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regarding banking ombudsman scheme
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ANALYSIS UF BANKING OMBUDSMAN SCHEME
History andDevelopment of The banking ombudsman scheme:
The Banking Ombudsman Scheme is introduced under Section 35 A of the Banking
Regulation Act1, 1949 by RBI with effect from 1995 to provide an expeditious and
inexpensive forum to bank customers for resolution of their complaints relating to
banking services. The Scheme covered banking services rendered by scheduled
commercial banks and scheduled primary cooperative banks2. The objective of the
Banking Ombudsman Scheme is to be a visible and reliable system of dispute resolution
mechanism for bank customers. The Ombudsmen generally resort to conciliation or
mediation for settlement of complaints.
The Banking Ombudsman Scheme was revised in 2002 to cover Regional Rural
Banks and to permit a review of the Banking Ombudsman’s Awards against the banks by
the Reserve Bank. The Scheme was further revised in 2006 giving it a much wider scope
by including several new areas of customer complaints. The Banking Ombudsmen
currently have their offices in 15 Centers spread across the country and are fully funded
by the Reserve Bank. The Banking Ombudsmen are serving Officers of Reserve Bank in
the rank of Chief General Managers and General Managers.
1 Under this section RBI has the power make regulations relating to banking services.
2 This is inserted in the amendment rules 2002.
Constitution, powers and functions of banking ombudsman
Appointments tenure:
The Reserve Bank may appoint one or more of its officers in the rank of
Chief General Manager or General Manager to be known as Banking Ombudsmen to carry
out the functions entrusted to them by or under the Scheme. The appointment of Banking
Ombudsman may be made for a period not exceeding three years at a time. 3
Location of office:
The office of the Banking Ombudsman shall be located at such places as may be
specified by the Reserve Bank. In order to expedite disposal of complaints, the Banking
Ombudsman may hold sittings at such places within his area of jurisdiction as may be
considered necessary and proper by him in respect of a complaint or reference before him. 4
Jurisdiction, powers and duties of banking ombudsman :
1. The Reserve Bank shall specify the territorial limits to which the authority of each
Banking Ombudsman appointed under the Scheme shall extend.
2. The Banking Ombudsman shall receive and consider complaints relating to the
deficiencies in banking or other services filed on the grounds mentioned in the
scheme and facilitate their satisfaction or settlement by agreement or through
3 Sections 4,5,6 of 2002 ombudsman scheme & section 4 of 2006 scheme.
4 Section 7, 8 of the 2002 ombudsman scheme & section 5 of 2006 scheme.
conciliation and mediation between the bank concerned and the aggrieved parties or
by passing an Award in accordance with the Scheme.
3. The Banking Ombudsman shall exercise general powers of superintendence and
control over his Office and shall be responsible for the conduct of business their own
office.
4. The Office of the Banking Ombudsman shall draw up an annual budget for itself in
consultation with Reserve Bank and shall exercise the powers of expenditure within
the approved budget on the lines of Reserve Bank of India Expenditure Rules, 2005.
5. The Banking Ombudsman shall send to the Governor, Reserve Bank, a report, as on
30th June every year, containing a general review of the activities of his Office during
the preceding financial year and shall furnish such other information as the Reserve
Bank may direct and the Reserve Bank may, if it considers necessary in the public
interest so to do, publish the report and the information received from the Banking
Ombudsman in such consolidated form or otherwise as it deems fit. 5
Complaint handling procedure BY the banking ombudsman
Grounds of complaints which banking ombudsman is entitled to here:
The Banking Ombudsman can receive and consider any complaint relating to the
following deficiency in banking services (including internet banking):
1. non-payment or inordinate delay in the payment or collection of cheques, drafts,
bills etc.;
2. non-acceptance, without sufficient cause, of small denomination notes tendered for
5 Section 10, 11 of 2002 scheme & section 7 of 2006 scheme.
any purpose, and for charging of commission in respect thereof;
3. non-acceptance, without sufficient cause, of coins tendered and for charging of
commission in respect thereof;
4. non-payment or delay in payment of inward remittances ;
5. failure to issue or delay in issue of drafts, pay orders or bankers’ cheques;
6. non-adherence to prescribed working hours ;
7. 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;
8. delays, non-credit of proceeds to parties accounts, non-payment of deposit or non-
observance of the Reserve Bank directives, if any, applicable to rate of interest on
deposits in any savings,current or other account maintained with a bank ;
9. complaints from Non-Resident Indians having accounts in India in relation to their
remittances from abroad, deposits and other bank-related matters;
10. refusal to open deposit accounts without any valid reason for refusal;
11. levying of charges without adequate prior notice to the customer;
12. non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on
ATM/Debit card operations or credit card operations;
13. non-disbursement or delay in disbursement of pension (to the extent the grievance
can be attributed to the action on the part of the bank concerned, but not with regard
to its employees);
14. refusal to accept or delay in accepting payment towards taxes, as required by Reserve
Bank/Government;
15. refusal to issue or delay in issuing, or failure to service or delay in servicing or
redemption of Government securities;
16. forced closure of deposit accounts without due notice or without sufficient reason;
17. refusal to close or delay in closing the accounts;
18. non-adherence to the fair practices code as adopted by the bank or non-adherence to
the provisions of the Code of Bank s Commitments to Customers issued by Banking
Codes and Standards Board of India and as adopted by the bank ;
19. non-observance of Reserve Bank guidelines on engagement of recovery agents by
banks; and
20. any other matter relating to the violation of the directives issued by the Reserve Bank
in relation to banking or other services.
21. A customer can also lodge a complaint on the following grounds of deficiency in
service with respect to loans and advances
1. non-observance of Reserve Bank Directives on interest rates;
2. delays in sanction, disbursement or non-observance of prescribed time
schedule for disposal of loan applications;
3. non-acceptance of application for loans without furnishing valid reasons
to the applicant; and
4. non-adherence to the provisions of the fair practices code for lenders as
adopted by the bank or Code of Bank’s Commitment to Customers, as the
case may be;
5. non-observance of any other direction or instruction of the Reserve Bank
as may be specified by the Reserve Bank for this purpose from time to
time.
6. The Banking Ombudsman may also deal with such other matter as may be
specified by the Reserve Bank from time to time.
Circumstances in which complaint not be considered by the Ombudsman :
Complaint will not be considered if:
a. One has not approached his bank for redressal of his grievance first.
b. One has not made the complaint within one year from the date one has
received the reply of the bankCC or if no reply is received if it is more than
one year and one month from the date of representation to the bank.
c. 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.
d. Frivolous or vexatious.
e. The institution complained against is not covered under the scheme.
f. The subject matter of the complaint is not within the ambit of the Banking
Ombudsman.
g. If the complaint is for the same subject matter that was settled through the
office of the Banking Ombudsman in any previous proceedings.6
6 Section 12 of 2002 scheme & section 8 of 2006 scheme.
procedure for filing the complaint before the Banking Ombudsman:
One can file a complaint with the Banking Ombudsman simply by writing on a plain
paper. One can also file it online. One may lodge his/ her complaint at the office of the
Banking Ombudsman under whose jurisdiction, the bank branch complained against is
situated. For complaints relating to credit cards and other types of services with
centralized operations, complaints may be filed before the Banking Ombudsman within
whose territorial jurisdiction the billing address of the customer is located.
details which are required in the complaint:
The complaint should have
i. the name and address of the complainant,
ii. the name and address of the branch or office of the bank against which the
complaint is made,
iii. facts giving rise to the complaint supported by documents, if any,
iv. the nature and extent of the loss caused to the complainant,
v. the relief sought from the Banking Ombudsman and
vi. a declaration about the compliance of conditions which are required to be
complied with by the complainant.
limit on the amount of claim and compensation :
The amount, if any, to be paid by the bank to the complainant by way of
compensation for any loss suffered by the complainant is limited to the amount arising
directly out of the act or omission of the bank or Rs 10 lakhs, whichever is lower. The
Banking Ombudsman may award compensation not exceeding Rs 1 lakh to the
complainant only in the case of complaints relating to credit card operations for mental
agony and harassment. The Banking Ombudsman will take into account the loss of the
complainant’s time, expenses incurred by the complainant, harassment and mental
anguish suffered by the complainant while passing such award.7
Situations of rejection of complaints by banking ombudsman:
The Banking Ombudsman may reject a complaint at any stage if it appears to him that a
complaint made to him is:
not on the grounds of complaint referred to above
compensation sought from the Banking Ombudsman is beyond Rs 10 lakh .
requires consideration of elaborate documentary and oral evidence and the
proceedings before the Banking Ombudsman are not appropriate for
adjudication of such complaint
without any sufficient cause
that it is not pursued by the complainant with reasonable diligence
7 Section 13 of 2002 scheme & section 9 of 2006 scheme.
in the opinion of the Banking Ombudsman there is no loss or damage or
inconvenience caused to the complainant. 8
Complaint handling procedure:
Generally on receipt of any complaint, the Banking Ombudsman endeavors to
resolve the complaint by agreement between the complainant and the bank named in the
complaint through a process of conciliation or mediation. For the purpose of such
resolution of the complaint, the Banking Ombudsman follows such procedures as he may
consider appropriate and he is not bound by any legal rule of evidence. If a complaint is
not settled by agreement within a period of one month from the date of receipt of the
complaint or such further period as the Banking Ombudsman may consider necessary, he
may pass an Award after affording the parties reasonable opportunity to present their
case. He shall be guided by the evidence placed before him by the parties, the principles
of banking law and practice, directions, instructions and guidelines issued by the Reserve
Bank from time to time and such other factors, which in his opinion are necessary in the
interest of justice.
the steps involved in complaint handling by the banking ombudsman are
Receipt of complaints
Decision to handle or not
Acknowledgement of those covered under the Scheme
8 Section 19 of 2002 scheme & section 13 of 2006 scheme.
Return of those that cannot be handled under the Scheme
Call for comments from Banks 9
Promote a settlement through conciliation 10or pass an award11
Appeal:
If one is not satisfied with the decision passed by the Banking Ombudsman, one can
approach the appellate authority against the Banking Ombudsmen’s decision. Appellate
Authority is vested with a Deputy Governor of the RBI. One can also explore any other
recourse and/or remedies available to him/her as per the law. The bank also has the
option to file an appeal before the appellate authority under the scheme.
time limit for filing an appeal
If one is aggrieved by the decision, one may, within 30 days of the date of receipt of
the award, appeal against the award before the appellate authority. The appellate
authority may, if he/ she is satisfied that the applicant had sufficient cause for not making
an application for appeal within time, also allow a further period not exceeding 30 days.
Appeal handling procedure
The appellate authority may
i. dismiss the appeal; or
9 Section 14 of 2002 scheme & section 10 of 2006 scheme.
10 Section 15 of 2002 scheme & section 11of 2006 scheme..
11 Section 16 of 2002 scheme & section 12 of 2006 scheme.
ii. allow the appeal and set aside the award; or
iii. send the matter to the Banking Ombudsman for fresh disposal in accordance with
such directions as the appellate authority may consider necessary or proper; or
iv. modify the award and pass such directions as may be necessary to give effect to
the modified award; or
v. pass any other order as it may deem fit.12
Enforcement of the award passed by the banking ombudsman
A copy of the Award shall be sent to the complainant and the bank named in the
complaint. An Award shall not be binding on a bank against which it is passed unless the
complainant furnishes to it, within a period of 15 days from the date of receipt of copy of
the Award, a letter of acceptance of the award in full and final settlement of his claim in
the matter. If the complainant does not accept the Award passed by the Banking
Ombudsman and fails to furnish his letter of acceptance within such time without making
any request for extension of time to comply with such requirements his complaint shall
be rejected by the Banking Ombudsman . Provided that in the event of the complainant
making a written request for extension of time, the Banking Ombudsman may subject to
his being satisfied with the explanation as furnished by the complainant about his
inability to consider the Award and furnish his letter of acceptance, grant extension of
time up to further period of fifteen days for such compliance.13
12 Section 14 of 2006 scheme. Here the 2002 scheme provide a review of ombudsman award by review authority under sections 17, 18.
13 Section 16 of 2002 scheme & section 12 of 2006 scheme.
Some examples of cases handled by banking ombudsman
Case 1
The complainant had availed a housing loan of Rs 3,40,000/-from the bank at a
fixed rate of interest of 8% per annum at quarterly rests on highest monthly reducing
balance. The complainant alleged that the bank had subsequently increased the rate of
interest to 12.75% contrary to terms of sanction of the loan. The bank submitted that
the customer was sanctioned loan at fixed interest rate, but as per their extant
instructions and internal circular, the interest rates are to be reset at the end of every
two years on the basis of interest rates prevailing at that time. Accordingly, the fixed
interest rates were changed from 8% to 12.75%. During the course of the proceedings
before the Banking Ombudsman, the bank re-worked the applicable interest at the
contracted rate of interest and refunded the excess amount of Rs 17,936/-, by credit to
the complainant's account. However, the bank contended that going forward, the reset
interest rate would be applicable. The complainant was also given an exit option, which
was not acceptable to him. If the interest rates are subject to periodical rests, it is only
fair and reasonable that the same is explicitly stated in the loan agreement and sanction
letter in an unambiguous and transparent manner. Further, in choosing to provide a
fixed rate loan to the customer, the bank has consciously decided to carry the interest
rate risk associated with the product. The loan also carried a higher interest rate
compared to floating rate product as a premium towards the interest rate risk. BO
passed an Award advising the bank to strictly abide by the terms and conditions of the
original arrangement and not give effect to their proposal to increase interest rate on
the loan, unless explicitly consented to by the complainant in writing. The bank was
also advised to pay an amount of Rs 1,000 to the complainant towards the cost of
pursuing this remedy to his grievance. The bank has implemented the Award.
Case 2
The complainant was maintaining a current account and approached the bank
to convert his current account to cash credit account. For the said purpose he had
pledged NSC amounting to Rs.1,20,000/-. Subsequently the bank neither sanctioned
him a cash credit limit nor returned the certificates. In the meantime the certificates
were matured for payment and he requested the bank to return the certificates. The
bank failed to return the certificates stating that the certificates had been misplaced.
The complainant approached us with a request to redress his grievances. On taking
up the matter with the bank, the bank assured to take up the matter with the post
office for issue of duplicate NSCs. On receipt of the duplicate NSCs from the concerned
post office, the complainant was compensated for the loss of the original certificates.
The complainant submitted a letter of satisfaction to the BO.
Case 3
A complaint relating to non-credit of cheque amount into the account of the
complainant was received. The complainant had reportedly taken up the matter
with the bank several times but there was no response by the bank towards
credit of the cheque amount. The complainant approached the BO for resolution
of his grievances. On receipt of the complaint, BO questioned the bank as to
what action had been taken on the complaint by them. The bank reported that
the cheque in question was lost in transit resulting in non-credit of the cheque
amount to the complainant's account. At the instance of BO, the bank took up
the matter with UTI Mutual Fund, Patna by submitting letter of undertaking
and death certificate. The Mutual Fund issued a duplicate cheque and the
amount was credited to the complainant's account. The complainant submitted a
letter of satisfaction.
Case 4
A complainant approached the BO alleging that the bank from which he had
availed a housing loan had been charging a higher rate of interest . Initially he
applied for a housing loan of Rs.8,50,000/-at the fixed rate of interest. The rate
of interest applicable on the loan was 9.25% as per the brochure provided by the
bank. However, the complainant alleged that the loan was sanctioned at an
interest rate of 9.75% without explaining about the terms and conditions of the
loan at the time of sanction. On taking up the case with the bank, the bank
informed BO that the higher rate of interest charged on the loan had since been
rectified by the bank's data center and excess interest charged on the loan was
adjusted and credited to the complainant's account.
Case 5
BO received a complaint where the complainant alleged that on her
husband's death, she approached the concerned bank on November 27, 2008 for
payment of family pension and all the formalities were completed as required by
the bank. The Treasury Officer had converted the pension into family pension and
advised the bank on October 18, 2008 to make payment to the widow. Though she
had been approaching the bank there was no response from the bank. BO
questioned the bank as to what action had been taken by them on the complaint. On
persuasion, the bank redressed the grievances and paid the family pension to the
complainant .
Case 6
The complainant was maintaining Priority Banking Savings accounts with a
private sector bank. This account was opened a year back with average quarterly
balance requirement of Rs.l lakh and the customer was promised several services,
which were allegedly not provided to him. These services included cheque collection
from his residence, valet parking at the branch, use of office for personal meetings,
credit card facility, demat services, portfolio services and timely response to
transaction queries. It was observed that the bank had introduced the priority
banking service product without first ensuring that its branches were properly
equipped to provide the promised services to all such customers. The bank was also
found deficient in as much as it had not communicated to the customer the various
conditions linked to the promised services. It was not considered fair that the
customer was made to maintain an average quarterly balance of Rs. 1 lakh without
providing all the promised services. Thus, had the customer maintained a normal
savings bank account with average quarterly balance requirement of Rs.5000/-, he
would have had an opportunity to invest Rs.95,000/-in fixed deposit to earn higher
interest. BO passed an award against the bank for payment of interest at fixed
deposit rate of interest applicable at the time of opening the account plus 2% (with
quarterly compounding) from the date of opening of account to the date on which
the bank pays the interest.
Case 7
A cheque drawn by the EPF Department on the ABC Bank's Nasik
branch forRs.21.36 lakh was sent to XYZ Bank, New Delhi for credit to the account
of the complainant. The amount was not credited to the complainant's account
advising that it had not received the cheque. The complainant, however, obtained
the Proof of Delivery from Post Office in support of the claim that it was delivered
to the XYZ bank.. It transpired that the XYZ bank had actually misplaced the
cheque before sending it for collection to ABC Bank and it had already furnished an
affidavit to the EPF Department reporting the misplacement of the cheque and
requesting for a duplicate cheque. With the intervention of BO, the bank credited
an amount of Rs. 18,894/-as interest on the delayedpayment since date of deposit of
the cheque.
Case 8
The complainant was holding a credit card of a foreign bank. He complained
that a caller from the bank persisted in selling Medical Insurance Benefit Scheme to
the card holder though he as well as his family members did not require the same.
After a few days he received a policy in the name of his son and daughter without
taking his approval. When he called up the bank in June 2006, he was assured that
the policies would be cancelled and later it was confirmed as well. But after a few
days, he was advised to send a cancellation request by fax. The statement received
showed unpaid balance. The complainant again sent two faxes in August and
September 2006 for cancellation of the policies. In the conciliation meeting held by
BO on 19 January 2009, the bank official stated that there was a recorded
telephonic conversation with an Insurance Company and the bank had debited the
account of the customer on the mandate received by the Insurance Company. There
was no written mandate with the bank from the customer for debiting his account
for premium of the policies of the Insurance Company. The bank failed to resolve
the complaint for 2/3 years. However, with the intervention of BO, the debits of
Rs.23,246/-were reversed. Case 9 The complainant maintaining an account at Bank
A attempted a withdrawal of Rs.25,000/-from Bank B's ATM, but no cash was
dispensed. However, his account was debited. He immediately complained to Bank
A and then to Banking Ombudsman subsequently. Bank A retrieved the JP log of
20.4.2008 from Bank B, which was not legible and confirmed that the transaction
was successful. However, BO observed that the JP log appeared to be of 20.1.2008
and not of 20.4.2008, the reply was that actually the digit was 4 but appearing as 1
because of faulty printing. As we were still not convinced and insisted for a legible
copy of JP log, Bank A informed after one month that they had received the
amount from Bank B and the complainant's account had been credited. In fact,
Bank B had possibly misinformed Bank A.
Case 10
An employee of a PSU had availed a housing loan of Rs 385000/-from
XYZ Bank, under the tie-up arrangement between the bank and the PSU. The
loan was offered at fixed rate of 7.5%. The bank subsequently increased the rate
of interest from 7.5% to 8.5% and changed the EMI. When the matter was taken
up with the bank, he was informed that as per the terms and conditions and the
MOU, the fixed rate applicable for housing loan is 'adjusted interest rate' on the
date of the agreement. The 'adjusted interest rate' was 'quoted rate' +/-changes
in the BPLR of the bank on the date of agreement between the bank and the
employees of the PSU. At the time of sanction of the loan, the BPLR was 11.50%
so the 'adjusted interest rate' would be 8.5% and therefore the bank had
charged the interest accordingly which would be reset after 5 years i.e. from
26.9.2006. As the bank's response was not convincing, he approached the BO.
On calling for their comments, the bank informed that they were charging the
interest in terms of the MOU entered between the bank and the PSU and that it
was in sync with the terms and conditions of the loan. BO advised the bank to
furnish copies of the sanction letter, agreement with the complainant and copy of
the MOU. On scrutinizing the aforesaid documents, it was observed that the
rate of interest mentioned in the agreement at clause 7 was 8.5% (Fixed) and at
clause 6 which was applicable to Floating rate, no entries were made. The
sanction letter indicated 8.5% at fixed rate for 5 years to be reset after 5 years.
Scrutiny of housing loan passbook disclosed that the bank was charging 7.5 %
fixed interest from November 26, 2006 for 168 months at an EMI of Rs 3710/.
The bank had not carried out the documentation of the loan properly, as there
was a discrepancy in the housing loan passbook and the agreement with respect
to rate of interest. The increase in EMI was not justifiable. Therefore, BO passed
the benefit of doubt to the complainant and directed the bank to consider the
rate of interest at 7.5% fixed for 5 years and reset thereafter and refund the
excess EMI recovered. Bank complied with the order of BO.
Durga Hotel Complex Vs. Reserve Bank of India and Others.
Fact of the case:
Banking ombudsman Award Legality of Clause 16 of the Banking ombudsman
Scheme, 1995 Sanction of Loan by Respondent-Bank to Appellant firm Part amount
disbursed Additional advance sought by Appellant refused Respondent-Bank recalled
loan after crediting original loan sanctioned from account of Appellant Appellant
made complaint before Banking ombudsman (BO) Respondent-Bank approached
Debts Recovery Tribunal (DRT) for recovery of loan Respondent-Bank questioned
jurisdiction of BO to entertain Appellants complaint BO rejected the contention and
decided the matter in Appellants favour Respondent-Bank challenged the award of
BO on ground that subject matter of adjudication was beyond its jurisdiction
Meanwhile, Appellant filed Writ Petition for enforcement of award Single judge
decided in Respondent-Banks favour Letters Patent Appeals filed by Appellant
dismissed Hence, present appeal Whether BO acted outside its jurisdiction in passing
the award when the subject matter had already been referred to the DRT Held, BO is
an independent and non-partisan officer acting as an alternative to adversary system
for resolution of disputes When the subject matter of complaint lying before BO is
taken to Court, Tribunal, Arbitrator or any other competent forum, subject matter is
taken away from the purview of BO to an adjudicatory forum under an adversarial
system The foundation of complaint filed before the BO gets lost in that case Even if
BO initially had jurisdiction, the same taken away when the matter was referred to
DRT Accordingly, in present case BO has no jurisdiction to deal with matter High
Court justified in interfering with the award of the BO Appeal dismissed
Judgement:
Civil Banking ombudsman Jurisdiction Clause 13 (b) of the Banking ombudsman
Scheme, 1995 Respondent-Bank questioned jurisdiction of Banking ombudsman
(BO) to entertain Appellants complaint BO rejected the contention and passed an
award in Appellants favour Whether the subject matter of complaint within the
purview of the BO Held, Clause 13(b) of the Scheme provides that ombudsman could
entertain complaints concerning loans and advances only insofar as they relate to non-
observance of directives of Reserve Bank on interest rates, delays in sanction/non-
observance of prescribed time schedule for disposal of loan applications and non-
observance of any other directives of Reserve Bank, as may be specified from time to
time It was not the case where Respondent bank was guilty of non-observance of the
abovementioned directives of the Reserve bank Directions issued by BO while
passing the award outside the jurisdiction as given under Clause 13 (b) Accordingly,
BO had no jurisdiction to deal with matter Appeal dismissed
Ratio Decidendi:
1. The jurisdiction of Banking ombudsman is laid down in Clause 13 (b) of the Banking
ombudsman Scheme and it would not have jurisdiction on subject matters outside the
purview of that provision.
2. When the subject matter of complaint lying before Banking ombudsman is taken to
Court, Tribunal, Arbitrator or any other competent forum, Banking ombudsman loses
the jurisdiction to deal with that matter.
UCO Bank rep. by the Chief Manager, Chennai Main Branch. Vs Digboi
Refinery, Indian Oil Corporation Ltd., (Assam Oil Division) and Banking
ombudsman
Facts of the case:
the petitioner Bank, the bank issued Guarantee No. 579/94 on 6.12.1994 at the
request of M/s.AICAM Engineering Ltd. for Rs. 22,61,171.40 favouring Indian Oil
Corporation {Ltd. towards advance payment and security deposit in relation to
contract work of fired heaters for Digboi Refinery Project. This guarantee was
originally valid until midnight ]of 5.12.1995. Similarly, the petitioner issued another
guarantee to Indian Oil Corporation Ltd., Assam Oil Division, Digboi on 18.12.1996
bearing No. 387/96 for Rs. 19,76,368/- against a contract work of erection of
equipment machinery fabrication and related civil and structural works for Digboi
Reformer Project valid upto the midnight of 7.3.1997. The petitioner bank received
two separate letters on 9.3.1998 from the first respondent, calling upon the petitioner
bank to extend the guarantees for a further period upto September, 1998 or to treat the
same as letters of invocation. Since the claim letters were filed on/lodged with the
petitioner after the expiry of both the Guarantees, that is, on 9.3.1998, when the
Guarantees were no longer in force and the bank was already released and discharged
from all liabilities thereunder irrespective of whether original guarantees were
returned or not, the claims were rejected by the petitioner bank and the first
respondent was advised accordingly by its letter dated 30.6.1998. The first
respondent preferred a complaint with the second respondent/banking ombudsman
claiming deficiency of service on the part of the petitioner bank in not settling the
claim filed after expiry of the Guarantees. The second respondent gave an award on
31.3.1999 that the petitioner should pay the amounts under both the guarantees
totalling a sum of Rs. 35,13,306/- forthwith and also to pay compensation of Rs.
5,000/- to the complainant. Aggrieved by the order of the banking ombudsman, the
petitioner filed the writ petition before thigh Court.
judgment
the learned Judge, after finding no merit in the issue raised for consideration, accepted
the decision of the Banking ombudsman and dismissed the writ petition filed by the
bank. Hence, the writ appeal. Ombudsman’s order was upheld by the high court and
and supreme court.
makant Choure Vs Banking ombudsman and OrS.
In this case the court held that ombudsman not have the power to order to give
the money for the victim who spend to his council for representing this case before
the banking ombudsman.
Balla Rama Rao v. Banking Ombudsman
A house in the name of B. Narayanama was given on lease to the bank in 1982.
Subsequently, the lady died. The Bank did not pay rent from June 1992 to Feb. 1997. Balla
Ramarao, the appellant approached the bank. Bank immediately paid the amount Rs.
3,09,562. Balla contended that the interest should also be paid for the period of 1992 to 1997.
The bank refused to pay interest. The appellant approached to the banking ombudsman. But
he rejected the complaint, holding no merit in the case as it was outside the jurisdiction of the
banking ombudsman. Balla approached to the Andhra Pradesh high court. The high court
rejected the appeal, finding that it was outside the jurisdiction of the banking ombudsman.
R. Lakshmanan, Indian Overseas Bank rep. by its Chief Manager and V. Indira
Stephen Vs. Indian Overseas Bank Nungambakkam Branch rep. by its Chief
Manager and Ors.
Order of Bank Release of Amount Clause 16(3)(d) of Banking Ombudsman
Scheme, 1995 Present writ petition filed to direct respondent to release awarded
amount passed by Banking Ombudsman in petitioner’s favour Held, award of
Banking Ombudsman has to be set aside on technical grounds that proper and
necessary parties were not impleaded to proceedings Further, criminal complaint was
pending, as a result of which jurisdiction of Ombudsman stood divested in terms of
Clause 16(3)(d) of Scheme Aallegations made by petitioner are disputed questions of
fact which could not have been gone into Ombudsman without impleading proper and
necessary parties and causing an enquiry into those facts Therefore, Ombudsman
order is liable to be set aside Writ petitions dismissed
Review of Banking Ombudsman Scheme
Data on 1997-2002
Complaints Received
As against 6062 complaints received during the period 1998-99 (April-March), the
number of complaints received during 1999-2000, 2000-01 and 2001-02 stood at
4994, 5803 and 5907 respectively. As compared to the complaints received during
1998-99, there is a decrease of 2.5% during 2001-02. Average complaints per year per
office decreased marginally from 404 to 394 during the above period.
Period No. of Offices of
Banking
Ombudsman
No. of
complaints
received during
Average No.
of complaints
per office 1998-99 15 6062 404.1
1999-2000 15 4994 332.9
2000-01 15 5803 386.9
15 5907 393.8
Analysis of complaints received
(subject-wise)
Particulars 1998-99 1999-2000 2000-01 2001-02
Deposit Accounts 1830 1687 1617 1662
Loans and Advances 1904 1844 1930 1982
Delay in collection of cheques/bills 1198 943 999 1062
Non-issue of duplicate drafts 198 138 170 130
Miscellaneous 2334 2188 2262 2186
Total 7464*
(1402)
6800*
(1806)
6978*
(1175)
7022*
(1115)
*No.of complaints includes previous year's pending complaints as indicated in
brackets.
Besides the miscellaneous complaints, the maximum number of complaints dealt with
during the period under review pertained to deficiency in servicing of loans and
advances followed by deposit accounts and delay in collection of cheques/bills, etc.
Bank-group-wise
Bank group 1998-99 1999-2000 2000-01 2001-02
Nationalised Banks 4063 3857 3657 3609
SBI Group 2337 1960 2175 2112
Private Sector Banks 390 417 531 629
Foreign Banks 219 198 147 254
Scheduled Primary Coop.
Banks
82 131 122 55
Others 373 237 346 363
Total 7464 6800 6978 7022
Centre-wise
For the year ended March 31, 2002 the maximum number of complaints were
received at Jaipur (1021). Other offices of the Banking Ombudsman, which received
more than the average number of complaints of 394, were New Delhi (624),
Thiruvananthapuram (545),Kolkata (506), Chandigarh (466) and Hyderabad (406). As
in the past, majority of complaints during the period emanated from metropolitan and
urban centers. Very few complaints were received from rural and semi-urban areas. In
order to popularize the Scheme among the rural and semi-urban population,
campaigns have been organized by the Offices of Banking Ombudsman apart from
inserting advertisements in the local newspapers. The Banking Ombudsmen are also
interacting with the Chambers of Commerce and Industry and Bank Managers' Club,
etc.
Disposal of Complaints
Particulars 1998-99 1999-2000 2000-01 2001-02
Complaints received 7464* 6800* 6978* 7022*
Of which not maintainable 3317 2614 2732 2404
Complaints maintainable 4147 4186 4246 4618
Disposed of 2807 2484 3131 3511
Pending 1340 1702 1115 1107
Of the pending complaints,
those pending for more
775 998 589 624
*Includes previous year's pending complaints.
The average number of complaints disposed of per office stood at 187, 166, 209 and
234 for the years ended March 31, 1999, 2000, 2001 and 2002 respectively and
showed an increasing trend.
AWARDS ISSUED
During the period under review (i.e. 1998-99 to 2001-02), 262 awards were issued
which formed 2.2% of the total 11933 maintainable complaints disposed of. Office-
wise details of the awards issued are furnished hereunder :
Sr. Centres 199
899
199920
00
20000
1
20010
2 1 Ahmedabad 1 4
2 Bangalore 7 6 3 7
3 Bhubaneswar 2 1 3
4 Bhopal 2 3
5 Kolkata 2 14 1 6 15
6 Chennai 8 10 9
7 Chandigarh 0 0 1 2
8 Guwahati 2 2
9 Hyderabad 14 9 2
10 Jaipur 4 1 3 4
11 Kanpur 28 20 8 5
12 Patna 2 3
1
3
Mumbai 2 1 1 2
14 New Delhi 2 3 2 3
15 Thiruvananthapuram 2
Total
awards
92 74 52 44
Awards not implemented by banks 49 34 27 16
% of disposal of complaints by issue of
awards to total maintainable complaints
3.28 2.98 1.66 1.25
% of disposal of complaints by
mediation/reconciliation/recommendatio
n to total maintainable complaints
96.72 97.02 98.34 98.75
Report (2003-2009)
PROFILE OF COMPLAINTS
Sr. Subject As on
No. 30.06.07 30.06.08
1 Complaints brought forward from the previous
year
6128 7105
2 Complaints received during the year 38638 47887
3 TOTAL 44766 54992
4 Complaints disposed during the year 37661 49100
5 Complaints pending at the close of the year 7105 5892
- Less than one month 2262 2712
(32) (46)
- One to two months 1936 1394
(27) (24)
- Two to three months 943 861
(13) (15)
- More than 3 months 1964 925
(28) (15)
6 Appeals received during the year 15 186
Appeals against Awards 15 17
Appeals against Decisions * 0 169
7 Appeals disposed of during the year 13 154
8 Appeals pending at the close of the year 2 32
Less than one month 0 17
One to two months 0 10
Two to three months 2 3
More than three months 0 2
Figure in brackets show % of pending
* Appeals against decisions were allowed only from May 2007
Table- Number of complaints received by the Banking Ombudsman Offices
Period No. of Offices
of
Banking
Ombudsman
No. of
complaints
received
during the year
Rate of
increase
(% over
previous
year)
Average No. of
complaints
per office
2003-
04
15 8246 — 550
2004-
05
15 10560 28 704
2005-
06
15 31732 200 2115
2006-
07
15 38638 22 2576
2007-
08
15 47887 24 3192
Population-segment wise Receipt
The offices of the Banking Ombudsman received complaints from
almost all the regions of the country. The region wise position of complaints is
given in Table 3 Chart 3:
Table - Population-segment—wise
receipt of complaint at the Offices of
Banking Ombudsman during 2007-08
Sr. No. Region No. of complaints received
1 Rural 8418
2 Semi Urban 6641
3 Urban 10978
4 Metropolitan 21850
TOTAL 47887
The reasons for larger number of complaints from the urban and metropolitan
regions are increased penetration of banking, increased awareness and increased
expectations of customers in such areas. There is however evidence that there is
increase in the receipt of complaints from rural and semi-urban areas, as the
Banking Ombudsman have created more awareness in such areas through personal
visits, media coverage and advertisements.
Banking Ombudsman-wise receipt
Table - Banking Ombudsman wise complaint receipt during 2006-07 and
2007-08
Banking Ombudsman Office 2006-07 2007-08
Ahmedabad 2107 2855
Bangalore 2406 2975
Bhopal 2731 3402
Bhubaneswar 689 998
Chandigarh 2006 2331
Chennai 2387 4545
Guwahati 170 282
Hyderabad 2767 2843
Jaipur 2976 3369
Kanpur 4321 5340
Kolkata 2011 2815
Mumbai 5525 6070
New Delhi 5481 6742
Patna 1481 1480
Bank Group-Wise Receipt at Banks
Table - Bank Group wise-complaints
received by Banks
Name of the bank
group
Received during the
2006-07
Received during
the2007-08
State Bank Group 21909 21736
Nationalized Banks 45794 59708
Old Private Sector
Banks
1100 1770
New Private Sector
Banks
828903 738942
Foreign Banks in India 342599 357516
TOTAL 1240305 1179672
The above data does not include complaints redressed within a day. It may be seen
that in the year 2007-08, bulk of the complaints at 92.95% has been received by
the new private sector banks and foreign banks. However, there has been a fall in
the number of complaints received by banks in 2007-08 compared to 2006-07
mainly due to reduction in complaints against new private sector banks.
Table Category-wise receipt of complaints received in 2006-07 & 2007-08
Nature of complaint Received during Received during
2006-07 2007-08
Deposit accounts 5803 5612
Remittances 4058 5213
Credit cards 7688 10129
Loans and advances - General 4442 5297
Loans and advances - Housing 709 757
Charges without notice 2594 3740
Pension 1070 1582
Failure to meet commitments 1469 6388
DSAs and recovery agents 1039 3128
Notes and coins 130 141
Others 9636 5900
TOTAL 38638 47887
Disposal of Complaints
Banking Ombudsman Offices disposed of more than 80% of the complaints dealt
on an annual basis. During the year 2007-08, 89% of the complaints dealt were
disposed off. Around 53% of the complaints dealt have been disposed by mutual
settlement or by award while around 36% of the complaints dealt have been
rejected. Table
Table - Disposal of Complaints by Banking Ombudsman Offices
Particulars 2003-04 2004-
05
2005-
06
2006-
07
2007-
08
Complaints received* 9483 12034 33363 44766 54992
Complaints disposed
by rejection
No. 4011 4963 12304 15511 19735
% 42 41 37 35 36
Complaints disposed
by mutual settlement/
award
No. 3998 5440 14889 22150 29365
% 42 45 45 49 53
Total number of
complaints disposed of
No. 8009 10403 27193 37661 49100
% 84 86 82 84 89
Complaints that are
carried forward to the
next year
No. 1474 1631 6170 7105 5892
% 16 14 18 16 11
* Includes previous year’s pending complaints.
The Banking Ombudsmen disposed of complaints, other than the rejected
complaints, either by settlement or by issuing an Award. During the period
reviewed, the ratio of complaints disposed by settlement to the complaints
disposed by award was around 0.28 clearly indicating the effectiveness of the
Banking Ombudsmen in arriving at mutually agreed consensus between bankers
and complainants. During the above period, only 70 awards were issued. From the
year 2005-06, the number of awards issued and the percentage of disposal through
award issuance have come down despite huge increase in the complaints received.
The fact that the Banking Ombudsmen could dispose of 99.72 % of the complaints
by settlement between the complainant and the concerned banks, indicates that the
conciliation approach was effective, and there was no need for the Banking
Ombudsman to pass any award. Table )
Table - Mode of disposal of complaints (other than rejected complaints)
during the years 2003-04 to 2007-08
Sr. Year No. of complaints Disposal by Disposal by
No. disposed of Award settlement
No. % No. %
1 2003-2004 3998 121 3.00 3877 97.00
2 2004-2005 5440 165 3.03 5275 96.97
3 2005-2006 14889 146 0.98 14743 99.02
4 2006-2007 22150 84 0.38 22066 99.62
5 2007-2008 29365 70 0.24 29295 99.76
Reasons for Rejection of complaints received in 2007-08
Table - Reasons for Rejection of complaints received in 2007-08
Sr.
No.
Reasons Number Percentage
1 First resort complaint 7950 40
2 Time barred complaint 260 1
3 Complaint dealt earlier 333 2
4 Pending in other forum 476 2
5 Frivolous complaint 137 1
6 Not signed, incomplete address etc. 434 2
7 Without sufficient cause 3249 16
8 Not pursued by the complainant 706 4
9 Complicated requiring alaborate evidence 478 2
10 No loss to the complainant 547 3
11 Complaint subject matter outside scheme
scope
2537 13
12 Unrelated complaint 1136 6
13 Bank branch outside jurisdiction * 1492 8
TOTAL 19735 100
* Sent to the BO under whose jurisdiction it falls for actions.
Appeal against the decisions of the Banking Ombudsmen
Table 16 - Number of Appeals Received
during 2007-08
Particulars No. of
Appeals
Appeals against Awards 17
Appeals against Decisions 169
TOTAL 186
Appeals disposed of during
the year
154
Appeals pending at the close
of the year
32
Less than one month 17
One to two months 10
Two to three months 3
More than 3 months 214
15
14
15 Annual Reports of RBI on BOS-1997 to 2008.
Advantages and disadvantages of banking ombudsman scheme
Advantages of banking ombudsman:
there is many advantages available in banking ombudsman scheme.
(i). this mechanism provides settlement on the basis of mutual concern.
(ii). If there is no possibility of settlement then only ombudsman decide to take
that matter for it’s adjudication and pass an award.
(iii). In ombudsman proceedings there is no fee is collected from the
complainant (customer).
(iv). 2006 scheme provide appeal facility, it gives more possible to the
customer to optain proper remedy without judicial intervention.
(v). even though enforcement is in the hands of complainant, if he give his
concern to enforce the award the bank has the liability to do it. Because
ombudsman is under the control of RBI.
(vi). Now a days many cases are handled by ombudsmann it reduces the
burden of judiciary.
(vii). More over time and cost of complainant and respondent also saved.
(viii). Regarding appeal against ombudsman award in to the judiciary
comparing bank side, customer side is very less, it means that the scheme is
appritiated and encouraged by customers.
Dis advantages of ombudsman scheme:
When we analyze the scheme and it is progress there is too many loopholes still
unplugged by RBI. They are as follows:
(i). the ombudsman scheme is an optional one but not a proper alternative one.
Because banking ombudsman’s decisions are not binding in nature and
referring the matter to ombudsman is not a statutory provision, it dippons
customer’s wishes and choices.
(ii). The Debt Recovery Tribunal (DRT) is especially constituted for the
purposes of dealing the matters of recovery of debts. Some times ombudsman
involve in this matter. This was reflected in “ durga hotel case”.
(iii). There is a possible the aggrieved party of anaward passed by
ombudsman go to writ on high court under article 226 of inndian constitution.
In many cases appeal was made against ombudsman awards.
(iv). In many cases banks not responding ombudsman proceedings including
filing the same complaint to (DRT) and struck down ombudsman’s
jurisdiction.
(v). the enforcement of ombudsman award is not in the hands of or banks, it is
in the hands of the customer according to the scheme.
Conclusion and Suggestions
Conclusion:
Above said details give a clear picture about nature and growth of banking
ombudsman scheme. When we go through table whys are relating to filing cases is
increasing, is shows the willingness of the people to settled the disputes relating to
banking through alternative rather than judicial adjudication. But the success of the
ombudsman depends the willing of the parties to settle the dispute through Banking
ombudsman. If one of the parties is not willing the scheme become useless.
Suggestions:
In 2002 ombudsman rules 21 and 22 scheme provide arbitration powers to the
ombudsman especially disputes relating to a bank and it’s constituencies and a bank
and an other bank. However the 2006 scheme is silent in this matter. I feel that the
arbitration proceedings regarding customers grievances there is more possible to
deduct the further appeals. RBI also need to describe the jurisdiction especially
matters relating loans and advances. RBI also search and find a suitable solution for
separate the DRT jurisdiction from ombudsman jurisdiction. RBI also keen to give
stipulations regarding ombudsman to all banks- especially not to dilute the
ombudsman’s jurisdiction from a dispute. if those changes will take place this scheme
would be more attractive and effect.