Banking Sector

Contents  hide 

1 Consumer protection with respect to Banking Sector

2 Role of RBI in Consumer Protection

3 Role of Banks

4 Recent Developments

5 Conclusion

6 Reference

6.1 Related

Consumer protection with respect to Banking Sector

• Banking Sectors are include in the definition of ‘Services’ gives under Section 2(42) of the Consumer Protection Act, 2019.
• The relevancy of consumer protection is increasing at a very high rate particularly in the Indian banking sector. Consumers are highly misle in the banking sector. This as a result causes financial insecurity with the consumers.
• The caretaking responsibility of the banking sector is on the Reserve Bank of India. RBI takes measures and initiatives to make sure that the customers in the banking sector are protect against malpractices.

Role of RBI in Consumer Protection

• RBI has been trying to strengthen the relationship of trust between the banks and the customers.
• RBI launched Banking Ombudsman Scheme 2006, which acts as a dispute resolver between the banks and the customers. As of now, there are around 20 BO offices in India.
• With the new advancement and developments in the banking sector, new kinds of risks are also prevailing. The same has made the process of BO offices more complex and tougher than before.
• RBI has also issued a “Charter of Customer Rights”:
• Right to fair treatment
• The right to transparency
• the Right to suitability
• Right to privacy
• Right to grievance redressal and compensation
• RBI also set up a Customer Service Department in the year 2006, which was later renamed as Consumer Education and Protection Department, the main focus of the same is to deal with consumer complaints and grievances and provide them with suitable solutions.
• An important milestone in strengthening the grievance redressal mechanism available to bank customers was the institutionalization of the Internal Ombudsman (“IO”) mechanism in 2015 in all public sector banks, select private sector, and foreign banks.
• To support the Ombudsman framework 2006, RBI launched a software application known as Complaint Management system[1] in the year 2019. Now the consumers can lodge complaints online easily by accessing Complaint Management System.[2]

Role of Banks

• To ensure the safety and security of consumers, banks need to adhere to the following points:
• The liability of customers should be limit in case of unauthorized electronic banking transactions.
• Ethical behavior should be enforce by financial service providers under the regulatory purview of the RBI.
• Importance should be given to “Consumer Education” – Advertisement campaign on fictitious offers/fund transfers, coordination with the cyber-crime department, etc.
• People in rural or semi-urban areas should be make aware of Banking Ombudsman.
• For effectiveness and timely response, improvements should be made in the internal grievances redress mechanism of banks.
• Frontline staff of banks should be sensitize on the role and importance of customer service.
• Continuous systemic improvement should be brought by analyzing the root cause of complaints.
• The BO Scheme should be review in light of emerging changes in the environment.
• Thematic surveys and studies on specific areas should be conducte.
• Implementation of the Charter of Customer Rights should be properly monitor.[3]

Recent Developments

• Different implementations of Article 21 are one the major reasons for developments in the Consumer Protection Laws in India. The inclusion of the Right to Privacy has changed the scenarios for consumers in our country completely.
• Consumers now have a right to personal choice and at the same time, the sellers or service providers have a duty to make sure that the consumer’s Right to privacy is being protected.
• In the case of Collector v. Canara Bank[4], it was held that: “Demanding information about bank accounts without statutory backings violates Right to Privacy”.
• The same has created hope in the banking customers about banks which are now responsible to maintain the privacy of the customers and upholding the validity of the Right privacy enshrined in the Indian Constitution.[5]

Conclusion

RBIs efforts in ensuring Consumer Protection in the Banking sector can be achieved only if the citizens are aware of the entire grievance redressal structure and process. There is a need to educate people about the procedures for lodging complaints specifically the grounds of complaints

Under the different Ombudsmen Schemes. Hence, public awareness at the ground level about the entire grievance redressal mechanism cannot be done away with. Both RBI and the Central Government of India have to coordinate with each other for achieving the same.

Since the banks have a duty to maintain the secrecy of information unless disclosure of the same is require by law, it must be well understand that the Right to Privacy is not lost as a result of confidential information being part by customers to the custody of the bank. Hence, the development of the overall banking sector in our country depends on

how efficiently and effectively the banks maintain the relationship of trust with their customers.

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Reference

[1] Complaint Management System, https://cms.rbi.org.in/cms/IndexPage.aspx?aspxerrorpath=/cms/cms/indexpage.aspx

[2] Akshay Ramesh and Gokul L, Present Status of Consumer Protection in Indian Banking Sector, MONDAQ (Oct. 21, 2020, 5:30 PM), https://www.mondaq.com/india/dodd-frank-consumer-protection-act/865580/present-status-of-consumer-protection-in-indian-banking-sector

[3] Ibid.

[4] AIR 2005 SC 186

[5] Supra note 1.