Frequent demand for KYC documents by Banks

The suppression of complaints and the frequent demand for KYC documents are issues that require immediate attention. In a recent powerful address delivered at the annual conference of RBI ombudsmen, RBI Governor Sanjay Malhotra highlighted the avoidable inconvenience caused by banks and NBFCs repeatedly asking customers for KYC documents.

Suppression of Complaints

suppression of complaints by banks
Transforming Grievance Redress:
The AI Advantage

With over 1 crore complaints received in FY24, and 57% requiring intervention by RBI ombudsmen, the current state of grievance redressal is far from satisfactory. Suppressing complaints not only violates regulatory norms but also erodes consumer confidence and tarnishes the banking ecosystem.

Despite the existence of a central database accessible to financial regulators, many institutions have yet to enable their branches to retrieve this information. This inefficiency not only frustrates customers but also reflects poorly on the industry’s commitment to leveraging technology for user convenience.

SOURCE: (INAUGURAL ADDRESS BY SHRI SANJAY MALHOTRA, GOVERNOR, RESERVE BANK OF INDIA – MARCH 17, 2025 – AT THE ANNUAL CONFERENCE OF THE RBI OMBUDSMEN, MUMBAI)

The solution for Repeated KYC Requests

The solution lies in early facilitation of centralized access to KYC data. By doing so, banks can eliminate redundant processes, streamline operations, and demonstrate a customer-first approach.

The Suppression of Complaints: A Regulatory Concern

Another pressing issue raised by the Governor is the misclassification of customer complaints to suppress their numbers Suppressing complaints not only violates regulatory norms but also erodes consumer confidence and tarnishes the banking ecosystem.

Leveraging Technology for Better Service

The Governor also advocated for the use of artificial intelligence (AI) in complaint redressal, provided that privacy concerns are adequately addressed.
AI can play a pivotal role in identifying systemic flaws, preventing repeat complaints, and enhancing overall customer satisfaction.
– Inaugural Address Ombudsmen conference

A Broader Perspective on Customer Service

Beyond KYC and complaints, the Governor called attention to other areas requiring improvement, such as misselling, digital frauds, and aggressive recovery practices. These issues further highlight the need for a holistic approach to customer service, where transparency, accountability, and empathy are at the forefront.

Importance of addressing complaints

Governor Malhotra emphasized the importance of addressing complaints promptly and effectively. He urged bank leadership, from managing directors to branch managers, to dedicate time each week to complaint resolution. This proactive approach is not just a regulatory obligation but a strategic necessity in a competitive industry.

Conclusion

Governor Malhotra’s address serves as a wake-up call for the banking sector. By addressing these challenges head-on, financial institutions can not only comply with regulatory expectations but also foster a culture of trust and loyalty among their customers. The path forward demands a commitment to innovation, efficiency, and, above all, a genuine concern for the people they serve.

The Need for Change

To address these challenges, it is imperative to adopt a more user-centric approach:

  • Enhancing Complaint Resolution Mechanisms:
  • Establishing transparent and efficient systems for handling complaints can rebuild trust and ensure that grievances are addressed promptly.
  • Regular audits and public reporting on complaint resolution statistics can further enhance accountability.
  • Streamlining KYC Processes:
  • Implementing centralized and secure digital repositories for KYC documents can reduce the need for repeated submissions.
  • Leveraging technology, such as blockchain, can ensure data integrity and security while simplifying verification processes.

Customers can escalate their complaints to bank management by following these structured steps:

1. Reach Out to the Bank’s Customer Care

  • Start by contacting the bank’s customer service via phone, email, or their official website. Clearly describe your issue and request a resolution.

2. Submit an Online Complaint

  • Many banks have online grievance portals where customers can register their complaints. This is often a quick and effective way to lodge your concerns.

3. Visit the Branch Manager

  • If the issue remains unresolved, visit your local bank branch and request to speak directly to the branch manager. Prepare all necessary documents and evidence to explain your case clearly.

4. Escalate to the Grievance Redressal Officer

  • If the branch manager is unable to resolve the matter, escalate it to the bank’s Grievance Redressal Officer. Their contact details are usually available on the bank’s official website.

5. Approach the Banking Ombudsman

  • If all attempts with the bank fail, you can lodge a complaint with the Banking Ombudsman, a service provided by the Reserve Bank of India (RBI). This service is free and helps resolve disputes between customers and banks.

6. Send an Email or Letter to Higher Management

  • You can write to the bank’s higher management, such as the regional or zonal head, or even the CEO, if necessary. Be concise but include all relevant details about your complaint and previous attempts to resolve it.

7. Legal Recourse

  • As a last resort, you can take legal action by filing a case in a consumer court if the bank fails to address your grievance satisfactorily.

Well said, Guv
kudos to RBI governor Sanjay Malhotra for speaking up for the little guy.

Last year, RBI raised concerns about gold loans. In Dec (24), it cautioned banks about unsecured loans, and
top-up loans offered with minimum due diligence.

The link appeared as an editorial opinion in the print edition of The Times of India.

Now, SC has sought a CBI probe into another old problem – the “nexus” between banks and builders due to which lakhs of homebuyers are paying EMIs without any hope of getting their house. As it told counsel for banks on Tuesday: “…knowing not a brick has been laid at the site, you released 60%. How can this be without quid pro quo?” Banks have much to answer, and fix. They should heed Malhotra’s warning: “Left unresolved, such issues can erode consumer confidence and tarnish the entire ecosystem.”

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