Banking Ombudsman Scheme

The Banking Ombudsman is a quasi-judicial authority established to address and resolve complaints from bank customers. It was introduced by the Reserve Bank of India (RBI) in 2006 and later revised in 2007 and 2009 to expand its role in handling customer grievances and adjudicating disputes.

Key Points:

• The Banking Ombudsman Scheme covers scheduled commercial banks, regional rural banks, and scheduled primary cooperative banks.
• Recently, the RBI extended the scheme to include Non-Banking Financial Institutions (NBFCs).
• Around 15 Banking Ombudsmen have been appointed, with offices primarily located in state capitals.
• The Banking Ombudsman’s services are free of charge.

Eligibility and Appointment:

• The Banking Ombudsman is typically an executive of the rank of General Manager, Chief General Manager, or other suitable authority.
• The term of office for an Ombudsman is three years.

Scope of the Scheme:

• The Banking Ombudsman Scheme addresses a wide range of customer complaints, including:
  • Delays in crediting funds or issuing drafts/pay orders
  • Non-payment or delay in payment of instruments like checks or drafts
  • Failure to provide or delay in providing banking services
  • Unauthorized debit or credit of accounts
  • Non-adherence to prescribed charges
  • Refusal to accept or delay in accepting deposits
  • Failure to provide or delay in providing account statements
  • Grievances related to ATM/debit card/credit card services
  • Non-compliance with RBI guidelines on interest rates, service charges, etc.

Process for Filing a Complaint:

• Customers can file a complaint with the Banking Ombudsman if they have not received a satisfactory response from their bank within 30 days of registering the complaint with the bank.
• The complaint must be filed within one year from the date of the incident or within one month from the date of receiving the bank’s response, whichever is later.
• The complaint can be filed online through the RBI’s website or by submitting a physical complaint form available at the Banking Ombudsman’s office.

Resolution Process:

• The Banking Ombudsman investigates the complaint and attempts to resolve it through conciliation or mediation.
• If a settlement is reached, the terms are recorded in a written agreement signed by both parties.
• If a settlement is not reached, the Banking Ombudsman may issue an award, which is binding on the bank.

Importance for Banking Aspirants:

Finance and banking aspirants should have a thorough understanding of the Banking Ombudsman Scheme for both practical purposes and competitive exams like the RBI Grade B exam.

Powers of Banking Ombudsman

The banking ombudsman has the following powers:

• Request additional information from the bank against which a complaint has been filed or any other bank involved in the complaint.
• Request certified copies of any documents related to the complaint.
• Maintain the confidentiality of any information or documents received.
• Conduct summary proceedings.
• The appellate authority in the Banking Ombudsman Scheme is the Deputy Governor in charge of the RBI department implementing the scheme.

Pre-conditions for Filing Complaints

The following pre-conditions must be met by bank customers before they can file a complaint with the Banking Ombudsman against a bank:

• The customer must have made a written representation to the bank and either had their complaint rejected or not received a response within one month from the date the bank received the representation.
• The complaint must be filed within one year of the customer receiving the bank’s response to their complaint.
• The complaint should not relate to a matter for which legal proceedings are pending before any court, tribunal, or arbitrator, or for which a decree, award, or order has already been passed by such authorities.
• The compensatory amount is limited to INR 10 Lakhs.
• The complaint should be genuine and not frivolous or made with inappropriate intentions.

Grounds of Complaints

Common grounds of inadequate services in banking that can be addressed under the banking Ombudsman scheme include:

• Non-payment or excessive delay in payment and collection of bills, checks, etc.
• Refusal to open a deposit account or close an account, or delay in closing accounts without a valid reason.
• Non-acceptance of small denominations of notes and coins without a valid reason.
• Failure to follow the Banking Codes & Standard Board of India (BCSBI) guidelines and engaging in unfair practices.
• Non-adherence to prescribed hours of serviceability.
• Failure to issue or delay in issuing drafts, pay orders, banker’s checks, etc.
• Any other matter related to non-compliance with directives issued by the Reserve Bank of India (RBI) or regulators of banks and financial institutions regarding banking or other services.
• Delay or failure to credit proceeds to parties’ accounts or non-observance of RBI guidelines.
• Complaints from Non-Resident Indians (NRIs) with accounts in India regarding remittances from overseas, deposits, or other bank-related transactions.
• Non-acceptance of an application for a credit facility is sufficient grounds for filing a complaint.

How to File a Complaint

• Complaints must be filed in writing and signed by the complainant or their authorized representative, clearly stating their name and address.
• The complete name and address of the bank’s branch or office against which the complaint is being filed should also be included.
• Along with the complaint, the complainant should provide the facts of the case, documentary proof (if any), the nature and extent of the loss, and the relief sought.

Other Matters Prescribed by RBI from Time-to-Time

• Levying of charges without adequate prior notice to the customer
• Non-adherence by the bank or its subsidiaries to RBI instructions on ATM/Debit Card or Credit Card operations
• Non-disbursement or delay in disbursement of pension (to the extent the grievance can be attributed to the concerned bank’s actions, but not as far as employees are concerned)
• Refusal to accept or delay in accepting payments towards taxes, as prescribed by the RBI or the government
• Within one month, the bank shall comply and inform the Ombudsman of the compliance
• Refusal to issue or delay in issuing or failure to service or delay in servicing or redemption of government securities
• Banks are required to display salient features of the scheme to guide the general public

Rejected Complaints

• Complaints that are anonymous or pseudonymous
• Complaints that are frivolous, vexatious, or beyond the jurisdiction of the Banking Ombudsman
• Complaints that are time-barred (generally, complaints must be filed within one year from the date of the incident)
• Complaints that are sub judice (pending before a court of law)
• Complaints that have already been settled or adjudicated by any other authority or forum

The Banking Ombudsman

The Banking Ombudsman is a quasi-judicial authority established to resolve disputes between banks and their customers. The Ombudsman can reject any complaint if:

• The complaint is frivolous or has inappropriate intentions.
• The complaint is without sufficient cause or beyond the pecuniary jurisdiction as per Clause 12 (5).
• The complaint is not pursued by the complainant with reasonable diligence.
• There is no loss, damage, or inconvenience caused to the complainant in the opinion of the Banking Ombudsman.

As an Arbitrator

The Banking Ombudsman also performs the role of an arbitrator in disputes between banks and their customers. The Ombudsman can act as an arbitrator if:

• The dispute is referred to him by the parties and he gets their consent through a duly stamped and notarized affidavit of understanding.
• The dispute is for an amount less than INR 10 lakh and the parties agree for arbitration in writing.

The Banking Ombudsman follows all the rules and guidelines as per the Arbitration & Conciliation Act, 1996.

Consumer Protection Act

The Consumer Protection Act (COPRA) was enacted in 1986 and implemented on 15th April 1987. The Act was amended comprehensively in 2002 and the amended version was implemented from 2003.

The Consumer Protection Act was enacted to promote and protect the important rights of consumers. Some important Consumer Protection Act objectives are:

• Right to be protected against marketing of goods that are harmful to life and property.
• Right to be informed about the quality, quantity, potency, purity, standard price of goods and/ or services in order to protect the consumer against unfair trade practices or exploitation of consumers and provide consumer education.
• Right to be heard and assured that the consumer interest will receive due consideration.
• Right to be assured wherever possible and access to an authority of goods at competitive prices.

Central Councils

The government of India has established the Central Consumer Protection Council (CCPC) for hearing the complaints of consumers or complainants. The CCPC is also called as the Central Council.

• The Chairman of the Central Council is generally the Minister of Consumer Affairs in the Central Government.
• Consumer interest under the CPA will be protected by the Consumer Protection Councils.
• Even at the state level, the CPCC is in existence and the state’s Minister of Consumer Affairs is the Chairman.

The objectives of the Councils are to:

• Promote and protect the rights of consumers.
• Provide a mechanism for redressal of consumer grievances.
• Create awareness among consumers about their rights and responsibilities.
• Promote voluntary consumer organizations.

Consumer Protection Act

• Protects consumers from harmful goods and services.
• Provides consumers with the right to be informed about product quality, quantity, and price.
• Ensures consumers have access to various goods and services at competitive prices.
• Safeguards consumers’ interests through the Consumer Protection Council.
• Upholds consumers’ right to be heard and have their complaints addressed.
• Establishes redressal agencies at the state and central levels to resolve consumer complaints.

Redressal Commissions

• District Consumer Disputes Redressal Forum (District Forum): Handles disputes up to INR 20 lakhs at the district level.
• State Consumer Dispute Redressal Commission (State Commission): Addresses disputes with claims between INR 20 lakhs and INR 100 lakhs.
• National Consumer Redressal Commission (National Commission): Resolves disputes above INR 100 lakhs.

Banking Code & Standard Board of India (BCSBI)

• Ensures fair treatment, quality, justifiable prices, and transparency in bank services.
• Established by the Reserve Bank of India (RBI) under the chairmanship of S.S Tarapore.
• Combines self-regulation and statutory regulation to protect customers.
• Develops comprehensive codes and standards for fair customer treatment.
• Acts as a watchdog to monitor banks’ adherence to the codes.
• Promotes self-regulation among banks.
• Adopts a collaborative approach to address customer service issues.

Code of Banks’ Commitment to Customers

• Covers products and services offered by banks to individual customers.
• Includes deposit accounts, safe deposit lockers, settlement of deceased account holders’ accounts, foreign exchange services, remittances within India, loans and advances, credit cards, and internet banking.

Updates on Banking Ombudsman

• Currently, there are 20 regional offices of the banking ombudsman across India.
• The newest regional office was established in Jammu and Kashmir in April 2017.
• The list of all regional offices nationwide is provided.