Banks caught into a trap of promising the world and delivering less
A few days back Prime Minister Narendra Modi, while addressing bankers at a conference, created waves on three counts. First, he called current banking practices as “lazy banking”. Second, he said that he is against any political interference in the functioning of banks but supports necessary “intervention” in the public interest. Third, the most interesting one, is that he took to mythology to underscore a need for building adequate knowledge capacities in the banking space, saying that Laxmi – goddess of wealth – would stay longer when combined with Saraswati, who is worshipped for knowledge.
The second and third count hints at major banking reforms on cards. But let us have a look at the first one – ‘lazy banking’ practices. Our banking system is well regulated when compared to rest of the world, particularly in the context of safety of depositors’ money. But the deteriorating standard of customer service offered by the banks has emerged as a major concern.
Today we find many customers unhappy after their expectations were raised only to find that the service or product failed to satiate their needs. In an endeavour to capture as many customers as possible, banks have fallen into the trap of promising the world and delivering less, hence unhappy customers. So, to achieve customers’ delight is a big challenge for banks today.
Last three decades have seen a remarkable increase in size, spread and scope of activities of the banks. Their business profile has transformed dramatically as their operations have gone beyond traditional activities. Today the banks offer facilities like merchant banking, mutual funds and new financial services & products.
But do banks continue to be customer friendly? This is the most important question today being asked whenever role and performance of banks is discussed formally or informally. Let me share an instance. Some time back I attended a brain storming interactive session on branding in which some top rated branding experts highlighted its importance vis-à-vis image building of an organisation, like banks. The deliberations during the session emphasised on need to offer high quality customer service which alone can help the banks to build their brand image. The session concluded with a serious note that rarely we find a customer friendly bank today despite the fact that integration of technology has revolutionised the banking services.
We have a plethora of cases involving banks fighting its small customers that has brought the inept attitude of banks to the fore. Frankly speaking, those wealthy and well-connected customers do not have to bother; banks are always at their doorsteps.
For example, the rate of interest factor has hurt the interests of many customers. It is very common to find banks raising interest rates periodically; many a time, they don’t even bother to inform customers about the rate increase. Banks just increase the amount of equated monthly installment (EMI) payable or even raise the number of installments payable by a customer. Instances of dispute galore where a customer had opted for fixed rate of interest and the bank unilaterally changed it to floating rate option without taking the consent of the borrower. In other words, banks have developed a habit of switching over the interest rate options at their own sweet will whenever they find a particular option more profitable for the bank. They show no respect to the loan agreements.
So we can sum up that the overall concept of banking has changed, but at the cost of long-term banker-customer relationship.
(The views are of the author & not the institution he works for)