49188221 Analysis of the Banking Ombudsman Scheme

8/12/2019 49188221 Analysis of the Banking Ombudsman Scheme

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ANALYSIS OF BANKING OMBUDSMAN

SCHEME



ANALYSIS OF BANKING OMBUDSMAN SCHEME

History and Developent o! "#e $an%in& o$'dsan s(#ee)

The Banking Ombudsman Scheme is introduced under Section 35 A of

the Banking Regulation Act, 1949 b RB! "ith effect from 1995 to

#ro$ide an e%#editious and ine%#ensi$e forum to bank customers for

resolution of their com#laints relating to banking ser$ices& The Scheme

co$ered banking ser$ices rendered b scheduled commercial banks andscheduled #rimar coo#erati$e banks&The ob'ecti$e of the Banking

Ombudsman Scheme is to be a $isible and reliable sstem of dis#ute

resolution mechanism for bank customers& The Ombudsmen generall

resort to conciliation or mediation for settlement of com#laints&

The Banking Ombudsman Scheme "as re$ised in ())( to co$er

Regional Rural Banks and to #ermit a re$ie" of the Banking

Ombudsman*s A"ards against the banks b the Reser$e Bank& The

Scheme "as further re$ised in ())+ gi$ing it a much "ider sco#e b

including se$eral ne" areas of customer com#laints& The Banking

Ombudsmen currentl ha$e their offices in 15 enters s#read across the

countr and are full funded b the Reser$e Bank& The Banking

Ombudsmen are ser$ing Officers of Reser$e Bank in the rank of hief-eneral .anagers and -eneral .anagers&



Constit'tion* po+ers and !'n(tions o! $an%in& o$'dsan

• Appointents ten're)

The Reser$e Bank ma a##oint one or more of its officers in

the rank of hief -eneral .anager or -eneral .anager to be kno"n as

Banking Ombudsmen to carr out the functions entrusted to them b or

under the Scheme& The a##ointment of Banking Ombudsman ma be

made for a #eriod not e%ceeding three ears at a time& 1

• Lo(ation o! o!!i(e)

The office of the Banking Ombudsman shall be located at such #laces as

ma be s#ecified b the Reser$e Bank& !n order to e%#edite dis#osal of

com#laints, the Banking Ombudsman ma hold sittings at such #laces

"ithin his area of 'urisdiction as ma be considered necessar and #ro#er b

him in res#ect of a com#laint or reference before him&

1



,'risdi(tion* po+ers and d'ties o! $an%in& o$'dsan )

1& The Reser$e Bank shall s#ecif the territorial limits to "hich

the authorit of each Banking Ombudsman a##ointed under the

Scheme shall e%tend&

(& The Banking Ombudsman shall recei$e and consider com#laints

relating to the deficiencies in banking or other ser$ices filed on the

grounds mentioned in the scheme and facilitate their satisfaction or

settlement b agreement or through conciliation and mediation

bet"een the bank concerned and the aggrie$ed #arties or b #assing

an A"ard in accordance "ith the Scheme&

3& The Banking Ombudsman shall e%ercise general #o"ers of

su#erintendence and control o$er his Office and shall be res#onsible

for the conduct of business their o"n office&

4& The Office of the Banking Ombudsman shall dra" u# an annual

budget for itself in consultation "ith Reser$e Bank and shall e%ercise

the #o"ers of e%#enditure "ithin the a##ro$ed budget on the lines of

Reser$e Bank of !ndia /%#enditure Rules, ())5&

5& The Banking Ombudsman shall send to the -o$ernor, Reser$e Bank,

a re#ort, as on 3)th 0une e$er ear, containing a general re$ie" of the

acti$ities of his Office during the #receding financial ear and shall

furnish such other information as the Reser$e Bank ma direct and

the Reser$e Bank ma, if it considers necessar in the #ublic interest

so to do, #ublish the re#ort and the information recei$ed from the



Banking Ombudsman in such consolidated form or other"ise as it

deems fit&

Coplaint #andlin& pro(ed're BY t#e $an%in& o$'dsan

Gro'nds o! (oplaints +#i(# $an%in& o$'dsan is entitled to #ere)

The Banking Ombudsman can recei$e and consider an com#laint

relating to the follo"ing deficienc in banking ser$ices including

internet banking2

1& non#ament or inordinate dela in the #ament or collection of

cheues, drafts, bills etc&6

(& nonacce#tance, "ithout sufficient cause, of small denomination

notes tendered for an #ur#ose, and for charging of commission in

res#ect thereof6

3& nonacce#tance, "ithout sufficient cause, of coins tendered and for

charging of commission in res#ect thereof6

4& non#ament or dela in #ament of in"ard remittances 6

5& failure to issue or dela in issue of drafts, #a orders or bankers*

cheues6

+& nonadherence to #rescribed "orking hours 6

7& failure to #ro$ide or dela in #ro$iding a banking facilit other than



loans and ad$ances2 #romised in "riting b a bank or its direct

selling agents6

8& delas, noncredit of #roceeds to #arties accounts, non#ament of

de#osit or nonobser$ance of the Reser$e Bank directi$es, if an,

a##licable to rate of interest on de#osits in an sa$ings,current or

other account maintained "ith a bank 6

9& com#laints from onResident !ndians ha$ing accounts in !ndia in

relation to their remittances from abroad, de#osits and other bank

related matters6

1)&refusal to o#en de#osit accounts "ithout an $alid reason for refusal6

11&le$ing of charges "ithout adeuate #rior notice to the customer6

1(&nonadherence b the bank or its subsidiaries to the instructions of

Reser$e Bank on AT.:;ebit card o#erations or credit card

o#erations6

13&nondisbursement or dela in disbursement of #ension to the e%tent

the grie$ance can be attributed to the action on the #art of the bank

concerned, but not "ith regard to its em#loees26

14&refusal to acce#t or dela in acce#ting #ament to"ards ta%es, as

reuired b Reser$e Bank:-o$ernment6

15&refusal to issue or dela in issuing, or failure to ser$ice or dela in

ser$icing or redem#tion of -o$ernment securities6

1+&forced closure of de#osit accounts "ithout due notice or "ithout

sufficient reason6



17&refusal to close or dela in closing the accounts6

18&nonadherence to the fair #ractices code as ado#ted b the bank or

nonadherence to the #ro$isions of the ode of Bank s ommitments

to ustomers issued b Banking odes and Standards Board of !ndia

and as ado#ted b the bank 6

19&nonobser$ance of Reser$e Bank guidelines on engagement of

reco$er agents b banks6 and

()&an other matter relating to the $iolation of the directi$es issued b

the Reser$e Bank in relation to banking or other ser$ices&

(1&A customer can also lodge a com#laint on the follo"ing grounds of

deficienc in ser$ice "ith res#ect to loans and ad$ances

1& nonobser$ance of Reser$e Bank ;irecti$es on interest

rates6

(& delas in sanction, disbursement or nonobser$ance of

#rescribed time schedule for dis#osal of loan a##lications6

3& nonacce#tance of a##lication for loans "ithout furnishing

$alid reasons to the a##licant6 and

4& nonadherence to the #ro$isions of the fair #ractices code

for lenders as ado#ted b the bank or ode of Bank*s

ommitment to ustomers, as the case ma be6

5& nonobser$ance of an other direction or instruction of the

Reser$e Bank as ma be s#ecified b the Reser$e Bank for

this #ur#ose from time to time&



+& The Banking Ombudsman ma also deal "ith such other

matter as ma be s#ecified b the Reser$e Bank from time

to time&

Cir('stan(es in +#i(# (oplaint not $e (onsidered $y t#e

O$'dsan )

om#laint "ill not be considered if

a& One has not a##roached his bank for redressal of his

grie$ance first&

b& One has not made the com#laint "ithin one ear from the

date one has recei$ed the re#l of the bank or if no re#l is

recei$ed if it is more than one ear and one month from the

date of re#resentation to the bank&



c& The sub'ect matter of the com#laint is #ending for dis#osal :

has alread been dealt "ith at an other forum like court of

la", consumer court etc&

d& <ri$olous or $e%atious&

e& The institution com#lained against is not co$ered under the

scheme&

f& The sub'ect matter of the com#laint is not "ithin the ambit of

the Banking Ombudsman&

g& !f the com#laint is for the same sub'ect matter that "as

settled through the office of the Banking Ombudsman in an

#re$ious #roceedings&

pro(ed're !or !ilin& t#e (oplaint $e!ore t#e Ban%in& O$'dsan)

One can file a com#laint "ith the Banking Ombudsman sim#l b

"riting on a #lain #a#er& One can also file it online& One ma lodge his:

her com#laint at the office of the Banking Ombudsman under "hose

'urisdiction, the bank branch com#lained against is situated& <or

com#laints relating to credit cards and other t#es of ser$ices "ith

centrali=ed o#erations, com#laints ma be filed before the BankingOmbudsman "ithin "hose territorial 'urisdiction the billing address of

the customer is located&

details +#i(# are re-'ired in t#e (oplaint)



The com#laint should ha$e

i& the name and address of the com#lainant,

ii& the name and address of the branch or office of the bank against

"hich the com#laint is made,

iii& facts gi$ing rise to the com#laint su##orted b documents, if an,

i$& the nature and e%tent of the loss caused to the com#lainant,

$& the relief sought from the Banking Ombudsman and

$i& a declaration about the com#liance of conditions "hich are

reuired to be com#lied "ith b the com#lainant&

liit on t#e ao'nt o! (lai and (opensation )

The amount, if an, to be #aid b the bank to the com#lainant b "a

of com#ensation for an loss suffered b the com#lainant is limited to

the amount arising directl out of the act or omission of the bank or Rs

1) lakhs, "hiche$er is lo"er& The Banking Ombudsman ma a"ard

com#ensation not e%ceeding Rs 1 lakh to the com#lainant onl in the

case of com#laints relating to credit card o#erations for mental agon

and harassment& The Banking Ombudsman "ill take into account the

loss of the com#lainant*s time, e%#enses incurred b the com#lainant,



harassment and mental anguish suffered b the com#lainant "hile

#assing such a"ard&

Sit'ations o! re.e(tion o! (oplaints $y $an%in& o$'dsan)

The Banking Ombudsman ma re'ect a com#laint at an stage if it

a##ears to him that a com#laint made to him is

• not on the grounds of com#laint referred to abo$e

• com#ensation sought from the Banking Ombudsman is beond

Rs 1) lakh &



• reuires consideration of elaborate documentar and oral

e$idence and the #roceedings before the Banking Ombudsman

are not a##ro#riate for ad'udication of such com#laint

• "ithout an sufficient cause

• that it is not #ursued b the com#lainant "ith reasonable

diligence

• in the o#inion of the Banking Ombudsman there is no loss or

damage or incon$enience caused to the com#lainant&

Coplaint #andlin& pro(ed're)

-enerall on recei#t of an com#laint, the Banking Ombudsman

endea$ors to resol$e the com#laint b agreement bet"een the

com#lainant and the bank named in the com#laint through a #rocess of

conciliation or mediation& <or the #ur#ose of such resolution of the



com#laint, the Banking Ombudsman follo"s such #rocedures as he ma

consider a##ro#riate and he is not bound b an legal rule of e$idence& !f

a com#laint is not settled b agreement "ithin a #eriod of one month

from the date of recei#t of the com#laint or such further #eriod as the

Banking Ombudsman ma consider necessar, he ma #ass an A"ard

after affording the #arties reasonable o##ortunit to #resent their case&

>e shall be guided b the e$idence #laced before him b the #arties, the

#rinci#les of banking la" and #ractice, directions, instructions and

guidelines issued b the Reser$e Bank from time to time and such other

factors, "hich in his o#inion are necessar in the interest of 'ustice&

• the ste#s in$ol$ed in com#laint handling b the banking

ombudsman are Recei#t of com#laints

;ecision to handle or not

Ackno"ledgement of those co$ered under the Scheme

Return of those that cannot be handled under the Scheme

all for comments from Banks

?romote a settlement through conciliation or #ass an

a"ard

Appeal)

!f one is not satisfied "ith the decision #assed b the Banking

Ombudsman, one can a##roach the a##ellate authorit against the

Banking Ombudsmen*s decision& A##ellate Authorit is $ested "ith a



;e#ut -o$ernor of the RB!& One can also e%#lore an other recourse

and:or remedies a$ailable to him:her as #er the la"& The bank also has

the o#tion to file an a##eal before the a##ellate authorit under the

scheme&

tie liit !or !ilin& an appeal

!f one is aggrie$ed b the decision, one ma, "ithin 3) das of the

date of recei#t of the a"ard, a##eal against the a"ard before the

a##ellate authorit& The a##ellate authorit ma, if he: she is satisfied

that the a##licant had sufficient cause for not making an a##lication for

a##eal "ithin time, also allo" a further #eriod not e%ceeding 3) das&

Appeal #andlin& pro(ed're

The a##ellate authorit ma

i& dismiss the a##eal6 or



ii& allo" the a##eal and set aside the a"ard6 or

iii& send the matter to the Banking Ombudsman for fresh dis#osal

in accordance "ith such directions as the a##ellate authorit

ma consider necessar or #ro#er6 or

i$& modif the a"ard and #ass such directions as ma be

necessar to gi$e effect to the modified a"ard6 or

$& #ass an other order as it ma deem fit&

En!or(eent o! t#e a+ard passed $y t#e $an%in& o$'dsan

A co# of the A"ard shall be sent to the com#lainant and the bank

named in the com#laint& An A"ard shall not be binding on a bank



against "hich it is #assed unless the com#lainant furnishes to it, "ithin a

#eriod of 15 das from the date of recei#t of co# of the A"ard, a letter

of acce#tance of the a"ard in full and final settlement of his claim in the

matter& !f the com#lainant does not acce#t the A"ard #assed b the

Banking Ombudsman and fails to furnish his letter of acce#tance "ithin

such time "ithout making an reuest for e%tension of time to com#l

"ith such reuirements his com#laint shall be re'ected b the Banking

Ombudsman & ?ro$ided that in the e$ent of the com#lainant making a

"ritten reuest for e%tension of time, the Banking Ombudsman ma

sub'ect to his being satisfied "ith the e%#lanation as furnished b thecom#lainant about his inabilit to consider the A"ard and furnish his

letter of acce#tance, grant e%tension of time u# to further #eriod of

fifteen das for such com#liance&



Soe e/aples o! (ases #andled $y $an%in& o$'dsan

Case 0

The com#lainant had a$ailed a housing loan of Rs 3,4),))):from

the bank at a fi%ed rate of interest of 8@ #er annum at uarterl rests on

highest monthl reducing balance& The com#lainant alleged that the bank

had subseuentl increased the rate of interest to 1(&75@ contrar to terms

of sanction of the loan& The bank submitted that the customer "as

sanctioned loan at fi%ed interest rate, but as #er their e%tant instructions and

internal circular, the interest rates are to be reset at the end of e$er t"o

ears on the basis of interest rates #re$ailing at that time& Accordingl, the

fi%ed interest rates "ere changed from 8@ to 1(&75@& ;uring the course of

the #roceedings before the Banking Ombudsman, the bank re"orked the

a##licable interest at the contracted rate of interest and refunded the e%cess

amount of Rs 17,93+:, b credit to the com#lainants account& >o"e$er, the

bank contended that going for"ard, the reset interest rate "ould be

a##licable& The com#lainant "as also gi$en an e%it o#tion, "hich "as not

acce#table to him& !f the interest rates are sub'ect to #eriodical rests, it is

onl fair and reasonable that the same is e%#licitl stated in the loan

agreement and sanction letter in an unambiguous and trans#arent manner&

<urther, in choosing to #ro$ide a fi%ed rate loan to the customer, the bank

has consciousl decided to carr the interest rate risk associated "ith the

#roduct& The loan also carried a higher interest rate com#ared to floating

rate #roduct as a #remium to"ards the interest rate risk& BO #assed an

A"ard ad$ising the bank to strictl abide b the terms and conditions of the

original arrangement and not gi$e effect to their #ro#osal to increase

interest rate on the loan, unless e%#licitl consented to b the com#lainant



in "riting& The bank "as also ad$ised to #a an amount of Rs 1,))) to the

com#lainant to"ards the cost of #ursuing this remed to his grie$ance& The

bank has im#lemented the A"ard&

ase (

The com#lainant "as maintaining a current account and a##roached

the bank to con$ert his current account to cash credit account& <or the said

#ur#ose he had #ledged S amounting to Rs&1,(),))):& Subseuentl the

bank neither sanctioned him a cash credit limit nor returned the certificates&

!n the meantime the certificates "ere matured for #ament and he reuested

the bank to return the certificates& The bank failed to return the certificates

stating that the certificates had been mis#laced& The com#lainant

a##roached us "ith a reuest to redress his grie$ances& On taking u# the

matter "ith the bank, the bank assured to take u# the matter "ith the #ost

office for issue of du#licate Ss& On recei#t of the du#licate Ss from

the concerned #ost office, the com#lainant "as com#ensated for the loss of

the original certificates& The com#lainant submitted a letter of satisfaction to

the BO&



ase 3

A com#laint relating to noncredit of cheue amount into the account of

the com#lainant "as recei$ed& The com#lainant had re#ortedl taken u#

the matter "ith the bank se$eral times but there "as no res#onse b the

bank to"ards credit of the cheue amount& The com#lainant a##roached

the BO for resolution of his grie$ances& On recei#t of the com#laint, BO

uestioned the bank as to "hat action had been taken on the com#laint

b them& The bank re#orted that the cheue in uestion "as lost in transit

resulting in noncredit of the cheue amount to the com#lainants

account& At the instance of BO, the bank took u# the matter "ith T!

.utual <und, ?atna b submitting letter of undertaking and death

certificate& The .utual <und issued a du#licate cheue and the amount

"as credited to the com#lainants account& The com#lainant submitted a

letter of satisfaction&



1evie+ o! Ban%in& O$'dsan S(#ee

Data on 022345665

om#laints Recei$ed

As against +)+( com#laints recei$ed during the #eriod 199899 A#ril

.arch2, the number of com#laints recei$ed during 1999())), ())))1

and ())1)( stood at 4994, 58)3 and 59)7 res#ecti$el& As com#ared to

the com#laints recei$ed during 199899, there is a decrease of (&5@

during ())1)(& A$erage com#laints #er ear #er office decreased

marginall from 4)4 to 394 during the abo$e #eriod&

?eriod o& of Offices

of Banking

Ombudsman

o& of

com#laints

recei$ed

A$erage o&

of

com#laints199899 15 +)+( 4)4&1

1999())) 15 4994 33(&9

())))1 15 58)3 38+&9

15 59)7 393&8



1eport 75668456629

?RO<!C/ O< O.?CA!TS

Sr& Sub'ect As on

o& 3)&)+&)7 3)&)+&)8

1 om#laints brought for"ard from the

#re$ious ear

+1(8 71)5

( om#laints recei$ed during the ear 38+38 47887

3 TOTAC 447++ 5499(

4 om#laints dis#osed during the ear 37++1 491))

5 om#laints #ending at the close of the

ear

71)5 589(

Cess than one month ((+( (71(

3(2 4+2

One to t"o months 193+ 1394

(72 (42

T"o to three months 943 8+1

132 152

.ore than 3 months 19+4 9(5

(82 152

+ A##eals recei$ed during the ear 15 18+

A##eals against A"ards 15 17

A##eals against ;ecisions D ) 1+9



7 A##eals dis#osed of during the ear 13 154

8 A##eals #ending at the close of theear

( 3(

Cess than one month ) 17

One to t"o months ) 1)

T"o to three months ( 3

.ore than three months ) (

<igure in brackets sho" @ of #ending

D A##eals against decisions "ere allo"ed onl from .a ())7



Table umber of com#laints recei$ed b the Banking Ombudsman

Offices

?eriod o& of

Offices of

Banking

Ombudsman

No: o!

(oplaints

re(eived

during the

ear

Rate of

increase

@ o$er

#re$ious

ear2

A$erage o&

of

com#laints

#er office

())3

)4

15 8(4+ E 55)

())4

)5

15 1)5+) (8 7)4

())5

)+

15 3173( ()) (115

())+

)7

15 38+38 (( (57+

())7

)8

15 47887 (4 319(



Advanta&es and disadvanta&es o! $an%in& o$'dsan s(#ee

Advanta&es o! $an%in& o$'dsan)

there is man ad$antages a$ailable in banking ombudsman scheme&

i2& this mechanism #ro$ides settlement on the basis of mutual

concern&

ii2& !f there is no #ossibilit of settlement then onl ombudsman

decide to take that matter for it*s ad'udication and #ass an a"ard&

iii2& !n ombudsman #roceedings there is no fee is collected from

the com#lainant customer2&

i$2& ())+ scheme #ro$ide a##eal facilit, it gi$es more #ossible to

the customer to o#tain #ro#er remed "ithout 'udicial

inter$ention&

$2& e$en though enforcement is in the hands of com#lainant, if he

gi$e his concern to enforce the a"ard the bank has the liabilit to

do it& Because ombudsman is under the control of RB!&

$i2& o" a das man cases are handled b ombudsmann it

reduces the burden of 'udiciar&



$ii2& .ore o$er time and cost of com#lainant and res#ondent also

sa$ed&

$iii2& Regarding a##eal against ombudsman a"ard in to the

'udiciar com#aring bank side, customer side is $er less, it means

that the scheme is a##ritiated and encouraged b customers&

Disadvanta&es o! o$'dsan s(#ee)

Fhen "e anal=e the scheme and it is #rogress there is too man

loo#holes still un#lugged b RB!& The are as follo"s

i2& the ombudsman scheme is an o#tional one but not a #ro#er

alternati$e one& Because banking ombudsman*s decisions are not

binding in nature and referring the matter to ombudsman is not a

statutor #ro$ision, it di##ons customer*s "ishes and choices&

ii2& The ;ebt Reco$er Tribunal ;RT2 is es#eciall constituted

for the #ur#oses of dealing the matters of reco$er of debts& Some

times ombudsman in$ol$e in this matter& This "as reflected in G

durga hotel caseH&

iii2& There is a #ossible the aggrie$ed #art of ana"ard #assed b

ombudsman go to "rit on high court under article ((+ of inndian

constitution& !n man cases a##eal "as made against ombudsman

a"ards&

i$2& !n man cases banks not res#onding ombudsman #roceedings

including filing the same com#laint to ;RT2 and struck do"n

ombudsman*s 'urisdiction&



$2& the enforcement of ombudsman a"ard is not in the hands of or

banks, it is in the hands of the customer according to the scheme&

Con(l'sion and S'&&estions

Con(l'sion)

Abo$e said details gi$e a clear #icture about nature and gro"th of

banking ombudsman scheme& Fhen "e go through table "hs are

relating to filing cases is increasing, is sho"s the "illingness of the

#eo#le to settled the dis#utes relating to banking through alternati$e

rather than 'udicial ad'udication& But the success of the ombudsman

de#ends the "illing of the #arties to settle the dis#ute through Banking

ombudsman& !f one of the #arties is not "illing the scheme become

useless&

S'&&estions)

!n ())( ombudsman rules (1 and (( scheme #ro$ide arbitration

#o"ers to the ombudsman es#eciall dis#utes relating to a bank and it*s

constituencies and a bank and an other bank& >o"e$er the ())+ scheme

is silent in this matter& ! feel that the arbitration #roceedings regarding

customers grie$ances there is more #ossible to deduct the further

a##eals& RB! also need to describe the 'urisdiction es#eciall matters



relating loans and ad$ances& RB! also search and find a suitable solution

for se#arate the ;RT 'urisdiction from ombudsman 'urisdiction& RB! also

keen to gi$e sti#ulations regarding ombudsman to all banks es#eciall

not to dilute the ombudsman*s 'urisdiction from a dis#ute& if those

changes "ill take #lace this scheme "ould be more attracti$e and effect&

Documents

49188221 Analysis of the Banking Ombudsman Scheme