Page 12 - BANKING FINANCE NOVEMBER 2023

RBI CORNER

"The RBI has, in exercise of its power, On July 5, the Reserve Bank of India cial advice and services rather than just
under section 35A of the Banking Regu- (RBI) had released a draft circular on making sales, he added.
lation Act, 1949, directed Bank of changing the arrangements between He said banks should have adequate
Baroda to suspend, with immediate card networks and banks and non-bank oversight whenever a product or ser-
effect, any further onboarding of their entities authorised to issue cards. vice is offered in partnership with a
customers onto the 'bob World' mobile According to the notification, cards fintech. Banks must view fintech as an
application," RBI said in a release must be issued across more than one opportunity and not a threat,
It said the action on the bank is based network and the issuers must give Swaminathan added.
on certain material supervisory con- their customers the option to choose "I am glad that most of you have
cerns observed in the manner of from them. Customers can exercise the adopted such a collaborative ap-
onboarding of their customers onto option at the time of the issuance of proach, but please bear in mind the
this mobile application. the card or at any other time. These principal responsibility to your custom-
Under section 35A, the RBI has power orders were stated to be effective from ers lies with you and not with partners.
October 1. It is therefore essential to have ad-
to give directions to banks 'to prevent
the affairs of any banking company be- The RBI also said the card issuers equate oversight when a product or
ing conducted in a manner detrimen- should not enter into any arrangement service is being offered through such
tal to the interests of the depositors or or agreement with card networks that partnership channels."
in a manner prejudicial to the interests restrained them from taking the ser-
of the banking company'. vice of other card networks, thereby Bank boards should pre-
The RBI directed BoB that any further debarring banks from entering into vent over dominance by a
onboarding of customers of the bank exclusive contracts with networks. few members: RBI
on the 'bob World' application will be
subject to rectification of the deficien- Bank staff's first duty is to Reserve Bank of India Governor
cies observed and strengthening of the meet needs of customers, Shaktikanta Das asked bank boards to
democratise discussions and prevent
related processes by the bank to the excessive dominance by few members.
satisfaction of RBI. not targets
Banks must ensure their employees In his address at the conference for di-
The bank has also been directed to en- rectors of urban cooperative banks
sure that already onboarded 'BoB understand that the primary responsi- (UCBs), Das said the quality of board
World' customers do not face any dis- bility is to serve a customers' financial discussions should be free and frank
ruption on account of this suspension. needs, while maintaining a focus on because the idea of cooperation is
targets, said Swaminathan J, deputy
In a statement, BoB said that it has al- governor, Reserve Bank of India. based on the idea of democracy.
ready carried out corrective measures "The (UCB) board members are elected
to address the concerns of the RBI. It While speaking to top executives of and the underlying principle of the func-
major banks on customer grievances,
has initiated further steps to plug any tioning of the co-operative bank is de-
Swaminathan said banks should have a
remaining gaps identified. The lender mocracy. The discussions on the board
also assured its customers that they policy on customer appropriateness should be democratic and transparent.
will not face any disruption and will con- and product suitability framework to Everybody should get a chance to speak
help reduce mis-selling.
tinue to enjoy uninterrupted services and there should not be an over domi-
on BoB World mobile app. "Being commercial entities, there's nance or excessive dominance by one or
nothing wrong in being target-driven, two members of the board or by the
RBI's multiple card rule but regulated entities must ensure chairman or the vice chairman or a
kicks off tomorrow employees understand their primary group of directors," Das said.
responsibility is to serve customers' fi-
From October 1, banks will provide cus- "We have seen this in big commercial
tomers the option to choose from mul- nancial needs." banks also, and wherever we have seen
tiple card networks like Visa, There should be a clear and transpar- this, we have told banks that this is not
MasterCard, and Rupay for their debit, ent incentive structure that rewards the way…one or two directors cannot
credit, and prepaid cards. employees for delivering quality finan- excessively dominate," he said. T

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