‘Extending deposit insurance cover to bank PPI needs examination’

“The Reserve Bank may examine whether Deposit Insurance and Credit Guarantee Corporation (DICGC) cover can be extended to bank PPIs and later to non-bank PPIs based on experience gained,” the committee recommended.
PPIs are instruments that facilitate purchase of goods and services, conduct of financial services and enable remittance facilities, against the value stored therein. PPIs can be issued by banks and non-banks.
DICGC insures all deposits such as savings, fixed, current and recurring including accrued interest. Each depositor in a bank is insured upto a maximum of Rs 5 lakh for both principal and interest amount held by them as on the date of liquidation or failure of a bank.

In order to protect the interests of the investors/account holders in the bank, DICGC, in 2020, raised the limit of insurance cover for depositors in insured banks from Rs 1 lakh to Rs 5 lakh.

The terms of reference of the RBI committee, headed by former RBI Deputy Governor B P Kanungo, were to evaluate and review the quality of the customer service, identify the best practices and suggest measures for bringing about improvements in quality of customer service and grievance redress mechanism in the REs.

The committee recommended that the RBI should put in place a suitable structure of incentives and disincentives to encourage the regulated entities to take pro-active steps towards improvements in customer service and impart systemic strength to overall customer protection efforts.

It also suggested that the RBI should impose a regulatory cost for entities where the quality of customer service is deficient.The committee recommended that the pensioners should be allowed to submit a Life Certificate (LC) at any branch of the bank in which they maintain their pension account. Moreover, they should be allowed to submit LC in any month of their choice to avoid rush in a particular month.

It said the RBI should consider progressively moving towards ‘principle-based’ regulation with regard to customer service in the REs.

During the supervisory process, the RBI should take a view on the reasonableness of charges levied by REs for the services offered, it said.

“In order to address the conflict of interests, and to increase the effectiveness of the Internal Ombudsmen (IO) appointed in the REs, the RI may nudge the Indian Banks’ Association (IBA) to create a fund to directly pay the salary / compensation to the IOs of the banks,” it recommended.

It said that the RBI should set up an RE-agnostic common portal for lodging complaints so that the customers of any RE can lodge complaints on a single platform.

The RBI has sought comments from stakeholders and the public on these recommendations till July 7, 2023.