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Annual Policy Statement for the Year 2010-11 click here

Annual Policy Statement for the Year 2010-11- 20th April 2010

Part B. Development and Regulatory Policies

IV. Credit Delivery and Financial Inclusion

Establishment of New Urban Co-operative Banks

84. Taking into account the systemic financial health of urban co-operative banks (UCBs), it was decided in 2004 not to set up any new UCBs. With a view to improving the financial soundness of the UCB sector, memoranda of understanding (MoU) were signed with all State Governments. Following the consolidation, the financial condition of the UCB sector has improved considerably and UCBs have also been allowed to enter into new areas of business. With a view to increasing the coverage of banking services amongst local communities, it is proposed:

to set up a Committee comprising all stakeholders for studying the advisability of granting new urban co-operative banking licences under Section 22 of the Banking Regulation Act, 1949 [as applicable to co-operative societies (AACS)]. Liberalisation of Off-site ATMs by UCBs

85. Under the extant policy of branch authorisation, UCBs, which are well-managed and meet the regulatory criteria, are required to submit annual business plans, based on which centres are allotted to them according to their choice for opening of branches. Centres where UCBs desire to open off-site ATMs are also required to be included in their annual business plan. In order to further improve the banking infrastructure, it has been decided to liberalise the approach to setting up of off-site ATMs by UCBs. Accordingly, it is proposed:

to allow well-managed UCBs to set up off-site ATMs without seeking approval through the annual business plans.

86. Detailed guidelines in this regard will be issued by mid-May 2010.

Customer Service

87. The issue of ‘treating customers fairly’ is assuming critical importance as the experience shows that consumer’s interests are often not accorded full protection and properly attended to. Customer service in the banking industry is increasingly becoming important as banks are privileged institutions and banking is a special public utility service. The Reserve Bank and the Banking Ombudsman’s offices have been receiving several complaints regarding levying of excessive interest rates and charges on certain loans and advances.

88. The Reserve Bank has, over the years, undertaken a number of initiatives for ensuring fair treatment to customers. This has taken the form of both regulatory fiats (such as reining in of recovery agents, introduction of comprehensive display board, banking facilities for the visually challenged, rationalisation of service charges on collection of outstation cheques and free use of ATMs) as also moral suasion and class action. The Code of Bank’s Commitment to Customers was introduced in July 2006 to set a minimum standard of banking practices for banks to follow for their dealing with individual customers.

89. However, within the domain of necessary freedom to banks to choose the types of services to be offered to the customers and related costs, concerted efforts need to be made to further develop a credible and effective functional system of attending to customer complaints. In particular, banks’ internal structure needs to be made functionally effective and scaled up to attend to not only basic customer needs, but the special needs of disadvantaged groups such as pensioners and small borrowers, including farmers. Though there exists a tiered mechanism for customer grievance redressal in the banks, its efficacy in terms of attending to customer complaints is far from satisfactory. Taking into account all these considerations, it is proposed:

to set up a Committee to look into banking services rendered to retail and small customers, including pensioners. The Committee will also look into the system of grievance redressal mechanism prevalent in banks, its structure and efficacy, and suggest measures for expeditious resolution of complaints. The Committee will also examine the international experiences in this regard.

to further strengthen the mechanism, for implementing the Reserve Bank’s guidelines on customer service, through on-site and off-site inspections.

to require banks to devote exclusive time in a Board meeting once every six months to review and deliberate on customer service.



Click Here For Highlights of Annual Policy Statement for the Year 2010-11

Click Here For Macro economic and Monetary Developments : 2009-10

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