Service Standards for Retail Banking | PAPER IV – RETAIL BANKING & WEALTH MANAGEMENT | Module C: Support Services – Marketing of Banking Services | Products

Service Standards in Retail Banking and BCSBI Codes

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Descriptive Notes

Retail banking involves direct dealings with individual customers and small businesses. To ensure high service standards and fair practices, guidelines have been framed by regulatory authorities, including the RBI, and voluntary bodies like the Banking Codes and Standards Board of India (BCSBI).

1. Members of BCSBI

BCSBI was set up by the RBI to ensure banks voluntarily adopt a self-regulatory code. Its members include most scheduled commercial banks, cooperative banks, and regional rural banks that adopt the BCSBI codes.

2. Main Aims and Objects

• To formulate codes of conduct for fair banking practices.
• To ensure transparency in dealings with individual customers and micro/small enterprises.
• To enhance customer trust and ensure consistent service delivery across the banking system.

3. Code of Banks’ Commitment to Customers

This Code sets the minimum standards banks should follow while dealing with individual customers. It covers aspects like opening/closing accounts, transparency in charges, and grievance redressal timelines.

4. Code of Banks’ Commitment to Micro and Small Enterprises (MSEs)

This is a voluntary code specific to the MSE sector to promote access to finance, timely loan disbursals, and fairness in credit decisions. It also includes timelines for loan applications and disclosures of rejections.

5. Functions of BCSBI

• Monitoring adherence to the codes.
• Conducting surveys and studies to ensure code implementation.
• Publishing compliance ratings for member banks.
• Providing guidance to banks and customers.

6. Code Compliance Rating

BCSBI assessed member banks on parameters like information dissemination, transparency, complaint handling, and adherence to timelines. These ratings helped consumers compare banks.

7. Customer Grievances Handling Mechanism

Each bank has a grievance redressal system with internal escalation matrices. Unresolved grievances can be taken to the RBI Ombudsman under the Integrated Ombudsman Scheme, 2021.

8. General Information

• BCSBI is not a statutory body; it was registered under the Societies Registration Act.
• RBI provided financial support for the board’s initial operations.
• The Code is reviewed periodically to incorporate evolving customer needs.

Mathematical Examples (Medium-Hard)

1. Turnaround Time (TAT) Calculation: If a bank promises to resolve a complaint within 15 working days and receives it on 1st July (Monday), what is the deadline for resolution excluding weekends and one bank holiday on 10th July?
   Answer: 23rd July
2. Interest Refund Calculation: If a customer is wrongly charged 12% annual interest instead of 10% for 3 months on ₹2,00,000, calculate the excess interest charged.
   Answer: ₹1,000
3. Loan Processing Time Breach: Bank commits to sanction loans within 21 working days. If an MSE loan application is submitted on April 1st (Monday), and there are 5 holidays in the month, by what date should the loan be sanctioned?
   Answer: April 30th
4. Complaint Escalation: If the first-level complaint is not resolved within 7 working days, and the escalation level takes another 10 working days, what is the maximum total time before the customer approaches Ombudsman?
   Answer: 17 working days
5. Processing Charges Refund: A customer is promised refund of processing charges if the loan is not sanctioned. If ₹5,000 is taken as fee and loan is denied, but only ₹2,000 is refunded, calculate the shortfall in refund.
   Answer: ₹3,000
6. Penalty Interest Compensation: Bank delays FD maturity payment by 4 days. FD amount is ₹1,00,000 and interest rate is 6%. Calculate the compensation (simple interest).
   Answer: ₹65.75
7. ATM Failed Transaction Refund: Refund must be made within 5 days. If ATM fails on 5th June, by when must refund be credited?
   Answer: 11th June
8. Minimum Service Score: If customer satisfaction score is based on 5 parameters each with 20 marks, and bank scores 15, 18, 19, 16, 20, calculate total score and average.
   Answer: 88, Average = 17.6
9. BCSBI Compliance Survey: Out of 1000 surveyed customers, 860 say their bank followed the code. Calculate compliance percentage.
   Answer: 86%
10. Penalty for Delayed Grievance: ₹100/day compensation for delay beyond 15 days. If resolution took 22 days, calculate compensation.
    Answer: ₹700

MCQs with Answers

1. Which institution monitors voluntary codes of conduct in banks?
   A. RBI
   B. BCSBI
   C. IBA
   D. SEBI
   Answer: B
2. The Code of Commitment to MSEs ensures:
   A. Credit at subsidized rates
   B. Fair treatment and timely sanctions
   C. Loan waivers
   D. Government guarantees
   Answer: B
3. BCSBI is registered under:
   A. Banking Regulation Act
   B. Companies Act
   C. Societies Registration Act
   D. Cooperative Societies Act
   Answer: C
4. Which of these is not a function of BCSBI?
   A. Drafting codes
   B. Regulatory supervision
   C. Monitoring adherence
   D. Publishing ratings
   Answer: B
5. How are Code Compliance Ratings useful?
   A. For government audits
   B. To help RBI penalize banks
   C. For customers to compare service
   D. To increase bank profits
   Answer: C
6. Turnaround time for loan processing under MSE Code is:
   A. 7 days
   B. 14 days
   C. 21 working days
   D. 30 calendar days
   Answer: C
7. RBI Ombudsman can be approached if complaint is unresolved after:
   A. 15 days
   B. 21 days
   C. 30 days
   D. 45 days
   Answer: C
8. ATM refund failure must be credited within:
   A. 3 days
   B. 5 days
   C. 7 days
   D. 10 days
   Answer: B
9. Which type of banking does BCSBI focus on?
   A. Wholesale banking
   B. Investment banking
   C. Retail and MSE banking
   D. International banking
   Answer: C
10. Which of the following statements is TRUE?
    A. BCSBI codes are mandatory
    B. BCSBI imposes penalties
    C. BCSBI codes are voluntary
    D. BCSBI replaces RBI regulations
    Answer: C