August 20, 2022

Good morning. Every Saturday, we write about one specific right that we possess as citizens in our country. In today’s edition of “Know Your Rights”, we examine the rights of bank account holders in India.

KNOW YOUR RIGHTS – EDITION 53

Rights Of Bank Account Holders

Consumer protection in the Indian banking sector is becoming increasingly important. There have been numerous cases of consumers being misled due to the incapacity of the bank, leading to financial insecurity amongst bank account holders. In light of this, it is imperative that we take a look at the rights awarded to bank customers.

The Reserve Bank of India (RBI) has taken up the responsibility to maintain a fiduciary relationship between banks and their customers by setting up the Banking Codes and Standards Board of India (BCSBI). In order to establish a transparent banking system, banks are obligated to coordinate with the RBI when it comes to customer service departments, customer protection policies, customer education initiatives, and other departments.

Although there is a framework outlining service standards, the RBI has actively interfered in order to provide further protection for bank customers. In 2014, it released a Charter of Customer Rights, awarding customers with five basic rights as bank account holders. If a customer experiences a violation of any of these rights, they can approach the apex bank.

Here are the rights that bank customers should be aware of:

1. Right to fair treatment: This right dictates that any bank is prohibited from discriminating against customers on the grounds of religion, caste, gender, and physical disability. However, banks retain the right to offer special products designed for a target market as long as they are backed by a commercially acceptable economic rationale.
2. Right to transparency, fair and honest dealing: Bank documents should adopt simple language that can be easily understood by the common person. The onus of effective and transparent communication is firmly on the banks. Any disadvantage to the customer should be made known to them and risks should be clearly disclosed.
3. Right to suitability: Complaints related to misselling, specifically in terms of life insurance policies continue to plague the distribution space. The RBI maintains that banks must sell products keeping in mind the customers’ needs and financial circumstances.
4. Right to privacy: Banks have a foresworn duty to protect customers’ personal information unless disclosure is demanded by the law or consent of the customer has been given. Confidential information cannot be passed on by banks to telemarketing companies or for cross-selling.
5. Right to grievance redressal and compensation: If your bank fails to adhere to basic norms, you have a right to grievance redressal. Banks are accountable for their products and services as well as those of third parties such as insurance companies and fund houses. They will be held accountable for the products even after they are sold. Compensation policies must be communicated in cases of lapses on their part.

Additionally, in ‘Digital India’, RBI guidelines dictate that banks are obligated to provide doorstep services to people with disabilities as well as senior citizens. In order to achieve financial inclusion, accessibility of banking facilities is crucial. India’s objective to become a digital economy necessitates that banks be more inclusive through infrastructure, braille keypads at ATMs for blind customers, legal guardian certification for people with mental disabilities, and other such initiatives.

Apart from this, the BCSBI has set up two codes; Code of Bank’s Commitment to Customers and Code of Bank’s Commitment to micro and small enterprises (MSEs) in the year 2006 and 2008 respectively. They set a minimum standard of banking practices with individual customers and MSEs.

The introduction of the Banking Ombudsman (BO) scheme by the RBI in 2006 was set up with the objective of resolving disputes between a bank and its customers. It is an ‘Alternative Dispute Resolution Mechanism’ with 20 BO offices spread across the country so far. Further, the RBI set up the Customer Service Department, later renamed the Consumer Education and Protection Department (CEPD) to focus on maintaining a level playing field between suppliers and consumers of financial services.

Apart from providing customers with sufficient disclosures, banks are responsible for actively educating customers about the products offered, potential risks, redressal options, operational techniques and other technical services. Article 21 of the Indian Constitution, the Right to Privacy further protects the rights of bank account holders. This is evident in the case of District Registrar and the Collector v Canara Bank, adjudicated by the Kerala High Court. The judgement of this case maintained that “Demanding information about bank accounts without statutory backings violates Right to Privacy.”

The creation of public awareness is essential to allow customers to exercise their rights as bank account holders. This is being achieved with the combined efforts of the RBI and the Union Government.