Banking Ombudsman Scheme


By Urvika Shah Sheth (Associate, Lex Services)

INTRODUCTION:

Indian Banking System owing to many discrepancies in services and piles of complaints registered at Reserve Bank of India, a need was felt to overhaul the banking sector by bringing reforms. The Reserve Bank of India brought the scheme of banking ombudsman to provide efficient and prompt services for the customers which would not only serve the purpose of disposing off the complaints but also by protecting the rights of the customers by enabling the banks to maintain healthy customer relationship..

WHAT IS BANKING OMBUDSMAN SCHEME?

The Banking Ombudsman Scheme is an expeditious and inexpensive forum for bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme is introduced under Section 35A of the Banking Regulation Act, 1949 by RBI with effect from 1995. Presently the Banking Ombudsman Scheme 2006 (As amended upto July 1, 2017) is in operation.

WHO IS BANKING OMBUDSMAN?

Banking Ombudsman (“BO”) is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services covered under the grounds of complaint specified under Clause 8 of the Banking Ombudsman Scheme 2006. At present there are 20 Banking Ombudsman which are located in state capitals.

BANKS COVERED UNDER THIS SCHEME

All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

GROUNDS OF COMPLAINTS

There are 25 grounds where customers can raise complaints. Some of them are as under:

  • non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.;

  • non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission in respect thereof;

  • non-payment or delay in payment of inward remittances;

  • failure to issue or delay in issue of drafts, pay orders or bankers’ cheques;.

  • non-adherence to prescribed working hours;

  • failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its direct selling agents;

  • complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank related matters;

  • refusal to open deposit accounts without any valid reason for refusal;

  • levying of charges without adequate prior notice to the customer;

  • Forced closure of deposit accounts without due notice or without sufficient reason;

  • Refusal to close or delay in closing the accounts;

  • The Banking Ombudsman may also deal with such other matter as may be specified by the Reserve Bank from time to time.

    • WHEN WILL THE COMPLAINT BE REJECTED?

      One has not approached his bank for redressal of his grievance first.

      One has not made the complaint within one year from the date of receipt of the reply of the bank or if no reply is received, and the complaint to Banking Ombudsman is made after the lapse of more than one year and one month from the date of complaint made to the bank.

      The subject matter of the complaint is pending for disposal / has already been dealt with at any other forum like court of law, consumer court etc.

      Frivolous or vexatious complaints.

      The institution complained against is not covered under the scheme.

      The subject matter of the complaint is not pertaining to the grounds of complaint specified under Clause 8 of the Banking Ombudsman Scheme.

      If the complaint is for the same subject matter that was settled through the office of the Banking Ombudsman in any previous proceedings.

      PROCEDURE FOR FILLING A COMPLAINT:

      Following are the 3 ways to file a complaint:

      1. File a complaint by writing on a plain paper at the office of the Banking Ombudsman under whose jurisdiction, the bank branch complained against is situated.
      2. By sending an email to the Banking Ombudsman. The List of emails can be found https://www.rbi.org.in/commonman/English/Scripts/AgainstBankABO.aspx
      3. By filing it online on cms.rbi.org.in site.

      DOES THE AWARD OF BANKING OMBUDSMAN HOLDS ANY VALUE?

      The award of ombudsman certainly holds great value and the bank are in obligation to follow the directions issued by the Banking Ombudsman. The scheme provides an elaborate procedure as to the execution of award. The complainant after getting the award from ombudsman is supposed to furnish a copy of the award to the bank along with a letter of acceptance in full and final form and bank may within 30 days from such acceptance of letter, file an appeal to the appellate authority if there is any objection relating to the award.

      SUCCESS OF THE SCHEME

      1. This scheme is free of cost, thus making sure that every customer of a bank can resolve their grievances by approaching the BO.
      2. This scheme has no interference from the Courts.
      3. Speedy disposal of complains. As per the report released by RBI in 2019,disposal rate for the year (2018-19) was 94.03% as against 96.46% in 2017-18.This is largely due to rise in volume of complaints with resource remaining the same.
      4. The Scheme covers wide varieties of banks.
      5. The Scheme lays down the grounds on which the complaints can be entertained by BO. The grounds from the inception of this Scheme has been expanded to include customer complaints relating to credit cards, deficiencies on the part of sales agents of banks to provide promised services and levying service charges without prior notice to the customer, etc.
      6. The scheme is directly functional between the customers and bank which is supervised by RBI and does not have any involvement of Government authorities.
      7. The Scheme has been widened wherein the BO has the powers to arbitrate between inter-bank disputes and bank-customer disputes.

      CRTICISM FACED BY THE SCHEME

      1. Lack of awareness among the customers about the grievance resolving mechanism through this Scheme.
      2. Lack of ability among the customers to file complaints against the bank misdeeds through this Scheme.
      3. There is a very low rate of disposal of a complaint by passing an order. As per the Annual Report of this Scheme 2018-2019, only 0.11% of the complaints were disposed by passing awards. Majority of the complaints are mutually settled between the customer and bank.
      4. Lack of faith and trust in this scheme and customers prefer going to consumer court as the consumer court has more authority.

      CONCLUSION:

      Banks being the organization of financial importance for every country in the world, the resolutions of grievances relating to their conduct and efficiency is a core attribute for 100% customer satisfaction. This is why the Banking Ombudsman Scheme introduced by RBI comes to play a very important role in resolving redresses of complaints against Banks. This Scheme is framed in such a manner that it doesn’t topple the jurisdiction of other courts, and every aggrieved customer can approach without hesitation to an alternative dispute resolution forum for speedy and cost-effective disposal of their grievances against Banks. The Scheme has been gaining momentum in the past few years and there has also been an increase of 19.75% in complaints received by BO from the last year (2017-18). However, there is an urgent need to promote this scheme by making people aware about this scheme and educating them about the complaint filing procedure. This awareness should be applicable to urban as well as rural population of the country.

      REFERENCES:

      1. Banking Ombudsman Scheme – Annual Report 2018-2019 – https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=19356
      2. Banking Ombudsman Scheme – FAQs – https://m.rbi.org.in/Scripts/FAQView.aspx?Id=24
      3. Performance Review of Banking Ombudsman Scheme: An Effective Tool to Empower Bank’s Customers – By Rajdeep Singh – Internation Journal of Research – Granthaalayah, June, 2016, Vol. 4 (Iss.6), Online ISSN – 2350-0530

      DISCLAIMER

      This article is the personal view and opinion of the author. This article is for information purpose only. This newsletter is not a substitute for professional advice. Lex Services disclaim all responsibility and accept no liability for consequences of any person acting or refraining from acting on the basis of any information contained herein.

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