Banks must ensure their employees understand that the primary responsibility is to serve a customers’ financial needs, while maintaining a focus on targets, said Swaminathan J, deputy governor, Reserve Bank of India.

“Being commercial entities, there’s nothing wrong in being target-driven, but regulated entities must ensure employees understand their primary responsibility is to serve customers’ financial needs."

There should be a clear and transparent incentive structure that rewards employees for delivering quality financial advice and services rather than just making sales, he added.

“Towards this, every financial institution should have a policy for customer appropriateness and product suitability framework."

Today, he said banks should have adequate oversight whenever a product or service is offered in partnership with a fintech. Banks must view fintech as an opportunity and not a threat, Swaminathan added.

“I am glad that most of you have adopted such a collaborative approach, but please bear in mind the principal responsibility to your customers lies with you and not with partners. It is therefore essential to have adequate oversight when a product or service is being offered through such partnership channels."

Swaminathan stressed that banks need to focus on five key areas, including the need for a customer-centric approach, addressing the root cause for complaints, importance of resolution at first point of contact, responsible handling of complaints and combating cybercrime. According to Swaminathan, some banks adopted an innovative way to classify certain complaints as queries, resulting in ignoring the problem. RBI will be taking strong action against such banks that tend to hide truth by engaging in such practices bank employees must guard against misbehaviour, he said.