With portability of accounts, banks cannot afford to be lackadaisical in their approach
Reserve Bank of India’s (RBI) move to introduce portability of bank accounts to induce competition and improve banking and financial services is a great idea whose time has come. This one move would wake bank officials from deep slumber and force them to provide real time and cost effective services to their consumers. Be it a savings bank account holder, retailer, industry leader, farmer or trader, they must have the basic right to move out of a bank with his or her account and the entire portfolio.
If mobile number portability became a reality and spurred competition among the 12-odd service providers beginning 2012, why not extend the same framework to banking and financial services? RBI deputy governor SS Mundra’s nudge to Indian Banks Association (IBA) to adopt account portability will in all likelihood face resistance from bank managements owing to apprehensions of losing business to competition. Rampant corruption, nepotism and mis-selling of banking services as well as products that occur regularly will have to be tackled right away. Also, treating an account holder as a valued customer is yet to become a reality in many banks that fail to offer even basic facilities.
Especially in rural areas, the bank officials treat the semi-literate and literate people with disdain. This must come to an end forthwith once a comprehensive overhaul in banking services including account portability is allowed.
If an insurer can port his or her car or life insurance policies for lack of services or premium cost consideration, the same must become a reality for bank accounts, investments like fixed deposits, bonds or any moveable or immovable assets linked with these accounts. Given that several private pension funds are also in operation, why not allow portability of pension accounts? Competition will ensure better service standards. For instance, insurance is bought the world over while in India it is sold. Policies are sold by salesman who have to complete their targets and servicing the client be damned.
While a mobile number remains same even with the change of service provider, the same should be possible with bank accounts. Given that the campaign to link bank accounts to Aadhar card and Pan numbers is underway, this is the right time to attempt portability in banking services. Offering a permanent financial address to Indians must become a reality. Way back in 2012, the RBI’s notification to facilitate intra-bank account portability has made a big difference ringing in competition among bank branches to secure business.
United Kingdom has had some experience in making portability of current accounts for bank customers based on a report of the Financial Conduct Authority (FCA), the country’s regulator. Though a million-odd people did port their accounts, this did not become a universal phenomenon given serious lacunae and costs involved. Successive governments in Australia have vetoed the move to allow bank account portability.
In the Indian context, already a robust National Payments Corporation of India (NPCI) has been facilitating unrestricted and smooth e-payment services gateway across banks, financial institutions, markets and products. Since, huge investments have already been made by both the banking sector and government to move towards a ‘less cash’ economy, this is the right time for ringing in bank account portability seamlessly. NEFT and RTGS payment systems across banks have been smooth.
In well-developed markets, people have had the freedom to switch service providers in a wide range of sectors like electricity, water, residential and community up-keep operations as well. While we propose to build over 100 smart cities, portability in banking services need not be denied. Security of these payment highways across banks may be a big challenge given the kind of cyber-threats the banking systems and markets continue to face globally. Once that is achieved, allowing portability of bank accounts will give a fresh opportunity for public sector banks that account for about 70 per cent banking business to widen the ambit of competition with private banks, foreign entities, cooperative and specialised banks.