Damodaran Committee Report!

What is it about:

The RBI constituted a committee under the chairmanship of former SEBI chairman M. Damodaran, last year. It was given the task of looking into banking services rendered to retail and small customers, including pensioners. Its report was tabled last month and made public last week. Some of the recommendations of the report include:

• System to block a stolen ATM card through an SMS
• to raise the insurance on bank deposits to Rs. 5 lakhs
• a single common toll free call number for all banks
• zero liability against loss in ATM and online transactions
• creation of a single common toll free call number for customer services for all banks
• banks to compulsorily get their deposits insured from Deposit Insurance and Credit Guarantee Corporation (DICGC)
• setting up of a third party Know Your Customer (KYC) data bank
• proper prescription of service charges for basic services
• provision of floating rate housing loans on a non-discriminatory basis

What are the reasonable recommendations:

All borrowers should be told upfront, rather than piecemeal, about the various documents required to be produced for processing their loan applications, customers should be given more choice and better services, etc.

And the unreasonable ones:

To suggest that the banks must recognise the socio-economic importance of funding projects  especially in the north-east, while determining the various parameters and not strictly interpret and implement sectoral exposure caps, makes the banks a commercial entity rather than arms of the government. Moreover, the committee's repetitive call for levy of 'reasonable' charges is a little unreasonable, too. It may not put a lot of pressure on the affluent class, but might be a bit too severe for the common man.

How can things be implemented for the best:

The recommendations can have the best results through competition, empowered customers and a watchful regulator, not through a stringent fiat. The financial literacy and awareness of customers should be developed. These recommendations might help satisfy the whole lot of customers who currently feel discriminated against and dissatisfied with the banking system on certain aspects.