Banks to shell out more for customer damages

Ethics body working on equitable compensation policy.

Very soon banks will find it difficult to get away with negligible penalties for lapses that lead to a loss to customers, if the Banking Codes and Services Board of India (BCSBI) has its way. The board is working on a policy which requires banks to adopt an "equitable compensation" approach.

Equitable compensation means if a customer bears a loss equivalent to say 13 per cent annual interest on the amount in question, the concerned bank would have to make up the loss at the same rate of 13 per cent.

Banks now usually provide compensation at the rate of 3.5 per cent which is paid on savings bank accounts, banking sources said.

A UTI Bank official agreed with the proposed equitable compensation policy and said "in case of compensation, customers should be compensated by banks equitably and every question of negligence should be dealt with on merit."

Eleven commercial banks have joined the Reserve Bank of India (RBI) in setting up BCSBI. The board would function as an autonomous and independent body to monitor and assess compliance with its codes and standards by banks which sign up with BCSBI.

The BCSBI code will require banks to have a tariff schedule of charges for various services provided and also list out services which would be rendered free of charge.

Each bank will also be required to lay down a cheque clearing policy whereby customers would have to be kept informed of the exact number of days required for crediting local as well as outstation cheques deposited.

The cheque collection policy deals with cheque purchase requests, time frame for credit of cheques, payment of interest in case of delay in collection of cheques, instant credit of local and outstation cheques, cheques lost in transit and charges for such collection.

It will be mandatory for the banks to inform the customer if the cheque bounces or remains unenchashed. In case there is a delay, the loss will be compensated.