M Damodaran Committee Recommendations on Banking Customer Service

The M. Damodaran Committee on Banking Customer Service was established by the Reserve Bank of India (RBI) in 2010–11 to examine, review, and improve the standards of customer service in the Indian banking industry. The committee, chaired by M. Damodaran, a former Chairman of the Securities and Exchange Board of India (SEBI), was mandated to identify systemic deficiencies, assess service delivery mechanisms, and propose measures to make banks more customer-friendly, transparent, and efficient in handling grievances.

Objectives and Terms of Reference

The committee’s key objectives were:

• To review the existing framework for customer service across public and private sector banks.
• To assess the efficacy of grievance redressal mechanisms and suggest improvements.
• To examine the impact of technological developments (like internet and mobile banking) on customer experience.
• To recommend special measures for vulnerable groups such as senior citizens, rural customers, and small borrowers.
• To strengthen consumer protection, transparency, and accountability in banking operations.

Major Recommendations

The M. Damodaran Committee submitted a comprehensive report outlining practical recommendations aimed at improving customer service quality across banks.

1. Strengthening Board and Management Oversight

• Every bank should constitute a Board-level Customer Service Committee to monitor service quality and ensure the implementation of customer-centric policies.
• A Chief Customer Service Officer (CCSO) or internal ombudsman should be appointed in each bank to independently review customer complaints before escalation to the RBI Ombudsman.
• Periodic reports on customer grievances and service improvements should be presented to the bank’s Board.

2. Deposit Insurance Enhancement

• The committee proposed increasing the deposit insurance cover for bank depositors from ₹1 lakh to ₹5 lakh, ensuring greater protection in case of bank failure or liquidation.

3. Transparency in Service Charges

• Banks must publish comprehensive lists of service charges on their websites and display them prominently in branches.
• There should be uniformity in charges for basic services across all banks to prevent exploitation of customers.
• Customers should be given advance intimation of any changes in charges, interest rates, or terms of service.

4. Simplified Account Opening and Portability

• A standardised account opening form with a uniform set of required documents should be introduced across all banks.
• Customers should be able to transfer their accounts from one branch to another without changing the account number.
• The Know Your Customer (KYC) process should be simplified for existing customers opening additional accounts within the same bank.

5. Service Standards for Deposits and Loans

• Banks must clearly disclose the terms and conditions of deposit and loan products, including interest rates, penalties, and repayment schedules.
• Passbooks and account statements should include complete customer information, IFSC/MICR codes, and contact details of grievance authorities.
• Timely communication regarding deposit maturity, TDS deductions, or dormant accounts should be ensured through SMS or email alerts.

6. Effective Grievance Redressal Mechanism

• Each bank should establish a multi-channel grievance redressal system encompassing branch-level, call-centre, mobile, and online complaint options.
• Complaint-handling staff must be trained and empowered to resolve issues promptly rather than merely forwarding them.
• Complaints should be categorised, analysed, and reported periodically to identify systemic service gaps.
• The Banking Ombudsman Scheme should be strengthened, with internal ombudsmen ensuring fair pre-settlement reviews.

7. Inclusive Services for Special Categories

• Banks should adopt special policies for senior citizens, pensioners, small borrowers, rural and tribal populations, and self-help groups (SHGs).
• Procedures should be simplified for illiterate and differently-abled customers, with services provided in local languages where necessary.
• Branches in remote areas should ensure adequate cash availability and grievance-handling facilities through Business Correspondents or Rural Service Centres.

8. Use of Technology for Customer Convenience

• Banks should deploy technology-enabled solutions such as self-service kiosks, cheque-deposit machines, and automated cash deposit systems to reduce waiting time.
• Electronic statements and secure digital communications should be promoted to improve efficiency and reduce paper-based processes.
• Adoption of Core Banking Solutions (CBS) and Customer Relationship Management (CRM) systems should be universal to ensure seamless customer experience across branches.

9. Fair and Ethical Practices

• Customers should be treated with respect and fairness regardless of account size or location.
• Banks should follow ethical norms in marketing financial products, avoiding mis-selling or coercive recovery practices.
• A clear Code of Commitment to Customers, outlining service standards and complaint rights, should be adopted by all banks.

Significance of the Recommendations

The committee’s recommendations were path-breaking in shifting the focus of Indian banking from operational efficiency to customer satisfaction and protection. Its emphasis on board-level accountability, transparent pricing, customer grievance systems, and technological innovation reflected a vision of modern, inclusive, and ethical banking.
These recommendations also aimed to align Indian banks with global best practices in consumer rights, disclosure standards, and corporate governance. The integration of technology and policy reforms was intended to bridge service gaps between urban and rural customers and ensure that banking remained both accessible and fair.

Implementation and Impact

While several recommendations were accepted by the Reserve Bank of India and implemented through circulars and policy guidelines, others required phased adoption by banks. Many banks have since introduced:

• Internal ombudsman mechanisms to handle customer complaints.
• Online grievance portals and toll-free helplines.
• Improved disclosures on websites and branch premises.
• Simplified account portability and better customer communication systems.