FINANCIAL CONSUMER PROTECTION AND EDUCATION
The Second Day of the conference began with a Keynote Address by Ms. Surekha Marandi, Executive Director, Reserve Bank of India. Ms. Marandi provided Indian perspective on the issues debated in the conference with respect to financial consumer protection and education by sharing the initiative of Reserve Bank of India. She started her presentation by sharing how consumer rights’ protection and promotion had been pursued by great leaders resulting in concomitant changes in the national policies. She argued that Financial Consumer Protection has become an increasing priority for all policymakers primarily for two reasons:
1. It is a contributing factor to the healthy development of the financial sector, including financial inclusion and helps in achieving broader economic growth, and
2. Widespread uptake of digital financial services has heightened risks for consumers and raised new concerns.
Ms. Marandi stated that consumer protection has been in consideration since the ancient times (scriptures) whereby the long cherished values ethical behaviour and punitive action for adulteration were mentioned in the early books like the Arthsastra by Chanakya and hence the concept of consumer protection existed in India since the early days, i.e., in the eighteenth century world itself. The meaning of “consumer protection” evolved as protection from excessive prices levied on primary commodities in eighteenth century to “caveat emptor” meaning ‘buyer beware’ in the nineteenth century. While the concept is still being evolved, she mentioned that Consumer Protection Act was being amended at the present moment as well.
She continued that, over the years, Financial Consumer Protection has become an increasing priority for all policymakers as it has become a contributing factor to the healthy development of the financial sector. She added that there were various regulatory Acts in the country for the same purpose such as 'Banking Regulation Act 1949, whose prime concern focuses on "the interest of depositors", 'Deposit Insurance Act 1961', and 'Consumer Protection Act 1986'. She elucidated that Consumer Protection Act, 1986 covered financial as well and non-financial products and services.
Moreover, Banking Ombudsman Scheme, 1995 was there since the early days. Now there is 'Ombudsman Scheme for Digital Transactions' 2019 as well which is the result of regular amendments in the Ombudsman Scheme.
She clarified that two more schemes had been added for non-banks and prepaid payment instruments. She elaborated that there has been greater emphasis on strengthening grievance redressal mechanism in regulated entities. She shared that there was proper infrastructure for handling any type of customer compliant, the base level of which is bank or its branch and the Apex Body being RBI Ombudsman. She also explained about other regulators such as sector-specific FCP Infrastructure regulators. They are Securities and Exchange Board of India (SEBI): Exchanges/Mutual Funds, Insurance Regulatory and Development Authority of India (IRDAI), Pension Fund Regulatory and Development Authority of India, and National Housing Bank. Ms. Marandi explained about Consumer Protection Initiatives taken by RBI which are:
- Standardisation of forms commonly used by Bank Customers,
- Ombudsman Scheme for Digital Transactions,
- Internal Ombudsman: strengthening internal grievance redressal structure of banks,
- Expansion of BO offices: 22 offices with specific jurisdiction covering entire country,
- Consumer Education and Protection Cells: 30 CEPC covering the entire country which is one of mechanism for handling entire spectrum of complaints, Ombudsman Scheme for Non-Banking Financial Companies in four zones covering the entire country,
- Ombudsman Scheme for Digital Transactions.
Thereafter, Ms. Marandi talked about some of the important and recent regulatory guidelines issued by RBI regarding Financial Consumer Protection. Some of them were:
a) Compensation for delay in resolution of complaints of short/non-dispensation of cash by ATMs after 7 days (May 27, 2011),
b) Compensation for delayed payment of pension @ 8 percent (April 13, 2012),
c) Non- discrimination of customer at home and non- home branches (July 1, 2012),
d) Levying SMS charges on actual usage basis (November 26, 2013),
e) Abolition of foreclosure charges/pre-payment penalties on all floating rate home loans/all floating rate loans (June 5, 2012 and May 7, 2014),
f) Charter of Customer Rights (Dec 3, 2014),
g) Limiting Liability of Customer in Fraudulent Electronic Transactions (July 6, 2017) includes Zero liability of customer and Limited liability of customer- Limits the liability of customer to Nil if electronic fraud is reported within 3 days and customer is not at fault in general but there are other provisions as according to the time period taken by customer to report the transaction and parties involved in transactions,
h) Banking Facility for Senior Citizen and Differently Abled Persons (Nov 9, 2017).
Ms. Marandi also explained the rights included in Charter to Customer Rights. Some of them are: right to privacy, right to transparency, fair and honest dealing, right to suitability, and right to grievance redressal and compensation.
Given the accelerated growth of the number of elderly people in India and the projections about number of elderly to increase rapidly, various provisions and policies have been made by RBI in the interest of senior citizens. She explained that RBI had advised banks to put in place an explicit mechanism for meeting the needs of senior citizens so that they did not feel marginalised but would be in a position to avail themselves of banking services without difficulty. Some of the initiatives taken in this regard were:
a) Dedicated counter providing priority services to senior citizens,
b) Automatic conversion of account into a ‘Senior Citizen Account’ based on the date of birth available in bank’s records,
c) Provision of higher rate of interest than normal deposits as per their board approved policy for senior citizen,
d) Provision of Income Tax exemption on interest on fixed deposit for which bank should provide documents within the stipulated time to claim for the same,
e) Banking Ombudsmen were advised to pay heed to complaints of senior citizens.
She shared that 'Door Step Banking' facilities was initiated by RBI for senior citizens of more than 70 years of age and make concerted effort to provide following basic banking facilities at the premises/ residence of such customers. Some of which are:
a) Pick up of cash and instruments against receipt,
b) Delivery of cash against withdrawal from account,
c) Delivery of demand drafts,
d) Submission of Know Your Customer (KYC) documents, and
e) Submission of Life certificate, etc.Besides these, she also mentioned about other instructions by RBI such as for pensioners and senior citizens, banks have been advised to levy charges on more liberal terms than the terms on which the charges are levied to other individuals. Also, banks have been mandated to include senior citizens in monthly branch level customer service committee meetings
Ms. Marandi also gave brief information about the special tax exemptions launched by government of India for Senior Citizens. Some of them are:
- Higher level of non-taxable income—No tax limit for normal Citizens Rs. 250,000
- No tax limit for Senior Citizens Rs. 300,000
- Tax exemption on interest income is Rs. 50,000/ as compared to Rs. 10,000/ for others.
- Higher tax exemption for health insurance (Rs. 50,000) and or tax deduction for expenses up to Rs.100000 for critical illness.Senior Citizens’ Savings Scheme: Government-sponsored Investment Scheme for Senior Citizens - Tax deduction up to Rs 1.5 lakh
Ms. Marandi on the later part of her presentation explained about the initiatives taken by RBI regarding Financial Education. One of the major initiatives by RBI was the SMS service using handle 'RBISAY'. She shared about Next initiative by RBI: RBI’s Public Awareness Campaign under the title ‘RBI Kehta Hai’ is a 360-degree campaign launched by the Reserve Bank using all the mass media, such as, television, radio, newspapers, hoardings, web banners and SMS/IVRS.
She also briefly explained about the 'National Strategy for Financial Education' and also about its major stakeholder viz., 'National Center for Financial Education' and other Institutions like RBI, SEBI, IRDAI, PFRDA, and similar market Intermediataries. Lastly, she discussed various 'Challenges and Regulatory Initiatives' taken by RBI, of which:
- Vast geographical and demographic expanse of the country,
- Barriers for unorganised sector and pensioners,
- Ageing population – unique set of challenges. Digitally less savvy,
Making available range of financial products: savings, credit, insurance, remittance and government payments.
- Relaxation in branch authorisation,
- Incentivising opening of branches in unbanked areas,
- Use of Technology – JAM Trinity,
- Banking Correspondents,
- Differentiated Banking – Small Finance Banks and Payment Banks
Source: OECD-SEBON;CONFERENCE AND ROUNDTABLE ON FINANCIAL CONSUMER PROTECTION AND EDUCATION IN ASIA-PACIFIC