RBI flags gaps in customer transaction policies, tells banks to fix them

Reserve Bank of India Deputy Governor Rohit Jain has identified shortcomings in banks' policies governing customer transactions, warning a recent review of bank websites revealed basic issues that could hinder customers' ability to access information and complete transactions. In some instances, banks directed customers to their schedule of charges or grievance redressal policies without providing direct links, while documentation requirements for outward remittances were overly broad, offering little practical guidance.

Jain emphasized that these issues are relatively simple to rectify and urged authorized dealer (AD) banks to conduct a thorough customer experience review and implement necessary improvements.

During his address to the Annual Day of the Foreign Exchange Dealers’ Association of India (FEDAI), Jain highlighted that a customer's experience with FEMA is not through the Act or Master Direction, but through their interaction with the AD bank in terms of documentation, quoted prices, transaction execution time, and explanation of failure to complete a transaction.

He advised AD banks to establish clear policies governing documentation, processes, approval authorities, charges, timelines, escalation, and grievance redress, which should be displayed on their websites and branches offering cross-border services. Jain stressed that policies must be comprehensive, up-to-date, intelligible, and adhered to at the bank's counter, with compliance tested through internal or concurrent audits, staff training, succession planning, and regular customer feedback examination.

Jain also addressed the growing importance of local currencies in cross-border trade and payments, emphasizing that the Special Rupee Vostro Account (SRVA) framework, implemented to facilitate invoicing, payment, and settlement of international trade in rupees, has been successful if it focuses on commercial viability, market-determined rates, and strengthening confidence in the settlement ecosystem.

He noted that the hard part lies in identifying corridors with genuine two-way flows, building reliable correspondent relationships, offering competitive conversion and hedging solutions, and explaining these mechanics to first-time users. Jain urged banks to see the settlement of cross-border transactions in local currencies not just as a means to reduce reliance on international currencies, but as a way to lower transaction costs, minimize currency mismatches, improve settlement efficiency, and facilitate trade where correspondent banking is costly or constrained. He expressed confidence that banks can and will rise to the occasion.