers

State Level Bankers Committees

Public and Private sector Banks, Regional Rural Banks

Financial inclusion Advisory Committee of RBI

Financial Stability Development Council-

Separate Technical Group on Financial Inclusion and Financial Literacy

Government of India & Reserve Bank of India


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Financial Literacy Centres (FLCs) of banks – reach out to the poor in rural andurban areas creating awareness of deposit, credit, other financial products

and services– at least once in a month- Standardized Curricula,FinancialDiary 16 posters Quarterly monitoring

FLCs – Annual calendar, advance publicity

Progressive learning / follow up sessions -

Basic Concepts- Information on products, their use, benefits, precautions

Teaching Financial planning

Concept of services through Banking correspondents

Demonstration of ICT devices opening of accounts

Evaluation - Gathering Feedback


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Create

awareness

Improve

Knowledge

Change in

Behaviour

Sync Literacy withaccess-Account

Opening in Literacy

camps

Facilitate access -

Standard Basic

banking Products


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Manage

Finance

UNDERSTAND YOUR

EXPENSES

ACHIEVE YOUR GOAL

WITH FINANCIAL

PLANNING

DO NOT SPEND MORE

THAN YOUR INCOME

THINK TWICE BEFORE

PLANNING

THE LESS YOU SPEND

THE MORE YOU CAN

SAVE

STOP

NON-ESSENTIAL

EXPENSES & INCREASE

YOUR SAVINGS

Some

Messages…

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RBI website, - material in English, Hindi and11 vernacular languages

Comic books on money and banking

Films, messages on financial planning,

Games on financial education

Explaining Resolution and grievance redressframework

Link for accessing the Banking OmbudsmanScheme


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FAQs on important products and services, regulatory

departments, regulatory developments, schemes – Banking,

Currency, Forex, Govt. Securities Market, Non-banking

Finance Companies, Payment System

Caution against fraudulent mails – phishing attempts,

lottery / prizes, inheritance notices

The RBI never asks for your e mail account or PIN number

The RBI runs no lottery schemes these are all phishing

fraudulent attempts or Ponzi schemes.


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Direct campaigns –

outreach visits to villages by the top management

Setting up stalls in local fairs (Melas), exhibitions,

distributing pamphlets, comic books,

enacting street plays and skits, conducting quizzes in schools

(RBI Q)

Take part in information / literacy programs .

Engage with other stakeholders Civil Society Launch of print and electronic Mass media campaigns –

Awareness drives- FM radio, TV, print media


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Professionalism, Quick & efficient service

Transparent, Fair, Non-exploitative & non-discriminatory behavior

Prior -knowledge of charges Safety & security – monies in account, financial transactions

No stealth banking

To be listened to with courtesy respect and attention


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•CONTINUOUS SUPPORT•PROMPT REDRESS

• EASE OF ACCESS FOR

REDRESS• INFORMATION ON

ALTERNATE REDRESS

FORUM

•CLEAR CONTRACTS•Simple LANGUAGE

•TRAINED STAFF

•NO MISLEADING ADVTS.

•TRANSPARENT, NON –

DISCRIMINATORY

PRICING

•No STEALTH BANKING

Product design

appropriate to

need/income stream

PRODUCT

DESIGN

MARKETING

AND

ADVERTISING

AFTER SALES

SERVICE

GRIEVANCES

REDRESSAL


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Statutes / Regulatory system – Different regulators - Banking, InsuranceSecurities Markets, Pension funds

Banking – Protection of depositor’s interest Banking Regulation Act, 1949 Reserve Bank of IndiaAct,1934

Capital market – Protection of investor’s interests – Securities Exchange Board of India Act 1992

Insurance - Protection of insured's interestInsurance Regulatory and Development

Authority Act 1999

Pension funds - Protection of pension beneficiariesPension Funds Regulatory and Development Authority

(soon to be enacted as an Act of Parliament)


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Instructions and Guidelines -

RBI guidelines on customer protection in banking services -

Guidelines on Customer Service, Deposit interest rates,loans and advances, remittances/fund transfers, electronicbanking, KYC etc.

Banking Ombudsman Scheme

Banking Codes & Standards Board of India


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RBI has directed banks to constitute –

Board level committees,

Standing committee - for ongoing improvement and

monitoring;

Branch level customer service committees – formal channel

of communication

Nodal officers – single point of contact for complaints

Frame internal redress & complaints escalation mechanism


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Reasons for

proactive

Consumer

Protection

Less

competition

Low Levels

of Literacy

Information

Asymmetry

Complex

Product

Proliferation

Aggressive

Marketing /

Sale targets /

Competition

Burden of proof

on customers /

Poor internal

complaint

redress

Why customers need protection



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The Banking Ombudsman Scheme(BOS)- notified by RBI in 1995- under

Section 35A of the BR Act

15 Banking Ombudsman Offices covering entire country - 28 states and 7 UTs

Scheme initially funded by participant banks and staffed by SLBC convener

bank in the State and RBI. Since 2006, the Scheme is fully funded andadministered by RBI.

Customer Service Department (CSD) was set up at Central Office on July 1,

2006 to oversee the implementation of BOS


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Apex level cost free and hassle free grievance redress mechanism –

Scheme covers – customers of◦ Commercial banks

◦ Urban Cooperative banks

◦ Regional Rural Banks

27 grounds of complaints covering all banking services( Exceptions – complaints against commercial decision of credit sanction / pricing / recovery, non-funded exposures,

forex,, cases requiring elaborate examination, cases already decided earlier at Banking ombudsman office and those

decided or under attention of courts / tribunals )

Quasi-judicial – Aims to settle disputes through conciliation /

mediation if bank does not redress it.

In the event of failure of conciliation, provision for issuing ‘Awards’

which are binding on banks subject to acceptance by complainant.

Right to appeal is there and vests with the Deputy Governor in

charge of Customer Protection



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IndividualCustomer Bank

Banking Ombudsman

AppellateAuthority

Complaint

Redressed/ Not redressed

If FRC Complaint

Examines theEligibility

Conciliation / Mediation

Settlementsucceeds

Failure of settlement

Issue of Award

Awardimplemented

If not accepted bycomplainant / bank

Appeal

Reject

Accepted

If not redressed

Banking Ombudsman -Complaint Handling Process


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Trend of complaints received at offices of BankingOmbudsman (2010- 13)

1 6 4 3 4

1 8 8 3 8

2 0 4 5 1

1 5 4 0 5

7 1 2 7 4

2 4 6 0 1

1 4 9 5 1

2 2 1 7 1

1 1 0 0 1

7 2 8 8 9

1 8 3 1 3

1 8 2 1 8

2 1 9 4 7

1 2 0 0 7

7 0 5 4 1

0

10000

20000

30000

40000

50000

60000

70000

80000

T r a d i t i o n a l p r o d u c

t s

N e w

p r o d u c t s / c o m p l a i n t s o

n

r e c o v e r y & D S A i s s u e

U n f a i r p r a c t i c e s / f a i l u r e

o f c o m m i t m e n t s /

c h a r g e s w i t h o u t n o t i c

e

o t h e r s / o u t o f s u b j e

c t

T o t

a l

2010-11 2011-12 2012-13


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Percentage of complaints on Unfair practices/non-fulfillment ofpromised services

27.00

27.50

28.00

28.50

29.00

29.50

30.00

30.50

31.00

31.50

2010-11 2011-12 2012-13



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93.46

90.92

90.61

92.57

94.67

93.2189.0893.93

93.16

98.21

92.10

94.41

91.63

99.26

Disposal(93%)

DEPOSIT

ACCOUNT

REMITTANCE

CARDS

ATM/DEBIT/CRE

DIT

LOANS & ADV-

HOUSING

LOANS AND

ADV- GENERAL

CHARGES

WITHOUT

NOTICE

PENSION

FAILURE ON

COMMITMENTS

RECOVERY

AGENT

NOTES AND

COINS

5.553.78

25.33

2.00

6.50

5.41

8.14

8.58

0.50

0.08

15.65

1.47 12.24

4.78

Receipt (70541)(%age to total receipt)

DEPOSIT ACCOUNT

REMITTANCE

CARDS-

ATM/DEBIT/CREDIT

LOANS AND ADVANCE-

HOUSING

LOANS AND ADVANCE-

GENERAL

CHARGES WITHOUT

PRIOR NOTICE

PENSION

FAILURE ON

COMMITMENTS

RECOVERY AGENT

NOTES AND COINS

FAIR PRACTICES

BCSBI

OTHERS

OUT OF SUBJECT



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Reasonableness of charges / fees

Guidelines on credit card operations & recovery agents, Norms on outsourcing services, Safety stipulations in electronic banking services

(authentication, alerts), Compensation for losses due to fraud, delayed credit / refund

of NEFT transactions, delayed pension updation /payments

Abolition of pre-payment charges on floating home loans, Abolition of the concept of home and non-home customers –

equal inter sol charges

Zero balance accounts – basic savings bank accounts

Relaxed KYC norms for small accounts

KYC authentication based on Aadhar documents

Portability of accounts within bank - fresh KYC not required


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Formulating clear customer protection code

Evolving a mechanism to measure effectiveness of customerservice/grievance redress in banks and in RBI

Building culture of Treating Customers Fairly

Policy on redress of grievances outside the scope of theBanking Ombudsman Scheme needed

Improving awareness, access and effectiveness of theGrievance Redress Mechanism

Ensuring skill adequacy of staff deployed for grievanceredress.

Benchmarking complaints handling and management systems

of banks / RBI against internationally approved standards.


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Financial

Stability

Financial Inclusion

Consumer Protection Financial Literacy


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Cette interaction a ete tres benefique pournous et j"espere que nous continueron de fairede meme. Cést une grand honneur pour nousde apprendre votre facon de travail. Nousesperonsque nous allons continuer au voir plusdïnteractions dans tous les domains. Mercibeaucoup.

(Our interactions with Banque de France have

been of immense benefit. Going forward wehope to continue the process of exceedinglybeneficial interactions, peer learning andengagement with the Banque de France)


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MERCI!

Thanks to Dr. Balu.K, GM; Shankar Suman, DGM; S. Ghosh, DGM;Sanjeev Prakash, DGM & B ipin Nair, AGM fo r their c ontr ibu t ion

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