RBI Governor Urges Banks to End Repeated KYC Requests, Focus on Better Customer Service

On Monday, Sanjay Malhotra, the Governor of the Reserve Bank of India (RBI), advised banks to avoid repeatedly asking customers for KYC (Know Your Customer) documents.

Speaking at the RBI Ombudsmen Conference, he pointed out that once documents are submitted to any financial institution, they should be accessible to others through a shared database. Calling repeated KYC requests an “avoidable inconvenience,” he urged banks to upgrade their systems.

Banks Need Better Customer Service

Malhotra expressed concern that most banks and financial companies have not linked their branches to the central database, which creates unnecessary trouble for customers.

He also warned banks against misreporting customer complaints to make their records look better, saying this is a serious violation of regulations.

Rising Customer Complaints

In the 2024 financial year, banks received 10 million customer complaints, and this number could rise further when complaints against other financial firms are included. He revealed that 57% of these cases needed RBI intervention, highlighting the need for better grievance handling.

Malhotra reminded banks that good customer service is not just a duty but also a competitive advantage. He urged bank leadership, starting from the managing director, to take immediate action.

Key Areas for Improvement

Malhotra stressed the need to fix recurring complaints, as they indicate deeper system problems. He also emphasized:

✅ Using artificial intelligence (AI) to handle complaints, while ensuring privacy
✅ Addressing issues like mis-selling, digital fraud, and aggressive recovery tactics
✅ Strengthening internal complaint resolution systems so customers don’t have to escalate issues to the RBI ombudsman

Final Message from RBI

The RBI’s recent press release reinforced Malhotra’s message: Banks must improve customer experience to reduce the need for complaints and grievance redressal.