Stop Repeated KYC Requests to Customers: RBI Governor Sanjay Malhotra Warns Banks
Stop Repeated KYC Requests to Customers: RBI Governor Sanjay Malhotra Warns Banks
The remarks arise during a period when banking customers have consistently voiced their frustrations regarding the inconvenience caused by requests for KYC re-submission.
On Monday, Sanjay Malhotra, the Governor of the Reserve Bank of India (RBI), urged banks to refrain from repeatedly contacting customers for “know your customer” (KYC) documentation.
During the annual conference of RBI Ombudsmen, Malhotra emphasized that when documents are submitted to an organization regulated by any financial authority, it allows for access by others through a shared database. He referred to the repeated requests for these documents as an “avoidable inconvenience.” The theme of the conference was “Transforming Grievance Redress: The AI Advantage”.
He expressed regret that the majority of banks and non-banking financial companies have not equipped their branches or offices with access to the central database, resulting in unnecessary inconvenience for customers.
At the same time, Malhotra cautioned banks about the dangers of misclassifying customer complaints to manipulate their statistics, emphasizing that such actions constitute a serious regulatory breach.
He noted that in the fiscal year 2024, banks recorded 10 million customer complaints, and this figure is expected to increase further when complaints against other regulated entities are taken into account. The governor indicated that 57 percent of these cases necessitated mediation or intervention from RBI ombudsmen.
Malhotra emphasized that banks must enhance their consumer services, not just as a responsibility, but also because it aligns with their own interests, highlighting the competitive nature of the industry. He urged bank leadership, beginning with the managing director, to take action.
It is important to prevent recurring complaints, as they highlight underlying systemic issues, Malhotra stated.
He also emphasized the importance of utilizing artificial intelligence for addressing complaints, while urging consideration of critical factors such as privacy.
Additionally, banks should concentrate on improving customer service in areas such as mis-selling, digital fraud, and aggressive recovery practices.
In a recent press release, the RBI highlighted Sanjay Malhotra’s call for a substantial improvement in customer experience to eliminate the necessity for grievance redressal. He urged Regulated Entities to bolster their internal grievance resolution systems, enabling them to manage complaints effectively and prevent the need for escalation to the RBI ombudsman.
