The appalling Indian Retail Banking

In India, as of April 2024, there were 12 Public Sector Banks, 21 Private Banks, 43 Regional Rural Banks, 34 State Co- Operative Banks totaling to about 137 Banks. Banking services are an inescapability in contemporary living. It’s part of a citizens’ circadian existence. However, is visiting a Bank, physically or electronically, a pleasant experience? Certainly not! Most Banks’ attitude is abysmal. Retail Banking in India is very much a supplier driven commodity. The entire Banking ecosystem reeks of entitleism. No matter what the Banks purvey, a retail customer is of least priority, almost a pestilence, and is to be treated accordingly. Awful encounters over the counter are not restricted to PSE Banks alone but are equally applicable to most Private and Cooperative Banks as well. The much publicized retail banking services are far from satisfactory, in fact, quite ugly for most customers. Being on the wrong side of the cashier’s desk is a hair raising experience. A Customer shudders at the very thought of visiting a bank outlet. Beyond the harsh, eye straining light, ill-conceived work stations/service counters, numerous ‘no go’ zones, lies a quagmire of unfamiliar rules, procedures, red tape, opaque prearrangements. These are all calculated at throwing off the most well intentioned, polite and patient customer. The permanently aggressive staff and eternally missing (meeting attending) Branch Manager add to the vagaries of retail banking. The entire arrangement is calculated at ensuring that marginal services are doled out with a ubiquitous ‘no enquiry’ diktat. ‘Take it or leave it’, is the underlying refrain of most Indian banks. Unless you are Connected, Diwali & New Year gift giving patron, most customers are an unwelcome commodity and need to be made fully aware of it. One does not know where to start while discussing Retail Banking in India. There are multifarious dimensions to it. Banking everywhere, including India, has been lately, riding on the crest of Technology. Today, one can’t imagine the Banking & Technology bereft of one another. Indian Fintech is estimated to become a US$ 150 billion industry by 2025. India has the 3rd largest FinTech ecosystem globally and is one of the fastest-growing Fintech markets in the world. While Technology has greatly enhanced the banking experience, it has also brought in a class of have and have-nots. India and Bharat consume technology differently. Routine, in the face, front panel skills can be easily mastered, however it’s a myth that it will lead to higher digital literacy. While, Digital Payment Platforms like UPI have been an unmitigated success, it has not lead to any significant edification. It’s only natural when large swathes of the country lack even basic IT Infrastructure/Internet. Its ironical that no efforts are being taken to make these services universally operable. Even the existing systems are tightly stretched. A headline of 02.04.2025, makes for a telling point- ‘With No Cash in Hand…’: India Hit by UPI, GPay Payment Failure; Internet Flooded with Memes. Unified Payments Interface (UPI) transactions UPI, Google Pay, PayTM along with State Bank of India (SBI) and other bank services were reportedly down in India on Wednesday, causing all payments to hang. The outage has caused huge inconvenience to people as many relied on digital payments, and did not carry cash with them. While the nation then faced technical glitches, according to several media reports, the outage surged throughout the day, but peaked only in the late afternoon and evening. Following that a number of reactions started to flood on social media platform X. So even the glorified UPI, after all, does have shortcomings. But such stories are quickly buried by service providers and soothsayers. Banking, remains one of the most regulated sectors in the Indian economy. When Government allowed private banks to operate more freely, many private banks came into existence, promising superior services. No doubt, over the years, retail banking added proficiency. Both Private & PSU Banks strengthened their armory. The digital revolution vouched for increased capacity, more accurate services and reduced downtime. Initially there were huge improvements but they soon became stagnant. Why the Banks can’t simply understand that Technology requires constant traversing, it’s not a onetime journey. And all this obviously requires regular investments. One has to put money where the mouth is. The very technology which was initially so effective now lead to bottlenecks. The oft heard refrain ‘Server is Down’ has become gist for jokes. Poor Communication channels often lead to traffic snarls on digital highways. Every Bank has pursued its own technology; lack of convergence & coordination are a bane. Today, Indian Banking faces quaint situations for even simple money transfers. Whereas, same day foreign exchange transfer, over thousands of kilometers has become possible; it still takes 48 hours, (sometimes more), for money to get deposited through a local Cheque Transfer from one Bank to another, just few kilometers away, in the same city. This despite Bank and RBI Claiming 24 hour transfers. To complicate matters further, the technology learning curve for a Bank, its employees and the customer is becoming more and more cumbersome. Many a times banking staff is seen trying to figure out processes in their own bank’s software and seeking help from others. Numerous Scams have ripped open the fragile Security Software. Lack of adequate firewalls and foolproof digital security systems have led to frequent hacking and retail customers losing their hard earned money. The Reserve Bank of India (RBI) recently released a list of three safest banks in India. These are banks that have been given the status of “domestic systemically important banks” (D-Sibs; the three safest banks are: – 1. State Bank of India (SBI), 2. HDFC Bank, 3. ICICI Bank. Well the other banks, by this logic, are quite unsafe, customers be warned! Well the truth is, most banks are susceptible to scams by swindlers who manage to keep far ahead of the banks security protocols. To the dismay of victims; the much touted Amitabh Bachan refrain – “Jankar Baniye, Satark Rahiye”, RBI averments and Ombudsman Claims, do not come to rescue in securing & refund of money lost in most scams. Without any realistic solution for ghost account holders, unscrupulous hackers and retail banking scams, RBI resorts to nondescript, knee jerk reactions. In an attempt to keep its slate clean, it regularly issues instruction to banks for taking measures to secure money deposited by the common man. On ground, such RBI instructions get translated into endless KYC certifications. Customers have to run helter skelter for KYC compliance. It’s turning out to be a sort of arm twisting of the hapless Account Holder. Money and Time get wasted on such vexatious experiments. Physical and digital platforms for KYC updating remain bothersome and long drawn. It’s often a heart breaking scene at Bank outlets when customers, especially Senior Citizens, are denied small sums of Cash by banks, due to so called non- compliance of KYC. Even if by some co incidence a customer does carry the Aadhar & PAN Card at that very moment, KYC is still not easy. Forms are required to be filled in, appropriate bank authorities (who may be absent from his seat) need to sign, entries are to be made in computer consoles before the KYC updating is actually done. By that time, in all likelihood, half a day or full banking day is gone for the woe begotten customer. Mera paisa aur mujhe hi nahi mil raha, is oft the indignant lament. Most times, these customers, leave in a huff, without obtaining the petty cash, much to the delight of the grinning staff. Fool proof security systems of Banks which should take precedence over everything is nowhere to be seen. What about the much touted AI based solutions? Have the banks even thought about it? Again it boils down basically to service optimization, customer delight and ultimately opening of purse strings. This brings us to another about a vital aspect, why does the consumer have to face the brunt of KYC updating? It’s after all Bank’s job and responsibility. Why can’t banks develop effective solutions to automatically update KYC of its customers? With current dispensations, surely it should not be an unsurmountable task! The lack of confidence of banks in their own systems and passing the buck to the customers is unacceptable. The answer may actually lie in the lack of will to provide service excellence and investing in robust, fool proof systems. Retail Banking today, has become yet another entitled social sub system in India. Although this article does not attempt to look at the financial performance of the leading banks in India but one cannot avoid a mention; after all Banking is all about money and profits. We can take three PSE Banks as representative examples. State Bank of India recently posted its Q4 2025 Results, wherein it admitted that Net Profit Declined 9.93% (YoY) to Rs 18,643 Crore. Loan losses provisions had gone up by 20.35% YoY. Domestic Net Interest Margin dropped by 32 Basis points. Domestic NIM was at 3.22% down 21 bps from 3.43% in FY 24. A reason being given by State Bank of India is that Q4 net profit dipped 9.9% due to a one-time pension provision of Rs 7,100 crore following a 50% pension hike. Well, well, well, who says that a PSU Bank job is not paying. Zindagi ke saath bhi zindagi ke baad bhi, should in fact, be the tag line of SBI. Punjab National Bank will shortly announce Q4 Results 2025, a dividend for its shareholders may also be there. But many customers point out that after the amalgamation of Oriental Bank etc. with PNB, the services of PNB have gone down drastically. Along with this the scam of issue of fraudulent letter of undertaking worth ₹12,000 crore (US$1.4 billion) by the Bank at its Brady House branch in Fort, Mumbai allegedly organized by jeweler and designer Nirav Modi has impacted it badly. Bank of Baroda announced its Q4 ’25 results on 06.05.2025. It had a 3% increase in its net profit for the fourth quarter of the financial year 2024-25, posting Rs 5,048 crore compared to Rs 4,886 crore in the same period last year. However, net interest income (NII), which is the core earnings from lending after interest expenses, declined to Rs 11,020 crore in the March quarter; a fall from Rs 11,793 crore reported in the same quarter last year. In 2023. In BOB, 4.2 lakh accounts, belonging to 7,000 branches, were suspected to have been wrongfully registered on the bank’s mobile banking application, and were subjected to an audit. So we find that these Banks once leading the sector had a brush with some sort of a scam which ultimately impacted the customers. It was also alleged that Rs 6,172 crore black money was remitted from Bank of Baroda to Hong Kong camouflaged as payments for non-existent imports like cashew, pulses and rice as far back as year 2015. While Financials are the staple of banks and are to be enhanced by all means it can’t mean that banks throw caution to the wind and become conduits for infractions. Eventually, it’s the common man and the nation which pay the price for banks’ transgressions. The story of Private Banks is no better, ICICI Bank has leaked funds for some time. Its operations, experts say are spread too thin for comfort. The sordid story of Ms Chanda Kocchar, who at one time was the blue eyed person of the Banking Industry in India, is known to all. Kotak Mahindra Bank while reporting its quarter results for the financial year 2025, posted a 14% YoY dip in its standalone profit after tax (PAT) at Rs 3,551.74 crore. The net profit for the corresponding quarter of the last financial year stood at Rs 4,133.3 crore. Recently, RBI imposed fines totaling ₹2.5 crore on ICICI Bank, Axis Bank and three others for compliance failures. Co Operative Banks tumble like Nine Pins in India. God help the customers whose accounts get frozen, consequent to imposition of withdrawal limits, by RBI. The joke in the banking circles is RBI should be asked to do the ubiquitous KYC – Know Your Co- Operative Banks, on itself. …NewsIP will shortly carry another story on retail banking scams in India …. The personal loan segment has expanded multifold in India. The market for such loans has rapidly increased. The reasons are ascribed to fintech & digital transformation, changing shopping habits & lifestyle aspirations, rise in number of self-employed borrowers, competitive interest rates and overall economy. However, all is not rose tinted. There are high application rejections, collateral issues, relatively high interest rates, credit rating problems and extremely lengthy paper work leading to much time consumption. RBI also plays spoil sport. RBI has directed Banks to set aside more capital and establish board board-monitored processes on such loans to prevent risk escalation. RBI has increased risk weights on these loans from banks, non-banking finance companies (NBFCs) and credit card providers. All these mean that it will now be more expensive for lenders to offer such loans to consumers. A borrower will have to pay higher interest on these loans. The new rules are not applicable to housing loans, education loans, vehicle loans and loans secured by gold and gold jewelry. Although loans may appear attractive to retail customers, it may be a case of ‘All that glitters is not gold’; it could even be fool’s gold. To compound matters, recently, major banks like State Bank of India (SBI), Punjab National Bank (PNB) and HDFC Bank have announced changes in their minimum balance rules, which will come into effect from 01.04.2025. This change will affect account holders in urban, semi-urban, and rural areas. As of now, there are only rumors’ on what the minimum amount would be. All in all, one can comprehend that retail banking in India is fraught with many anomalies and the consumer continues to get the short end of the stick. Suggestions, Complaints, Brickbats have no impact on the too powerful bank lobby and unionized employees. Readers will be surprised to know that in Banks, even officers have Unions which are dominant and hold sway over the management. They have good salary, relatively less responsivity, cushy Pension & PF, sometimes both. All this does not go along with the spirit of service industries. The outlook is depressing for the average bank customer. For Banks the proverb – He becometh poor that dealeth with a slack hand, may be paradigmatic.