01 July, 2006

Dr Y V Reddy, Governor, Reserve Bank of India today released the Code of Bank's Commitment to Customers at a function held in the Reserve Bank of India's Central Office building. The function was attended by Chairmen and Chief Executives of several banks including, Shri V.P Shetty, Chairman, Indian Banks' association (IBA) .

The Code sets minimum standards of banking practices for banks to follow when they deal with individual customers. It provides protection to the individual customers and explains how banks are expected to deal with their customers in their day-to-day operations. The document enshrines the rights of customers in the form of key commitments by banks to its customers.

The Code has been evolved by Indian Banks' Association in consultation with Banking Codes and Standard Board of India and therefore a product of collaborative efforts. Banks in India would voluntarily adopt this Code as their code. The Banking Codes and Standard Board of India would keep a watch on each bank's adherence to this Code.

The Banking Codes and Standards Board of India was set up earlier this year to function as an autonomous, independent body to effectively monitor and assess the compliance with codes and standards which banks agree to. With a view to making the Board an effective autonomous body, the Reserve Bank has decided to reimburse the Board's expenses for the first five years and has, through an earlier communiqué, also said that it will derive supervisory comfort from the banks that are members of the BCSBI. After phasing out of the funding by the Reserve Bank, the activities of the BCSBI would be wholly funded by subscription fees from the member banks.

The Code contains details of the information a bank would give before a person becomes its customer and it also details the information a person would get after he becomes a customer of a bank. Through this Code the banks have committed that the information not essential for account opening would be sought from their prospective customers only on voluntary basis. The banks further commit not to use personal information about clients for any commercial purpose without seeking prior consent of the customer.

In the Code, banks also commit themselves to keep their customers informed about the changes specially in Tariff Schedule. The most significant aspect of the Code is that it covers the activities of the Direct Selling Agents whose services banks avail to market their products and also covers the third party products sold through bank branches.

Two areas, namely Cheque Collection Policy and Compensation Policy for compensating the customer for the financial losses incurred due to mistake of banks, also have been addressed in the Code. Through this Code the bank is committing itself to its customers to have these two polices in place and follow them in a transparent manner. The single most significant advantage this Code has for a common person would be that now he will have a document in his hand which enumerates his rights and which he can enforce against his bank. On the part of the Board, the effort would be to implement the Code more by way of collaboration than by use of penal action.