Fake Cheques A Cause For Worry, Says RBI Deputy Governor Mundra

Reserve Bank of India’s (RBI) banking ombudsman office (BO) has received a large number of complaints regarding fake cheques getting cleared by banks, said Deputy Governor SS Mundra in a speech on Tuesday.

According to Mundra, the large number of complaints could point to two things. One possibility is that systems may be compromised, which is allowing customer information to be accessed from outside the bank. A second possibility is that cheques being issued by banks are of low quality and can be easily faked, he added.

Mundra was speaking at an event organised by Banking Codes and Standards Board of India (BCSBI), talking about various issues that concern customer protection in banking.

With the rapid rise in digital transactions over the last few months, there is a need for the banking sector to consider limited liability of customers in case of fraudulent transactions, the deputy governor said.

In August 2016, the central bank had come out with a discussion paper on customer protection, which had floated the idea of limited liability of a customer. While RBI has received inputs from stakeholders, final guidelines in the matter are expected shortly, Mundra added.

The regulator said that there was a need for the Principal Code Compliance Officers (PCCOs) of banks to work together with the internal ombudsmen offices of banks, so that banking customers might be served better. The BCSBI had been updating the banking codes on a regular basis, keeping the charter of customer rights in mind, he noted.

In 2014, the RBI had released a charter of customer rights which guaranteed a banking customer the right to fair treatment, right to transparency, fair and honest dealing, right to suitability, right to privacy and right to grievance redressal and compensation.

“On its part, Reserve Bank will be monitoring aberrations/ non-adherence to the Charter during the supervisory process,” Mundra said in his speech.

The RBI deputy governor pointed out that the internal banking ombudsman office (IBO) at individual banks have not proven to be effective in improving customer service. He added that there is a need to improve the level of awareness among frontline staff at banks to ensure that customer complaints are looked into.

Typically, when customers have any grievance with a bank’s services, they reach out to the IBO for redressal. If the IBO has not been helpful, the complaint moves to the RBI’s ombudsmen office, the BO.

“A continuous rise in the number of complaints to the BO is perhaps a pointer to the fact that the institution of IBO has not been very effective or has not been empowered enough by the management,” Mundra said.

During this year, the central bank would be closely watching the efficacy of internal ombudsmen offices at banks, to ensure that they are functioning effectively. The enforcement division of the RBI would not shy away from penalising banks where it finds the ombudsmen scheme lacking, Mundra added.

Mundra, who will retire in July, also reiterated his preference for bank account portability - an issue he has raised many times over his tenure.