You cannot expect banks to offer good services and at the same time not charge for it, says K J Udeshi, chairman of the Banking Codes and Standards Board of India (BCSBI). Similarly, lenders should be transparent on transaction details, she says. Udeshi spoke to Khyati Dharamsi and Vivek Kaul on the BCSBI’s credit counselling programme and how they bridge customers and lenders. Excerpts:
BCSBI has commenced credit counselling—What has been the experience?
BCSBI has a major advantage in this field as it is a neutral body with banks as its members.The body is, therefore, able to engage in a dialogue with the concerned member bank on the debt restructuring, etc. and member banks, too, on their part, have extended full cooperation to BCSBI.
What are the hurdles?
Counselling ought to be face to face. Since BCSBI operates only at Mumbai there is a logistics problem.We are in the process of setting up counselling centres in other cities also, but we also have a huge task before us of creating awareness among the public
What kind of cases have you dealt with?
Mostly, there are cases that involve persons using multiple credit cards and are unable to repay.Moreover, there are individuals who have availed of personal, education, housing loans, etc. There are also cases of small entrepreneurs seeking a one-time settlement from banks.
What is the procedure followed?
The debt problem is discussed with the applicant and necessary guidance is given. Our Counsellors help the applicants in drawing up a repayment plan and they co-ordinate with the bank in this regard.
Who are the counsellors?
The counselling centre is manned by two senior-level retired commercial bankers with credit experience. The services provided are available free of cost, on all working days.
What is your opinion on multiple charges levied by banks?
In the context of granting greater functional autonomy to banks, freedom has been given on all matters pertaining to banking transactions, including levy of charges. On one hand, you say that private bank charges are very high and on the other hand services of public sector banks are not good. You want service also and you don’t want them to charge also, then how fair are you?
Most banks stipulate a high average quarterly balance in savings bank accounts? Any comments?
First and foremost, neither the Reserve Bank of India (RBI) nor the code of banks’ commitment to customers prescribes what the minimum balance amount should be.What the code does stipulate, however, is that the banks should be transparent about this and should display the information on their comprehensive notice board. Therefore, if a customer goes to a bank, which prescribes a high minimum balance requirement, then it is his choice and he should not complain about it. I do admit, however, that competition itself cannot bring in best practices and that is why the BCSBI exists.
Can terms and conditions not be explained to customers before they undertake loan transactions?
I agree with you that a bank should explain to the customer the most important terms and conditions, before sanctioning a loan.We have asked banks to give a print-out of the terms and conditions for loans and credit cards and to the customer upfront. The difficulty is that most borrowers do not read the terms. Customers must be aware of the implications of their transactions.
Can banks be penalised if they don’t comply with the code?
If penalising banks could bring about systemic improvements, then the RBI could have done this on its own. The BCSBI, however, believes that systemic improvements can only be brought about through cooperation and collaboration with banks and not by imposing penalties. BCSBI has received full cooperation from member banks in this regard.
What are the other issues on which the BCSBI plans to work with banks?
The BCSBI would continue to ensure that the provisions of the two codes, viz. code of banks’ commitment to customers and code of banks’ commitment to MSMEs are implemented by banks in letter and spirit. In keeping with the thrust on financial inclusion, we would focus more on the implementation of banks’ commitments towards providing basic banking facilities in urban/rural and semi-urban areas.
Are micro-entrepreneurs getting loans?
Although the nomenclature has been changed to MSME so as to include the micro sector, we have yet to see any evidence of bank finance flowing to such sectors like the dabbawallas, cobblers, carpenters, plumbers, etc.
Are recovery agents needed?
Recovery agents are required by banks so as to strengthen their recovery efforts. The RBI has prescribed guidelines to ensure that proper persons are recruited as recovery agents.
Are banks putting up recovery agents’ names and details on their websites, as the BCSBI has suggested?
Yes, a lot of banks such as Citibank, Union Bank of India, HDFC Bank, Bank of India have put it on their website.
How is the BCSBI financed?
The RBI has been fully meeting the body’s budgetary requirements for the first five years.During this period, banks are also contributing annually towards building the corpus of the BCSBI, which will enable it to eventually become a self-sustaining organisation.
How many regional rural banks and co-operative banks are members of the BCSBI?
We now have 22 urban co-operative banks and regional rural banks as members. In the area of lending to MSMEs and financial inclusion, they are playing a useful role.
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