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In a significant move, RBI Governor Sanjay Malhotra has urged banks to refrain from repeatedly requesting KYC (Know Your Customer) documents from their customers. Speaking on the issue, he highlighted that once a customer submits their KYC documents to a financial institution, there should be no need to insist on resubmission. This guidance comes amid growing customer complaints about the inconvenience caused by the repeated KYC requests.
Repeated KYC Requests Are a Customer Inconvenience
In his comments, Governor Malhotra pointed out that many banks and NBFCs (Non-Banking Financial Companies) have not made use of the central database, which would allow them to access a customer’s previously submitted KYC documents from one location. As a result, customers are forced to resubmit their KYC documents at multiple branches or offices. This situation, according to Malhotra, is an unavoidable inconvenience for customers and should be addressed promptly.
The Governor emphasized that the financial industry is highly competitive, and banks must work to improve customer service. Not only is this a duty for the banks, but it is also in their best interest to ensure customer satisfaction and reduce such inconveniences.
Rising Customer Complaints about KYC
Governor Malhotra's remarks come in the wake of customer complaints flooding social media platforms, with many customers expressing frustration over the need to repeatedly submit their KYC documents. Malhotra acknowledged the rise in customer complaints, stating that banks received 1 crore (10 million) complaints in FY 2024. If complaints from other regulated entities are also included, this number increases even further.
He also warned banks not to misclassify customer complaints, as doing so would constitute a gross regulatory violation. Out of the complaints received, 57 percent required intervention from the RBI Ombudsman, indicating a serious gap in customer service that needs to be addressed immediately.
Focus on Resolving Complaints and Grievances
The RBI Governor advised that all bank leaders, from managing directors to branch managers, should allocate time each week for grievance redressal. This initiative is crucial to prevent customer dissatisfaction and to uphold the integrity of the banking ecosystem. Malhotra stressed that unresolved complaints can erode consumer confidence and damage the overall financial environment.
Furthermore, the Governor highlighted that complaints should not be seen as a nuisance. Instead, they should be viewed as an opportunity to identify and fix systemic flaws that are causing customers inconvenience. He urged banks to treat complaints seriously and act on them promptly to avoid further complications.
The Road Ahead for Banks
The RBI Governor’s advice calls for immediate changes in the way banks handle customer service and complaints. By addressing the issue of repeated KYC requests and focusing on resolving grievances efficiently, banks can enhance their customer experience and maintain trust. These steps will also help avoid regulatory penalties and ensure that the banking sector remains competitive and customer-friendly.
