Magazine 2015
International Peer-Reviewed Journal  
Sunita Sharma  
Customer service is a challenging issue for the banking sector, as it is very difficult task to keep pace  
with and meet the rising aspirations and expectations of customers. The computerization and Core  
Banking Solutions (C.B.S) implementation has revolutionized and transformed the face of the banking  
industry. Each bank has its own product and process, but the attitude and approach are important  
factors while serving a customer.  
This article focuses on the different types of customers which approach a bank, common practices in  
customer service followed across banking industry in India and the challenges faced by the industry.  
Data has been collected from primary and secondary sources and critical incident method of obtaining  
data for analysis has been used. Bank group-wise and category-wise, analysis of complains received  
by Banking Ombudsman Offices is attempted. Tables and figures have been used to present information.  
The paper concludes by suggesting a road map for ‘smiley customer service’ by banks.  
Key Word : Customer Service, Know Your Customer, Banking Ombudsman Scheme, Smiley Customer  
Quality in a service or produce is not what you put into it, It is what the client or customer gets out of  
it” says Peter Drucker one of the most influential management author.  
The above definition is suitable to banking industry which basically deals with service. Banks have no  
physical products which can be distinguished by its appearance or design. The only differentiation  
indeed is the service level commitment by employees of the bank to their customers which develops  
purely on their relationship. Customer service is a challenging issue in any service sector as it is very  
difficult task to keep pace with and meet the rising aspirations and expectations of customers. Banks  
which deal with the hard earned money of their customer’s are required to provide not only better  
service but consistently as well.  
Banking industry in India was considered as conventional sector before a decade. The computerization  
and Core Banking Solution (CBS) implementation, which has happened with the keen initiative of  
Reserve Bank of India (RBI), has revolutionized and transformed the face of the banking industry. The  
change has helped the banks to offer variety of new products to their customers and present new  
avenues for accessing their accounts. It also brought the challenges which the industry had not faced  
until then.  
Objectives of the Study  
The present study has been carried out with the following objectives:  
To classify the customers of the banks.  
To review the common customer services of banks in India.  
To examine the complaints received by Banking Ombudsman (BO) offices, find out bank group-  
wise and category-wise classification of complaints received.  
To suggest roadmap for ‘smiley customer service’ by banks.  
Research Methodology  
For this study, data has been collected from primary and secondary sources. Responses were gathered  
from fifty respondents residing in Mumbai city and were using services of banks. The convenience  
sampling method was applied in this survey. Data was collected through personal survey method. The  
critical incident method of obtaining data for analysis has been used. The customers were asked two  
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When did you feel good about bank services and  
When did you feel exceptionally bad about bank services that turned you off.  
The limitation of the above method was that people recalled only the most recent experiences. The  
recovery of events’ bias is embedded in this methodology. Information has also been taken from  
books, journals, annual reports of RBI and Banking Ombudsman Scheme. Tables and figures have  
been used to present information.  
Classification of Customers :  
The bank like a manufacturing company can classify customers, according to their potential profitability  
and projected loyalty.  
Table 1  
Classification of Customer  
True Friends  
Good fit between banks offering  
Good fit between bank’s offerings  
High Profitability  
and customer’s need: high profit  
and customer’s needs: highest profit  
Potential Profitability  
Low Profitability  
Little fit between bank’s offerings  
and customer’s needs;  
potential Short term customers  
Limited fit between bank’s offerings  
and customer’s needs; low profit  
Long-term customers  
Projected Loyalty  
Source: Harvard Business Review “The Management of Customer Loyalty” by Werner Reinartz and V.  
Kumar, July 2002, p. 93.  
The above figure classifies customers accordingly:  
Strangers: show low profitability and little projected loyalty. There is little fit between the bank’s  
offerings and their needs.  
Butterflies: are profitable but not loyal. There is a good fit between the bank’s offering and their  
needs. However, like real butterflies, the bank can enjoy them for only a short while and then  
they’re gone. The banks should create satisfying and profitable transactions with them.  
True Friends: are both profitable and loyal. There is a strong fit between their needs and the  
bank’s offerings. The bank wants to make continuous relationship investments to delight these  
customers and nurture, retain and grow them. It wants to turn true friends into ‘true believers’  
who come back regularly and tell others about their good experiences with the bank.  
Barnacles: are highly loyal but not very profitable. There is a limited fit between their needs  
and the banks offerings. Like barnacles on the hull of a ship, they create drag, barnacles are  
perhaps the most problematic customers.  
Today’s small customers may one day become a big customer. This should be borne in mind by  
banks. Today banks prefer on-line business, and use of electronic products like ATM, ECS, NEFT and  
RTGS. The relationship of the customers with the banks are becoming more impersonal and form  
filling. The banks should not forget that characteristic features of services are intangibility, in separability,  
heterogeneity and perish ability. Therefore they must become customer-friendly.  
Customer Services of Banks in India- common practice: customer service is not what banks offer  
but what the customer gets and how he perceives it. The few common practices in customer service  
followed across banking industry in India – while some are self initiative, others are mandated by the  
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Enquiry / May I help you counter: All the banks have an enquiry or may I help you counter in  
their entrance which addresses all the customer’s queries invariably. Apart from the regular customer  
who does the transaction on daily basis, all others can approach the desk. In most of the banks  
this counter is placed in such a way that it looks predominantly in the branch. The customer  
service officers who are placed in the desk are trained to handle all the customer queries and  
complaints. This counter forms the primary interaction point with the customers as well as non-  
Comprehensive Notice Board: RBI vide its circular DBOD No. Leg BC.33/09.07.005/ 2008-09  
dated August 22, 2008 made it mandatory to display the various information like service charges,  
terms and conditions, interest rates, time norms for various banking transactions and grievance  
redressal all in trilingual through the comprehensive notice board. This information is one of the  
modes of imparting financial education and enables the customers to take informed decisions  
about different products and services. It disseminates the information on grievance redressal  
Customer Education Series: This is one of the recent initiatives among the banks, to educate  
their customer and to make them aware of their responsibility. It assumes great importance with  
regard to debit/ credit cards and online banking services. The education happens, among others,  
through various channels like brochures/ pamphlets, SMS, emails, notification through statements.  
These education series helps the customer to recognize the importance of understanding the  
banking products and services completely.  
Customer Service Committee Meetings: In order to encourage the formal channel of  
communication between the customer and the bank, RBI has advised the banks to establish and  
strengthen branch level committee with greater involvement of customers. This committee serves  
as an opportunity to interact with the customers and to get their feedback. Since the meeting is  
mandatory, it also acts as a forum to discuss various changes that are planned to be implemented  
by the bank. The customer can also voice his concerns over a range of issues which affect them.  
Thus it is a win-win solution for both the bank and customer.  
Citizen’s Charter: There was no bench mark level for the customer service in the banking industry.  
On occasion of completion of fifty years of independence, Government of India introduced the  
concept of Citizen’s Charter in form of a promise to the customers from public authority. It provides  
a resolution that any customer who is not getting the service as per the promise could access the  
grievance redressal machinery of the bank.  
Customer Service Centers: 33 customer service centers have been set in state capital/ major  
cities, where a public sector bank is given the lead responsibility to coordinate grievance redressal  
Customer Day: Observance of 15 day of every month as ‘Customer Day’.  
Setting up of a Directorate of Public Grievances under the cabinet secretariat which entertains  
grievances from the public.  
Use of courier service and other faster means of remittances.  
Regulatory Expectations  
In the past RBI has made several attempts to provide quality customer service across the industry. In  
975, the Government of India (GOI) had appointed the Talwar Committee on customer service in  
banks. In 1990, RBI appointed the Goiporia Committee on customer service in banks. The committee  
made 15 core recommendations which includes – service of counters, business & working hours,  
nomination, issuance of statements and passbooks, adequate infrastructure, time norms, availability  
of complain books, instant credit of outstation instruments, penalty for delay in outstation instruments  
collection and extended business hours.  
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In 2004, the Tarapore Committee recommendations led to formation of Board level committees for  
monitoring customer service in banks. In 2006, RBI appointed a working group to formulate a scheme  
to ensure reasonableness of bank service charges under the chairmanship of Shri N. Sadasivan.  
RBI had set up in 2010 a committee headed by Mr. M. Damodaran, former Chairman, SEBI. The  
objective, was to review the existing system of attending the customers with respect to approach,  
attitude and fair treatment. Evaluate the present system of grievance redressal, role of board of directors  
in customer service. The committee made recommendations ranging from the uniformity in account  
opening forms and Know Your Customer (KYC) to online grievance redressal system etc. The important  
recommendation is involvement of boards in customer service. It involves the proactive role of  
management in implementing the guidelines and instructions.  
The above not only shows the regulatory expectation on customer service but also sets the minimum  
standards on customer service in the banking industry. While many of the above recommendations  
are implemented across the industry, whether it is followed in letter and spirit is still a debate.  
Challenges in Customer Service: The Baking Ombudsmen Scheme (BOS) was introduced by RBI  
for banking sector in 1995. The scheme aims at providing an expeditious and inexpensive forum to  
bank customers for resolution of complaints relating to deficiency in banking services provided by  
commercial banks, regional rural banks and scheduled co-operative banks. The scheme is administered  
through 15 OBOs, spread across the country. Based on feedback and to suit the requirement of  
customers in a fast changing banking scenario, the BOS is being updated regularly by RBI. Since  
inception, the BOS has been modified four times in 2002, 2006, 2007 and 2009, to include customer  
complaints on new areas such as credit cards, internet banking, and deficiencies in providing the  
promised services by both bank and its sale agents, levying service charges without prior notice to the  
customers non-adherences to the Fair Practices Code adopted by individual banks etc.  
In the words of Dr. D. Subbarao, Governor, RBI at The Annual Conference of Banking Ombudsman  
help at RBI in September, 2011, he stated that often, prevention was better than cure. In customer  
service area, rendering good customer service was like ‘prevention’ and was better than the ‘cure’  
which was the various grievances redressal mechanism. True to Governor’s remarks, the below Table  
& Figure 1 shows the number of complaints the Banking Ombudsman has received from the year  
005-06 to 2013-14. This is despite the fact that there are internal grievances redressal mechanisms  
before approaching the ombudsman. The table 1 shows an increasing trend of the number of complaints  
received by B.O. The number of complaints received by B.O. in 2013-14 are more than double of those  
received in 2005-06.  
Table 2  
Number of Complaints received by BO Officers in the year 2005-06 to 2013-14  
No of BO Offices  
No. of Complaints received during the year  
Source: Banking Ombudsmen Scheme – Annual Report 2009-10, 2011-12, 2012-13 & 2013-14 by RBI.  
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Figure 1  
There is a marginal increase of 9% in the average number of complaints received per OBO. On an  
average each OBO has received 5,105 complaints during the year 2013-14 compared to 4,702 during  
the year 2012-13 as indicated in Table 3 and Figure 2.  
Average number of complaints received per OBO  
Source: Banking Ombudsmen Scheme – Annual Report 2011-12, 2012-13 & 2013-14 by RBI.  
Figure 2  
The bank group wise classification of complaints received by OBOs is indicated in Table 4 and Figure  
for the period 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14. Among bank groups, SBI & Associates  
with 32% of the total complaints received were the highest complaints recipient along with nationalized  
banks. 31% is followed by private sector banks with 22% and foreign banks with 6.5%, in that order. In  
respect of nationalized banks, complaints increased by 1%. For SBI & Associates, and foreign banks  
group there was a decline of 1% and 0.5% in complaints received, over the previous year.  
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Table 4  
Bank Group-wise classification of Complaints received by OBOs  
(Figures in bracket incidate %age to total complaints of respective years.)  
Source: Banking Ombudsmen Scheme – Annual Report 2011-12, 2012-13 & 2013-14 by RBI.  
Figure 3  
The spirit to meet the customer’s expectation is something which is lacking in the industry. It is not only  
the nationalized banks but also the private sector banks which are far beyond the customer’s expectation.  
Why the so called modern tech savvy banks amount to such a large proportion of complaints, is a  
matter to be studied in depth. Below are the intricate challenges faced by the industry, which is the  
primary reason for the above BO complaints as well. The Table 5 & figure 4 portraits the nature of  
complaints received under different category.  
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Table 5  
Category-wise Receipt of Complaints  
Source: Banking Ombudsmen Scheme – Annual Report 2011-12,2012-13 & 2013-14 by RBI.  
Category wise Distribution of Complaint for the year 2013-14  
Figure 4  
Card related complaints at 24% of total complaints received, constituted the single largest ground of  
complaints received. However, compared to previous year there is a decline of 1% in the number of  
card related complaints. Increase in general awareness about the usage of cards can be one of the  
reasons for decline in number of complaints on this ground.  
Unsuitable products or services: The products that the banks offer should meet the customers’  
demand and expectations. Of late there are complaints that the product or services offered to the  
customers are not satisfying their expectation. This is a fact in many of the advisory products such as  
derivatives, mutual funds and insurance. RBI has slapped fine on various banks for selling derivatives  
without carrying the due diligence with regard to the suitability of products to the particular customer  
RBI press release dated April 26,2011). Most of the advisory products such as mutual funds, insurance  
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are sold without properly illustrating the inherent risk in the particular products. As mentioned in RBI  
Annual Report 2010-11 pg 106, the risk appetite of the customer is also not considered by the banks  
while promoting these products which leads into a feeble situation for the customer and the banks.  
Inadequate Knowledge: “Caveat Emptor” (Let the buyer beware) may be a known doctrine in trade.  
But when it comes to banking products and services the anus lies on the banks to make the customer  
aware of the risk in the respective products. Morally the doctrine applies here is “Caveat Venditor” (Let  
the seller beware). The word morally is used here as there is no legal binding on the banks when the  
customer signs the application along with terms and conditions. But if the details are made known to  
the customer before taking the decision, it would avoid many embarrassing situations later. We are  
witnessing large number of complaints on credit cards and loans. Credit card complaints tops the  
above BO complaint table for the year 2009-10, with 24% respectively. It is second highest for the year  
013-14 with 24.1%. This arises out of the ignorance of the customer on part of the billing or payment  
Failure to meet commitments: When a commitment is made by the bank, it should be honored  
without fail. If the commitments comes with any pre-condition that should be informed to the customer  
well in advance. There are cases where the commitment is partially/ not fulfilled. This leads to the  
dissatisfaction which ultimately leads to losing the customers or facing the legal action and sometimes  
both. The presence of numerous print and online medias make the situation worse as they publish  
such negative news of the banks. There are highest numbers of complaints (26.6%) BO received in the  
year 2013-14, under the category failure to meet commitments.  
All the above clearly narrates the lack of transparency and lack of awareness. A well informed ordinary  
customer is far better than an ignorant but loyal customer.  
Smiley Customer Service :  
A customer does not select the bank for the catchy slogans colorful brochures, but for the efficient and  
prompt services offered to them. Smiley customer service is one of the mantras to retain the customer  
for lifetime with bank.  
RBI in its BO – Annual Report 2013-14 has emphasized the following principles to deal with customers.  
Minimum courtesy and behavioral standards  
Non-discriminatory policy  
Deliver what is promised  
Allowing ‘switching’ of products without excessive penalty.  
Appropriateness of ‘sell’ and  
Firm and polite stand against unreasonable customer demands.  
While the above principles emphasize the minimum standards on customer service, on the basis of  
interviews conducted, a list of ten essential tips for great customer service skills are suggested.  
Answer your phone: Get call forwarding or an answering service, but the bank should make sure  
that someone is picking up the phone. Phone answering skills are critical for businesses, and the  
way it is answered form’s customer’s first impression.  
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Don’t make promises unless you will keep them: Reliability is one of the keys to any good  
relationship. Think before you give any promises, appointments, deadlines etc to you clients,  
because nothing annoys customers more than a broken promise.  
Listen to your customer: Let your customer talk and show him that you are listening by making  
the appropriate responses, such as suggesting how to solve the problem.  
Satisfaction of needs of the customer: As a banker you have to be clear about the customer  
needs and their expectations. The customers of the banks are in large numbers, and it is difficult  
to dovetail the products to individual needs, deposit plans and leading schemes are designed to  
meet the needs of different customer groups. Therefore, every customer has to be guided and  
helped to choose the scheme from among those available and most suitable to his / her needs.  
Well designed customer service must be accompanied by good delivery. The five elements that  
constitute good delivery are – speed, timeliness, accuracy, courtesy and concern.  
Be helpful-even if there’s no immediate profit: The fact that a customer cared enough to ask is  
all you need to know. It may be an exception from your customer service policy, but (if it isn’t  
illegal), try to do it. Remember you are not making one exception for one customer, not making  
new policy.  
Train your staff: The diversity calls for multitasking skills and depth in product knowledge. The  
banks should have training programs, which refreshes the staff. There should be a rotation policy  
among the staff within the same branch. It helps everyone to understand and equips them to  
handle the customers. The customers get greater satisfaction when the involvement of staff is  
Creating awareness: The customers may not go through all the terms and conditions. There are  
many cases, when they trust the banks and sign the document blindly, though it is not a good  
practice. The banks should make the customers aware by putting terms and conditions in local  
language which makes the customers comfortable. The change in terms and conditions, should  
be informed to customers by all possible methods.  
Proper redressal mechanism: The bank should have a decided counter which will provide a  
reference number to the customer irrespective of the nature of the complaint. The unit can co-  
ordinate with the relevant department and resolve the customer query. The bank should have  
fixed time to resolve each query. Once the customer approaches with his complain or query, he  
can be given a reference number and expected resolution time for the same. In case the customer  
feels the time is too long or he is in urgency, importance can be given to the particular case and  
can be resolved on priority basis.  
Modern technology: Innovation and growth of the modern technology has changed the face of  
the industry. It provides an opportunity for the banks to offer various new products. But the challenges  
it throws on the industry is equally high. This hurdle can be overcome only by creating the awareness  
among the customers as well as the staff.  
0. Equal and Non-discrimination in service: Fair treatment of all customers is another important  
factor in customer service. The common practice among the banks is to classify the customers  
according to the balance or the multiple product holdings. The customer with the higher balance  
is given priority over others. There should not be any differentiation in the basic service level with  
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huge population still to be covered by banking service, fair treatment will ensure faith of the existing  
customers who will bring new customers eventually. On applying the above ten rules consistently  
the bank will become known for its good customer service.  
It is always a challenge to maintain higher customer satisfaction level. There are efforts to standardize  
the common practice across the industry by regulators and self regulatory and professional associations.  
While the process and products can be standardized, what is impossible is to standardize the customers  
aspirations and expectations. Each customer requires a different approach. Especially in a country  
like India which is multi-faced with different-linguistic and cultural background. To be more effective in  
the market, banks should focus more on their service and pay attention on the core competitive strategy.  
Therefore, “Smiley customer service is one of the mantras to retain the customer for life time with  
banks and “service with smile is authenticity of positive display”.  
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the Customer for lifetime with Bank,” Bank Quest-Journal of Indian Institute of Banking & Finance, Vol  
3: No1, ISSN00194921, pp. 35-42.  
Reserve Bank of India, Annual Report 2010-11, 2012-13.  
Reserve Bank of India, Banking Ombudsmen Scheme – Annual Report 2009-10, 2010-11, 2011-12,  
012-13, 2013-14.  
Sharma, S. N. and Padhy, L.P. (2011, October-December), “Customer Service in Banks – Best Practices,”  
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Subbarao, Duvvuri. (2011, September 5), Speech by Governor at “The Annual Conference of Banking  
Tiwari, Aparna and Parind, Burande. (2012, January – June), “Customer Relationship Management:  
Emerging Practices, Process & Discipline,” International Research Journal of Sinhgad Institute of  
Management, Pune. Vol 5: Issue II, ISBN:0974-0597, pp. 134-137.  
Turban, Elraim. (2002), Electronic Commerce: A Managerial Perspective, Prentice-Hall, ISBNo  
Prof. Sunita Sharma, Head, Dept. of Commerce, Maniben Nanavati Women’s College, Mumbai.