Mumbai: Reserve Bank of India Governor Sanjay Malhotra has urged banks to end the repeated requests for know-your-customer (KYC) documents, calling the practice an "avoidable inconvenience" for customers. Addressing the annual conference of RBI ombudsmen, Malhotra emphasized that once a customer submits KYC documents to a regulated financial entity, the information should be accessible to other institutions through a central database.
“We need to ensure that once a customer has submitted documents to a financial institution, we do not insist on obtaining the same documents again,” Malhotra stated, highlighting that most banks and non-banking financial companies (NBFCs) have yet to fully integrate their branches with the central database. He urged banks to facilitate this process at the earliest for the benefit of both institutions and customers.
The remarks come amid growing complaints on social media about banks frequently requesting customers to resubmit KYC documents. Malhotra also warned financial institutions against misclassifying customer complaints to artificially lower complaint numbers, calling such actions a "gross regulatory violation."
According to PTI, banks received one crore customer complaints in the financial year 2023-24. If grievances against other regulated entities were included, the number would be even higher. Notably, 57 percent of these complaints required mediation or intervention by RBI ombudsmen.
“This is a highly unsatisfactory situation and needs our urgent attention,” Malhotra asserted, stressing that improving consumer service is not just a regulatory requirement but a competitive necessity in the banking industry. He called on bank leadership, from managing directors to branch managers, to dedicate time weekly to address complaints.
“This is a must for all banks,” he said, pointing out that chief executive officers worldwide prioritize consumer grievance redressal. “Left unresolved, such issues can corrode consumer confidence and tarnish the entire ecosystem.”
Malhotra urged banks to view complaints not as a nuisance but as indicators of systemic flaws that need correction. He suggested leveraging artificial intelligence for complaint resolution while respecting customer privacy. Additionally, he stressed the need for banks to address other pressing concerns, including misselling, digital fraud, and aggressive loan recovery practices, which continue to affect customers.