The Customer Comes First: Winning Back Trust in a Fractured Market

Banks are losing their grip. Over the past twenty years, their share of BFSI sector assets has collapsed from 85% to just 57%, while non-banks, fintechs, and asset managers have accelerated past them. Yet, banks serve 71% of India's financial system user base across deposits and borrowing. They have the numbers but not the loyalty. The reason is deceptively simple: they have stopped being the primary channel of trust, having been replaced by providers willing to listen to what customers actually need.

This shift is not accidental. Banks might still enjoy the structural advantage of frequent customer contact through everyday transactions, but they have largely squandered it. The younger demographic—digitally native Gen Z and millennials—is less interested in habitual savings and more inclined toward alternative investments. Individual deposits are migrating out of the system, returning as bulk deposits and certificates of deposit, creating dangerous asset liability management gaps and squeezing net interest margins.

Banks can reverse this not through acquisition or aggressive pricing, but through something more fundamental: building customer centricity at their core. This means rethinking how they operate, train their staff, and deliver every interaction. The Reserve Bank of India has already paved the way with a coherent policy framework. The question is whether banks have the discipline to follow it.

Serving Seamlessly
Customer service architecture is the place to begin. What does good customer service actually mean amid shifting preferences and fractured expectations? It means ensuring that every transaction—irrespective of the customer's geography, income level, or digital literacy—is handled correctly, accurately, and within a timeframe customers deem reasonable. More importantly, it means the customer never has to fight for something they are entitled to.

The operating ecosystem supporting this includes technology, workflows, documentation, and crucially, staff training. An interaction with a bank employee today often reveals gaps that customers find exasperating: staff with insufficient knowledge, systems that don't talk to one another, and processes designed for the bank's convenience rather than the customer's. While major banks rate their own customer service as good, grievances filed with the RBI ombudsman continue to climb year on year.

The solution lies in standardising service delivery. Banks and non-banks should build detailed standard operating procedures for every customer-facing service, embedding customer care at every step of the journey. Service audits, improved support infrastructure, and relentless outcome orientation must become part of ongoing surveillance.

Unlike mature markets, India lacks uniform, public benchmarks for customer service quality across the banking sector. The J.D. Power Retail Banking Satisfaction Study in the United States, now in its twenty-first year, employs seven clearly weighted dimensions—trust, people, account offerings, access, time and money savings, digital channels, and problem resolution—assessed across thousands of customers on a 1,000-point scale. Its 2026 findings showed overall satisfaction at 657 points, a modest gain from the prior year. India has nothing comparable.

The RBI recognised this gap and tasked the B.P. Kanungo Committee in 2022 with developing a Customer Service Index that would combine regulatory adequacy, customer experience, and grievance redressal efficacy into a single score. Years on, this index remains unbuilt. Until such measurement infrastructure exists, banks have little incentive to improve systematically.

Culture Over Metrics
Customer centricity cannot be grafted onto an organisation; it must be embedded in how the institution thinks. A customer-centric bank asks itself: "What are our clients struggling with right now, and how do we design a solution?" rather than "What targets do we need to hit this quarter?"

This sounds obvious but requires systemic change. It demands that product design, service delivery, and policy-making flow from customer needs rather than institutional convenience. It means re-engineering how products are offered, what choices customers face, and how problems are resolved.

The RBI has been signalling this direction for years. The customer charter introduced in 2014 prescribed five fundamental rights: fair treatment, pricing transparency, suitability, privacy, and effective grievance redressal. The Integrated Ombudsman Scheme unified resolution mechanisms across banks and non-banks. Key Fact Statements were mandated for digital lending. Pre-payment and foreclosure charges were harmonised. Two-factor authentication became standard for digital payments.

More recently, a unified framework on Responsible Business Conduct, effective from January 2027, targets mis-selling and unethical loan recovery practices across all regulated entities. Digital banking fraud compensation capped at ₹25,000 ensures retail depositors bear a known maximum loss. These measures define the regulatory envelope within which customer-centric practice must operate.

The tools available to banks today were unimaginable a decade ago. Machine learning and artificial intelligence can now detect customer behaviour patterns at scale, enabling hyper-personalised service without compromising privacy. An AI-driven system might flag when a customer's spending habits suggest financial stress, allowing a bank to offer credit counselling rather than pushing another loan. This deepens customer centricity and transforms the nature of the relationship from transactional to supportive.

The Path Forward
Banks that endure will be those that embed customer centricity not as a compliance exercise but as a strategic imperative. This means training frontline teams rigorously, ensuring they have the authority and knowledge to resolve problems at the point of contact. It means investing in systems that work, not those that simply protect the institution. It means accepting that customer satisfaction and market share in a competitive financial system are now inseparable.

Asset reshuffling in the BFSI sector will continue. Non-banks and fintechs are not slowing. For banks, particularly public sector banks with deep community roots, customer centricity offers a genuine competitive differentiator. Trust, once given, is exceptionally difficult to rebuild. The task is to regain it through service that is responsive, capable, and above all, genuinely oriented toward customer needs rather than institutional targets.

Preparing banks to align their services with changing customer-centric policies is a sine qua non for winning market share amid intense competition.