The S S Tarapore Committee on Procedure and Performance Audit on Public Services has suggested a set of stringent measures for censuring banks offering bad customer service.
The report will form the basis of the Reserve Bank of India's proposed Banking Codes and Standards Board of India.
The board will be set up to ensure a comprehensive code of conduct for fair treatment of customer. It would "evolve on the model of the mechanism in the UK," an RBI release said on Thursday.
Sanctions by the board could include publication of banks' name and details of the reach, inclusion of breach details in its annual report, issuing of instructions to banks on remedial action, warning or reprimand, cancellation of its registration with the board and finally imposition penal action.
The board would be empowered to report such matters to the regulatory authorities, the report recommended.
As per the recommendations, the BCSBI should be set up an independent organisation but supported and fully funded by the RBI.
The board would draw up specific formats in which the relationship managers would report their findings.
Once the board is formed, there would be a formal convenant between the bank and the board and this document would serve as a registration of the bank to the board.
The board would have five members drawn from different disciplines such as banking, law and accountancy and could be assisted by small staff of qualified and experienced persons.
In addition to this, the committee suggested that there would be a large number of relationship managers, who would not be the board's staff but would be remunerated by the board and would report to the board on their findings.
Each RM would be required to attend to a specified number of banks/branches at select locations and use a variety of instruments to collect information based on press reports and formal visits to banks/branches to assess adherence to the codes and standards.
In cases where the board has serious concerns, the report suggested, it could appoint a special team of auditors to examine the matter and the cost of the audit could be borne by the concerned bank.
Based on the reports of the RMs and the board's own assessment and the audit report, the concerned bank would be asked to explain in writing any deviations from the codes and standards and its own compliance report.
The board's decision would be final and not subject to revision/arbitration by any other body. The recommendations have stressed that the entire framework would be based on a convenant between the bank and the board and the case would go through a myriad of processing.
BCSBI is based on the institutional arrangement in the UK, where a separate board has been set up to oversee the code drawn by the banks' association.
The Banking Code of the British Bankers Association is a voluntary code, which sets standards of good banking practices for financial institutions to follow when they are dealing with personal customers in the UK.
The code applies to savings deposits and current accounts, card products and services, loans and overdrafts and payment services including foreign exchange.