Why RBI gave banks a knuckle rap for their misaligned retail focus

Subscribe to enjoy similar stories. Reserve Bank of India (RBI) Governor Sanjay Malhotra does not seem to believe in slow starts. Soon after assuming office, he has shot multiple arrows from his regulatory bow.

This has met with the customary scepticism, but a central bank governor’s words have weight and can work through multiple regulatory channels. It is, therefore, remarkable that he has chosen to address the issue of power hierarchies and asymmetries in the financial system, especially the disadvantageous position of individuals in the banking system. A little over three months into his tenure, he has decided to address the banking system’s aversion to addressing customer grievances.

Quoting official data, he said that the number of complaints received under RBI’s Integrated Ombudsman Scheme increased at a compounded average rate of almost 50% per year over the past two years to reach 934,000 in 2023-24. Malhotra also decried the banking system’s deliberate attempts to sweep grievances under the carpet: “I would also like to draw your attention to the misclassification of complaints as requests, queries and disputes by the regulated entities. This results in the complainants’ grievances remaining unaddressed.

Moreover, this is also a gross regulatory violation." This indicates that banks either lack the capacity to address the rising tide of complaints or deliberately ignore customer grievances, allowing complaints to get bumped around. This also demonstrates how the organizational structure of most banks is fundamentally misaligned with the retail business. As an individual, suppose you get a wrong message about your credit card dues or a missed payment.