‘Customer service charter as an enforced regulation’ | Sunday Observer

‘Customer service charter as an enforced regulation’

Central Bank Governor Dr. Indrajit Coomaraswamy responding to queries on what steps the bank intends taking to the problem faced by borrowers in Jaffna who have to pay high interest rates to micro lenders said the Bank had issued a customer service charter as an enforced regulation to curb unethical practices followed by financial institutions in extending lending and recovering loans.

A customer service charter is a written policy that communicates one’s business commitment to doing business with others. The objective of the charter is to provide a framework for defining service delivery standards, the rights of customers and how complaints from customers will be handled.

 “Our regional office in Jaffna has set up help desks in District Secretariats to receive complaints related to indebtedness in the Northern Province. Banks and finance companies have agreed to grant moratoriums for the loans of Rs. 50000 and below,” he said.

The government has introduced special loan schemes to enhance the economic livelihood of people to enable them to obtain low cost funds not for consumption but for economic activities.

“CBSL conducts awareness programs to upgrade the knowledge of the public on financial literacy, debt repayment and other related issues,” the Governor said.

The regulator said last year that it was mulling moves to come up with a moratorium and an interest rate cap. However, it prefers the lending institutions to understand the condition and practice self regulation.

Dr. Coomaraswamy in one of the Monetary Policy review briefings last year said regulatory measures will be tightened on lending institutions that do not comply with regulations.

Meanwhile the Ministry of Finance has planned to hold a two-day program on indebtedness in the Northern province during the first week of next moth. Meetings with financial institutions, government agencies and other stakeholders to discuss implementation of budget proposals pertaining to the issue.

Secretary to the Treasury and Ministry of Finance Dr. R.H.S. Samaratunga said all government sponsored programs for the Northern province will be consolidated and added that the Finance Ministry will hold talks with Government Agents, heads of banks, chambers of commerce and cooperative associations regarding the future course of action on lending.

A large number of households in Jaffna took to street last month demanding action from the government against lending institutions charging exorbitantly high interest rates which low income earner say they have fallen from the frying pan to the fire.

Borrowers resorted to protest months after the Central Bank pledged action on mounting household debt in the war-ravaged region which is still not fully on its feet economically even almost after a decade since the end of the conflict.

The aggrieved parties held slogans which read ‘Our home and country are indebted, what is the solution?; ‘Stop loans, give employment’ and ‘Strengthen people’s organisations’.

Women engaged in self employment and the sole bread winner having lost their husbands in the war were among the most affected by the high interest rates and unregulated loans while others called for speedy intervention of the authorities lest it gets out of hand. Many microfinance institutions facilitated easy access to credit to those struggling to rebuild their lives after the end of the conflict in 2009.

Micro lenders have mushroomed in the country pledging handsome returns to gullible public who rush for higher returns where angels fear to tread. Golden Key and Sakvithi are some of the recent examples where depositors were hoodwinked and robbed. Depositors fail to understand that higher the return the higher the risk is.