RBI Governor Urges Banks to Streamline KYC Processes and Enhance Customer Service
Reserve Bank of India (RBI) Governor Sanjay Malhotra has urged banks and non-banking financial companies (NBFCs) to cease the practice of repeatedly requesting ‘Know Your Customer’ (KYC) documents from customers. Speaking at the annual conference of RBI Ombudsmen, Malhotra emphasized that once a customer submits KYC documents to any financial institution regulated by a financial sector regulator, these documents should be accessible through a centralized database, eliminating the need for resubmission. He described the repeated requests as an “avoidable inconvenience” for customers.
Malhotra highlighted that many banks and NBFCs have not enabled their branches or offices to access information from the Central Know Your Customer Record Registry (CKYCR). This lack of integration forces customers to resubmit documents unnecessarily. He urged financial institutions to facilitate access to the CKYCR promptly, stating that it would benefit both customers and the institutions themselves.
In addition to addressing KYC procedures, Malhotra expressed concern over the rising number of customer complaints. In the financial year 2023-24, banks received over 10 million complaints, with 57% requiring mediation or intervention by RBI ombudsmen. He described this situation as “highly unsatisfactory” and called for urgent attention to improve consumer services. Malhotra advised bank leadership, from managing directors to branch managers, to dedicate time each week to address customer grievances, emphasizing that unresolved issues could erode consumer confidence and tarnish the entire financial ecosystem.
The Governor also warned against the misclassification of customer complaints to suppress numbers, labeling such actions as “gross regulatory violations.” He stressed that banks need to improve consumer services not only as a duty but also in their own interest, especially in a competitive industry.
Furthermore, Malhotra advocated for the use of artificial intelligence (AI) in complaint redressal systems. He suggested that financial institutions could leverage AI to analyze large volumes of data, detect issues such as ATM failures or erroneous charges, and receive pre-emptive alerts. AI-driven chatbots and voice recognition tools could also help eliminate language barriers in a linguistically diverse country like India. However, he emphasized the need to consider essential aspects like privacy when implementing such technologies.
In summary, Governor Malhotra’s address underscored the importance of enhancing customer experience, streamlining processes like KYC documentation, and adopting advanced technologies to improve grievance redressal mechanisms. He called on financial institutions to strengthen their internal frameworks to effectively address grievances and prevent escalation to the RBI ombudsman.
