Will Customer Ever be the King in India?

Before closing his statement on Monetary Policy in December 2025, Reserve Bank of India Governor exhorted all regulated entities “to keep customers central in their policies and operations, improve customer service and reduce grievances.” Starting from home ground, he proposed to clean up the complaints pending for more than a month with the RBI Ombudsmen in a two-month campaign beginning January 1, 2026. 

According to the latest annual report of the RBI’s Banking Ombudsman Scheme, the total number of complaints received was 1.33 million in 2024-25, up from 1.18 million in 2023-24. The RBI Governor cited “receipt of large number of grievances” as one of the reasons for increased pendency of complaints at RBI Ombudsmen offices.

The Ombudsmen Scheme
The Reserve Bank introduced the Banking Ombudsman Scheme in 1995. The objective of the scheme was to provide cost-effective grievance redressal system to common citizens. The RBI has expanded the scope of the scheme over time. Under what is now called the Reserve Bank - Integrated Ombudsmen Scheme, it covers virtually all the regulated entities and all the grounds on which complaints could be made, including credit cards, internet banking and even digital banking. The scheme does not cover loans sanctioning which remains a prerogative of banks, and rightly so. 

To complain under the scheme against any bank, the customer does not require any legal expertise. A customer can complain online through the RBI website or simply write a letter or an email attaching all evidence of deficient service and the RBI takes it on board. But before approaching the RBI, a customer must exhaust all the avenues of grievance redressal provided by the bank itself. The RBI had introduced this condition to nudge the banks about improving the quality of customer service and resolving complaints of their own customers. 

The Banking Ombudsmen followed a simple procedure. Upon receiving a complaint, they first asked the bank to explain. This was the first stage when the bank concerned would prefer to settle the matter bilaterally. If not, the BO brought the bank authorities and the complainant face to face and let them sort out the complaint. If the complaint is still not settled, only then did the BO act as a quasi-judge and issued an order against the bank or dismissed the complaint. The number of cases of passing an order was limited but there were some cases in which the Banking Ombudsmen gave exemplary orders and the banks had to comply. 

Initially the scheme was very successful as the complaints were less, perhaps due to low awareness and the then Governor had strictly instructed the BOs to give benefit of doubt to the customers in case there was lack of clarity. Banks too tried to settle claims in favour of the complainants the moment they threatened to go to the BO as customer complaints with BO was perceived negatively by the regulator. For the same reason, banks also quickly complied with the BO’s orders, whenever they were issued. 

The fact that the number of complaints today have increased is perhaps because of increased awareness about the scheme. The complaints could have also increased because customers today have higher expectations from the banks and demand better service. It is ironical that while technology is enabling banks to provide more and better services at low cost, customers are meted out sub-standard services. 

The Malaise
It won’t be an exaggeration to say that apathy towards customers and customer complaints are generic to all services in India. The recent IndiGo crisis is a case in point. When one speaks about customer service, what stands out is that the customer is the least of the concerns. One reason for sub-standard customer services is, the supply is much less compared to the demand. 

In banking for instance, as of March 2024, banks were dealing with 2.5 billion accounts with 1.87 million employees. This means one employee is dealing with approximately 1,390 accounts. This of course is too generalised a statement but will improving this ratio help? Perhaps no because the poor customer service is the outcome of two issues — first, the banks today are competitive and so are the bank staff. They are young and ambitious. Their focus is achieving business targets and in digital first approach, human touch is given a go by. This is an irony as technology should have helped in reducing the workload on bank staff. The second and more important constraint is lack of knowledge or incomplete information about rules that govern banking services. Often half knowledge results in harassment to the customers. A case in point being KYC and re-KYC for bank accounts.

Technology Can Help
Fortunately, both the constraints are not insurmountable. 

The RBI has recently revamped all its instructions and consolidated the current operational ones into a few Master Directions. Can a simplified version of these directions also be created for the customers?  The simplified version can be  published on a portal which the bank employees and citizens can refer to? These can also be fed to an AI bot with natural language ability. This bot can be trained to respond to customer queries not only mechanically but also with empathy. Thankfully, this is possible now.   

The same information can be used to train bank employees. An institution like the Indian Institute of Banking and Finance can devise a periodic test to be taken — may be every three years — by bank employees. The test could be modular, simple and objective type.  Modules can be based on the instructions on specific areas of banking, such as, deposits, loans, within loans there could be sub-modules for MSMEs, industry related and personal/consumer loans, NRIs related and so on. These can also be enriched with case studies. The institute can issue a certificate for passing the test. Passing marks should not be less than 80%. Bank employees can study each module and take the modulewise test as per their convenience; but it should be compulsory for bank employees to clear them before going in for promotion for sure. 

The Reserve Bank has been a unique central bank in placing all regulations it issues to regulated entities on its website. Started in the nineties, the reason behind this practice was mainly to instantaneously reach the instructions to the regulated entities so that the customers get the benefit of the revised instructions. The purpose behind publishing the all the banking instructions was also to help customers know the regulator’s instructions which are in their interest. Customers should get full benefit of this. 

Would it ever happen?