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Why banks in India can't charge USD 5 for use of debit card

(or Rupees 5/- if you may please)

Customer centricity is the new buzz word for bankers.  The banks are drawing up strategies to retain customers, reduce customer attrition and when asked quote authentic statistics to show how less expensive it is to retain a customer than go out into the world trying to find a new one. All this sounds great. Our chest swells up as bank customers, we feel we are truly the ‘Kings’. Nothing is farther from truth.

The durbin amendment triggered a 5 dollar fee per month for use of debit cards.  So the ‘King’ is now being tapped to make up for the loss in income. The ‘King’ is without the option. Let us get to the other side of the globe; India. The banks have done better than their illustrious cousins in the US and Europe. The banks are customer centric and customer is the king.  Astonishing!  How is this accomplished? Here is the little secret.

The Reserve Bank of India set up a committee in mid 2010 on customer service in banks. The committee submitted the report in July of 2011. The recommendations are significant and ensure the buck does not stop at the customer. No room for ad hoc fee such as $5 for use of debit cards.  The terms of reference are very clear. I am quoting the first of the five from the report

‘To review the existing system of attending to customer service in banks -approach, attitude and fair treatment to customers from retail, small and pensioners segment.’

This sets the tone and is the underlying theme. In page 6 the ‘international perspective’ TREATING THE CUSTOMERS FAIRLY is the source of inspiration and guidance starting from United Nations spanning across the UK, USA, European Commission culminating in the six components in Section 1.18.  The section 1.24 sums up ‘What exactly do customers want?’ This is customer centricity. For the customer, by the customer and of the customer.

A couple of excerpts from the report :

1.       Banks should be transparent, objective, non-discriminatory and non-exploitative in all dealings with customers including pricing and quality of service and full disclosure of information.

2.       No penalty prescribed by a bank should exceed in value the shortfall, if any, which has resulted in violation in meeting any requirement stipulated by a bank. Any penalty prescribed by bank in case of customer failure must be matched by equivalent compensation in case of a mistake committed by the bank.

The full report encapsulates how regulators can positively direct banks to be customer oriented. If this can happen in country as diverse as India, why not in the US or Europe or any where else in the world? It is all here to read..


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