RBI takes the first step towards customer protection

It took 10 years but it has finally happened. On 22 August, the Reserve Bank of India (RBI) released a draft charter of customer rights (http://goo.gl/clycrO) that enumerates and explains a set of five customer rights. These are: Right to fair treatment; right to transparency, fair and honest dealing; right to suitability; right to privacy; right to grievance redress and compensation. What I like about the draft is that it is finally out after much delay. I don’t think we need to stress the point that bank branches are now the places where a customer goes to get trapped into toxic financial products. The draft is important because in it RBI formally accepts that the sale of third-party products (not the ones manufactured by banks but others such as mutual funds, insurance and car loans) comes under its regulatory umbrella. My fight with RBI for a decade has been the unforgivable attitude of “not-my-problem”. It has actually been said to me: this is not our problem; the other regulators need to deal with it. But with this draft, third-party product sale, advice and due diligence is firmly the bank’s responsibility.

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Rich now, poor next moment

To the guy knocking on the rolled-up window of my old Swift Dzire, I’m surely rich. I get driven around and sit reading a paper in air-conditioned comfort. But as I turn into the office parking lot and my car becomes one among the many parked there, my aura of “richness” fades a bit. To the parking attendant, my value-for-money car compares unfavourably with the high-end cars parked there. To the young intern who lives in a south Delhi barsati, I must seem rich—life looks sorted and the home bought. But to a financial sector business leader who I meet the same day—I surely seem very middle-class, not rich. The same chief executive who looks rich to me—with his small aircraft-like car and the two digit with a crore at the end of it house in Cuffe Parade—looks positively poorer than the 20-something e-commerce entrepreneur who is now worth a few million dollars, or to the third-generation inheritor with the right last name to do business in India. Who then looks not-so-rich when he finds his name missing in the list of the 100 richest people in the world. But then, one of the richest people in the world who sits on that list still cuts out coupons to eat cheeseburgers and drinks Cherry Coke rather than the finest single malt. That’s not a very “rich” thing to do. Want to guess who that person is? It’s legendary investor Warren Buffett.

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A hunt for PPF that leads to toxic sales pitches

I’ve known anecdotally that banks push customers towards products. That they hardsell products which fetch them the highest commissions. That they tie bank facilities such as lockers to fixed deposit balances and buying insurance policies. But to experience it myself was an entirely different thing. It was a simple visit to my bank branches to open a Public Provident Fund (PPF) account, which once again put into focus the way financial products are being sold by banks. Here’s how the conversations went with relationship managers (RMs) at the two banks I visited.

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Evil foreigners, upright Indians and FDI in insurance

Do we see representatives of trade unions and other such organized labour unions come out on the street in “national interest”? Do they threaten to strike work if rapists are not brought to book? Do they burn effigies of airline owners who owe banks millions of rupees and don’t pay their employees for months, while they vacation in their yachts and buy super-expensive stuff for aspiring offspring? Nope. But try doing something that will enhance efficiency, reduce corruption and increase consumer protection in any industry controlled by these unions and see them pour out on the streets to protest. The red rag of higher foreign direct investment (FDI) in insurance was waved in the budget and as the Bill struggles to get passed, the political parties against the legislation have cranked up the organized protests. Trade unions, insurance staff and the Communist Party of India (CPI) have all been active in the past week threatening strikes and worse if the Bill that allows foreigners a 49% stake in insurance companies, up from 26% now, goes through.

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