There is a large emphasis on consumer protection in the banking space in India and it’s rightly so since your money is at play. Be it sending money in India or abroad, a consumer enjoys several rights and is protected by the guidelines set by India’s Central Bank - Reserve Bank of India (RBI). RBI takes care of the Indian banking sector.
International money transfers are covered under FEMA - The Foreign Exchange Management Act. It is the legislation covering the flow of international money transfers by you and it’s enforced by the RBI.
The foreign exchange rules applicable to individual residents are drafted under FEMA in the “Liberalized Remittance Scheme (LRS)”. According to the Liberalized Remittance Scheme, a resident individual can transfer money overseas to the limit of USD 2,50,000 per financial year. This monetary limit can be used in a one-time transaction or through multiple purchases.
Earlier, it was not necessary for you to produce PAN card for money transfer transactions abroad up to USD 25,000 or its equivalent. However, in April 2018, this rule was amended. Now, it is mandatory to produce the PAN card for all your remittance transactions from India to abroad regardless of the amount being transferred. This is to ensure that you are being compliant to the LRS limit of USD 2,50,000 in a single financial year.
RBI has taken a lot of steps in safeguarding and improving your banking experience. Now you can easily file your complaints with the Customer Service Department which was set up in 2006 to act as the nodal department in the RBI for grievance redressal. The department got renamed as Consumer Education and Protection Department (CEPD).
You can also access the Complaint Management System ("CMS") portal at RBI's website to file the complaints against any of the entities regulated by RBI. It was launched by the RBI.
The Reserve Bank of India formulated the 'Charter of Customer Rights' which includes 5 basic rights of bank customers.
Charter of Customer Rights
1. Right to Fair Treatment – Right to Fair Treatment prohibits banks from discriminating against customers on grounds of gender, age, religion, caste and physical ability while offering products and services.
2. Right to transparency, fair and honest dealing – The bank documents will be simplified and transparent “Any features that may disadvantage the customer should be made known to him. Important terms and conditions should be clearly brought to the notice of the customer,” the charter says.
3. Right to suitability – This right tells the banks to sell products after keeping the needs of customers in mind and their financial circumstances.
4. Right to privacy - “Customers have the right to protection from all kinds of communications, which infringe upon their privacy,” the charter states.
5. Right to grievance redressal and compensation – If the bank does not follow the basic norms, you are protected by the right to grievance redressal and compensation.
Role of Banks in Consumer Protection
Banks not only need to make adequate reports about all aspects of their activities and procedures, but they do need to play a proactive role in informing consumers about the products provided, the operating strategies, the risks involved, the precautions and the available recourse options. Banks need to keep pricing, service costs, fines and penalties clear.
Banks should limit consumer responsibility when electronic banking transactions are not authorised. They also have to implement ethical behaviour by financial service providers within the RBI regulatory remit. Banks play a huge role and can spread information by putting emphasis on "Public Awareness"-Marketing campaign on fake offers / fund transfers, cooperation with the Department of Cybercrime, etc.
By disseminating awareness about Banking Ombudsman in rural and semi-urban areas, banks can protect the consumers. They can improve the internal grievances redress mechanism of banks for effectiveness and timely response.