Bankers peeved over RBI hold in codes body

Commercial banks are at loggerheads with the Banking Codes and Standards Board of India (BCSBI) over the manner in which the body functions.

Banks are finding it difficult to implement the customer services code as per the wishes of the RBI-appointed governing council of BCSBI.

The banks want to assume operational management of BCSBI and are not keen on waiting for the first five years to end, when the central bank would stop funding the initiative.

Bankers argue that the customer services code is being forced upon banks with absolutely no say in the decision-making of the body. "The BCSBI was supposed to be a society of members. It was supposed to be a voluntary code to be implemented voluntarily and not as a regulatory diktat. The BCSBI cannot act as a regulator. Right now, the feeling is that it is issuing diktats," a senior banker said.

Under the aegis of the Indian Banks' Association (IBA), banks have conveyed to the RBI and the BCSBI that they would want to takeover the funding of the board from the central bank. Banks want the BCSBI to start functioning as their self-regulatory organisation and not like a regulatory body.

"Banks are quite capable of funding the BCSBI and the BCSBI can start working as a self-regulatory organisation," said H N Sinor, chairman, IBA.

The BCSBI was set up last year as a society with the RBI and commercial banks as members to monitor the implementation of the banking services code, with the banking regulator empowered to nominate the governing council members and assuming the responsibility of funding the board for the initial five years.

K J Udeshi, chairperson of BCSBI, said "We are telling banks that they should at least start implementing, we will give them time. We are not convinced of the banks' efforts. A copy of the code costs only 75 paise. We are saying give each and every customer a copy of the code. The code is a charter of rights, banks are scared customers will come to them armed (with information)."

This is not the first time that banks have represented to the RBI to fund the BCSBI. The first request was made when the board was set up, but the RBI has always maintained that it wants to have complete say in the operations of the BCSBI in the initial years.

Udeshi said "As the rules stand, the question of anyone else nominating another member on the council does not arise. The memorandum of association stipulates that the first governing council will have a term of five years. The members shall be nominated by the RBI and remain at the pleasure of the RBI. The RBI feels that having one serving banker (from private or public sector) on the council will create a conflict."

"This (banks' demand) has not found favour with the RBI and the RBI has informally conveyed to us that the BCSBI should be allowed to mature before banks are allowed to fund it," Sinor said

Pending a decision on allowing banks to fund the BCSBI, the IBA has sought to nominate a banker on the governing council of the BCSBI. The governing council of BCSBI includes representatives from depositors' association and industry and also former bankers, but no serving banker is a member.