BANKING CODES AND STANDARDS BOARD OF INDIA
In the year 2003, the Committee on Procedures And Performance Audit Of Public Services was created under the chairmanship of Shri S. S. Tarapore, former deputy governor of the Reserve Bank of India. The main purpose of this committee was to look into the issues which pose difficulty in making the availability of adequate banking services to the general public.
This committee was required to identify the factors which help in making the customer services available as well as making suggestions through which the banking services which are available to individual customers can be improved.
It was felt by the committee that efforts should be made continuously to upgrade the services which are offered by the banks to their customers as well as that benchmark should be set for the purpose.
The committee did an in-depth study at the root level and concluded that there exists an institutional gap to measure the performance of banks against a benchmark that reflects the best practices (Codes & Standards).
This way the committee came up with the recommendation that the BCSBI, Banking Codes, and Standards Board of India be set, which will be consistent with the U.K.-based Banking Codes and Standards Board.
One should note that the scheme of banking ombudsman, which is one among the existing institutional structures, fails to look into the systematic issues. And the fact that it has been functioning for quite some time.
In an ideal situation, such matters should be locked into by a Self Regulatory Organisation but due to the existing framework of the Indian banking sector, the committee felt that an independent and autonomous board will be best suitable for this task.
For this reason, in the monetary policy statement of April 2005, RBI Governor, Dr. Y.V. Reddy announced the setup of Banking Codes and Standards Board of India whose main purpose was to ensure that a comprehensive code of conduct will be established for the fair treatment of customers as well as it will be adhered to.
Setup as a society: The Banking Codes and Standards Board of India (BCSBI) has duly been registered as a separate society under the Societies Registration Act, 1860 so that it could function as an independent & autonomous body.
One should know that BCSBI is not any Reserve Bank of India’s department. Although the Reserve Bank of India has agreed to help the Board financially for a limited period of time. It will be working as an independent watchdog over the banking industry to ensure that all the customers will get what they have actually been promised to.
To actually ensure the autonomy and independence of the board’s watchdog status of the industry, the Reserve Bank of India decided that it will extend financial support to the board. This will be done by paying the full expenses of the board for the first five years of its set up.
This will enable the Board to fulfill its Economic Critical Mass to obtain independence in its functioning and take a stand on its views on any bank without facing an existential threat.
The Reserve Bank of India will have a supervisory comfort in the case of banks which are members of BCSBI.
To truly explain it in one line, this board has been set up with the intention that a common man is not deprived of the banking services and is in no way at a disadvantage when it comes to dealing with banks as well as that he gets what he has been promised to.
Relationship between RBI and BCSBI:-
As already mentioned, the board is an independent and autonomous organizational body but still, it is only supported by the Reserve Bank of India. This support comes in the form of financial nature by way of financing the cost of this institution for the first five years of its existence. It is in the best interest of the whole banking industry, to be specific, in the interest of common people i.e bank customers.
Even though the membership of BCSBI is optional, the Reserve Bank of India is supposed to look more intensively at the banks which are not members of BCSBI.
Functions of BCSBI
Banks themselves have taken initiative to establish this board because it is going to empower their customers by way of providing a higher level of satisfaction when it comes to the services which are offered by the banks. This satisfaction will be driven through significant and enduring improvements in customer-related services.
On an international level, these kinds of codes are themselves developed by the banking associations as a self-regulating exercise.
IBA & BCSBI have drawn up voluntary codes which are again followed by detailed guidance notes to explain the codes.
BCSBI will monitor whether all the codes are being followed by the banks or not. This way, the main function of the board will be to ensure that all the member bands file detailed compliance reports on the observance of codes and the fact that they are being followed rigorously.
The Board can do a thorough assessment of such compliances and if it is still not satisfied with the compliances, it is empowered to contemplate sanctions which may include the following:
- Follow through with the “Name & Shame” policy. i.e to say that there will be published by the Board of the bank’s name and details of the breach;
- Instruct the banks to take remedial actions for any breach;
- Warn or reprimand the bank that does not comply with the code;
- Bring it under public censure;
- Cancel the registration of the bank.
Although the panel provisions exist for action, its main and basic approach will be to take collaborative remedial action rather than go through the panel measures.
Note: Sometime back reserve Bank of India had announced that the setup of BCSBI and its role and functions have been discussed in detail at RBI and it has been decided that because RRI can take up the activities which have been identified for BCSBI, the BCSBI has been directed to start the process of its resolution.
Since then, BCSBI has stopped its activities and has taken steps to dissolve by passing a resolution on 28-09-2022 for the approval of the resolution by its members.
So at present, customers are required to file for the redressal of any grievance with their respective banks and if they remain unheard, they can approach banking ombudsman offices.