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For a Better Banking Experience

Dipak Mondal/Money Today   Delhi     Print Edition: September 2011

Imagine a situation where you lose your ATM/debit card and want to block it to prevent misuse. You call the bank's customer care department, which asks you to enter the 16-digit number mentioned on the card before it can proceed further. There is a high chance that you don't remember the number and hence are unable to talk to the customer care executive.

In such a situation, all you wish for is an easier procedure for blocking the card . How about just an SMS from the mobile number registered with your bank?

A committee headed by M Damodaran, former chairman of the Securities and Exchange Board of India, has recommended many such steps to make banking more convenient and safe.

Pay more for using non-bank ATMs

Among other recommendations by the committee is a common toll-free customer care number for all banks, a third party know-your-customer (KYC) data bank to avoid repetition of the documentation process, increase in the insurance cover on deposits from Rs 1,00,000 to Rs 5,00,000 and discount on online transactions.

Recommendations

DEPOSITS
  • Bank should offer no-frill savings accounts with certain basic facilities such as cheque book and ATM card without prescribing any minimum balance.
  • All fixed deposit receipts should prominently indicate the annualised interest rate to help customers take more informed decisions.
  • The Indian Banks Association should standardise the account opening form for all banks, similar to the one used for loans.
REMITTANCES
  • Banks should facilitate electronic transfer of the demand draft amount to the receiving institution and issue a numbered tear-away receipt to reduce time and cost.
  • Banks should be allowed to issue prepaid cards with a maximum withdrawal limit of Rs 50,000 every day. This will reduce customers' dependence on cash.
  • Users of electronic bank platforms(utilities, airlines, railways) for making collections should offer small discounts to customers to popularise electronic payment.
LOANS
  • Banks should be careful while reporting a borrower as a defaulter to credit bureaus. Banks must inform the customer before making any adverse remark in credit reports.
  • Title deeds of property should be returned to customers within 15 days of the the full settlement of home loans.
  • Banks should allow home loan borrowers to switch from fixed to floating rate and vice versa at least once during the tenure of the loan.
The report asks banks not to impose exorbitant charges on prepayment of home loans and hence not to discourage 'switching to other banks/ financial entities to enjoy the benefits conferred by market competition.'

The committee has also questioned the practice of discriminating between new and old customers with identical risk profiles with regard to loan rates.

Satkam Divya, business head, rupeetalk.com, said such discrimination was evident in teaser home loan schemes started by many banks.

"While banks lured new customers with attractively-priced home loans, old customers continued to pay higher rates," he says. Teaser home loan schemes offered a lower rate of interest in the first few years.

Harsha Roongta, founder and CEO, apnaloan.com, however, says some of the committee's recommendations, including the one on discrimination between old and new home loan customers, are more wishes than genuine remedies. "The committee has made the recommendations without suggesting ways to implement these," he adds.

However, he welcomes the recommendation on lower prepayment charges on home loans and bundling of products.

The report says that "customers in general have expressed a desire to pay only for the product they use, prefer plain vanilla products and are unhappy paying for the entire bundle, most of which they feel they will never use."

Most of the recommendations made by the Damodaran committee are to do with modern banking facilities such as self-personalisation of credit cards, allowing customers to fix limits, area of operation, activation for international use, instant blocking of debit/credit cards through SMSes and transition to chip-based cards with photographs. Hence, they require banks to upgrade their technology.

On whether banks are technologically equipped to implement these changes, K R Kamath, chairman and managing director, Punjab National Bank, says his bank will see how to put in place the required technical support after these recommendations are implemented.

The committee has mooted many pathbreaking changes in banking services, but it needs to be seen how many of its suggestions are implemented.

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