The RBI will Take Action Against Banks That are not Meeting KYC and Customer Care Standards

Nitin Konde, Varun Bhardwaj

Nov 21, 2024 — 2 min read

RBI to Act Against Banks Failing KYC and Customer Care Standards

Swaminathan J, the deputy governor of the RBI, has urged banks to adhere to KYC regulations with "precision and empathy," failing which the central bank will take regulatory action against them. Speaking on 18 November to a Conference of Directors of Private Sector Banks, the Deputy Governor also voiced worry that the Internal Ombudsman system and other customer grievance processes are frequently viewed as formalities rather than as strong, useful resources.

According to him, the Internal Ombudsman system should be more than just words on paper; it should function with the zeal and dedication required to settle disputes quickly and fairly. He suggested that bank boards should strive to create customer-focused institutions where all people, regardless of age, background, or income, feel appreciated and respected.

Focusing on Customer Centric Governance

Every policy, procedure, and point of contact with services should demonstrate customer-centric governance. He added that this is especially true when it comes to serving banks' clients properly and openly.

"We are putting a lot of effort into improving customers' trust in the system in this area, as I have stated previously, and we won't think twice about taking action if a supervisory intervention is deemed required," Swaminathan stated.

Additionally, the Deputy Governor urged bank board members, especially the chair of the Customer Service Committee, to make sure that KYC regulations are adhered to with accuracy and compassion. According to him, the Reserve Bank will not think twice about pursuing regulatory or supervisory measures against organisations that do not promptly and thoughtfully resolve these issues.

He added that although traditional governance duties like risk management and financial supervision would always be of utmost importance, boards must embrace technology, spearhead digital changes, embrace customer centricity, and guarantee moral leadership in the future.

AI-Enabled System to Prevent Financial Fraud

The RBI apparently sought to create an AI-enabled system earlier this year to notify people of financial wrongdoing in real time. Additionally, the regulator has requested banks and fintechs to let persons with disabilities (PwDs) use their point of sale (PoS) devices and other payment solutions. Following the announcement of the "Accessibility Standards and Guidelines for the Banking Sector" earlier this year by the finance ministry, the adjustments have been made.

The latest move is consistent with the RBI's effort to increase the fintech industry's accessibility for India's general public. For example, the central bank said earlier this year that it will soon introduce a platform to provide small and rural enterprises with financing. The "Unified Lending Interface" platform will serve a wide range of unmet lending needs, especially for MSME and agricultural borrowers. In an effort to boost UPI use even more, the central bank raised the transaction limit for UPI123Pay and UPI Lite earlier this week.