Banking And Bank-Ombudsman; Requirement, Changes Complaint Analysis And The Way Forward

The International Journal Of Management

19 Vol 2 Issue 3 ( July, 2013) www.theijm.com

Banking And Bank-Ombudsman; Requirement, Changes

Complaint Analysis And The Way Forward

1.Genesis Of Banking Ombudsman In India In the banking sector, so far consumer or customer are concerned, their grievances are many and varied. Reserve Bank of India

(RBI) has been flooded with complaints. They received complaint and forwarded the complaint to concerned bank and banks were

required to submit their comments. Banking sector was constantly under criticism by press, public and estimate committees.

Various committees, commissions and working group were formed to go into the issue since 1972. Banking Commission was

headed by Sri R. G. Saraiya followed by Sri. R. K. Talwar and lastly report of the Goiporia Committee was a step further as to the

sustained anxiety of RBI towards improvement of customer services in banks. The „Narasimhan‟ Committee on “Banking and

Financial Sector Reforms” examined this complaint redressal aspect in full detail and recommended introduction of the “Banking

Ombudsman Scheme 1995” as a part of Financial Sector Policy and Systems Reforms 1991-92 to 1995-96.

In this background RBI accepted the recommendation and as a part of banking policy, Dr. C. Rangarajan; Governor, announced

the “The Banking Ombudsman Scheme” on June 14, 1995. The scheme was issued under the provision of Banking Regulation

Act, 1949, covering all Scheduled Commercial Banks and the Scheduled Primary Co-operative Banks having business in India. The Scheme became operative from June 1995. Initially Ombudsman was appointed on full time basis in three centers i.e.

Mumbai, New Delhi, and Bhopal but subsequently more centres were added.

The aim and objective mechanism of ombudsman is to deliver quick and inexpensive facility to resolve grievances of customers

arising out of deficient services rendered by the banks. Hence, banking ombudsman is in place to cater to public complaints

against deficiency in banking services concerning operation of deposit accounts and loans and advances. Paradigm Shift of

Banking Ombudsman Scheme 1995 to Banking Ombudsman Scheme of 2006; the attempt over years has been to extend the scope

and jurisdiction of the Banking ombudsman to hitherto uncovered areas.

Over time, RBI has expanded the scope of the banking ombudsman to include customer complaints relating to credit cards,

deficiencies on the part of sales agents of banks to provide promised services, levying service charges without prior notice to the

Dr. Lalat K Pani

Former Reader, Dept. Of Commerce, Bhadrak Autonomous College, Bhadrak, India

Sukhamaya Swain

Circle Business Banking Head, Orissa Circle, Axis Bank, Mallick Commercial Complex

Kharavela Nagar, Bhubaneswar, Odisha, India

Abstract:

Banking in India has come a long way from traditional banking; it has criss-crossed nationalization, seen entry of private &

foreign banks and is now all poised to set new frontiers by addition of new services and aspects harnessing technology and

best global practices. With the advent of competition, the customer has become demanding and his demands have become

challenging. Technology has made the customer dependent on third-party interfaces that are at equal distance from the

bank-employees too. RBI’s efforts of penetrating to the rural and unbanked areas have brought banks to the doorstep of

many who would have otherwise read about banks only in newspapers. The diversity in the population of the bank

customers in terms of education, financial soundness and knowledge of financial products is increasing with each passing

day; RBI is monitoring the inclusion initiatives of each bank. Against this backdrop, we have the monitoring role of RBI

becoming very important. It is with this motive that we have Banking Ombudsman whose role is statutory and with punitive

powers. In this paper, we discuss about this authority, the genesis, the complaint analysis and the complicacies involved over time.

Key words: banking performance; banking ombudsman; customer relations; consumer or customer; complaints; grievances

ISSN 2277-5846

ISSN 2277 – 5846I

ISSN 2277 - 5846

2277 - 5846

THE INTERNATIONAL JOURNAL OF MANAGEMENT



customer and non-adherence to the fair practices code as adopted by individual banks. In order to make the scheme more

effective, the RBI has decided to take the onus of recruitment and funding of the scheme. It has also allowed complainants to file

their complaints online and appeal to it against the judgments given by the banking ombudsman.

The Banking Ombudsman Scheme, 1995 was notified by RBI on June 14, 1995 in terms of the powers conferred on the Bank by

Section 35A of the Banking Regulation Act, 1949 (10 of 1949) to provide for a system of redressal of grievances against banks.

The Scheme sought to establish a system of expeditious and inexpensive resolution of customer complaints. The Scheme which is

in operation since 1995 has been revised during the year 2002 and 2006. The Scheme is being executed and administered by

Banking Ombudsmen appointed by RBI at 15 centers covering the entire country.

2.Areas of handling Complaints The important areas are

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 for this service;

Non-acceptance, without sufficient cause, of coins tendered and for charging of commission for this service;

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 honour guarantee or letter of credit commitments;

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;

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 ;

Delays in receipt of export proceeds, handling of export bills, collection of bills etc., for exporters provided the said

complaints pertain to the bank's operations in India;

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

Levying of charges without adequate prior notice to the customer;

Non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/debit card operations or credit

card operations;

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);

Refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government;

Refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of Government securities;

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

Refusal to close or delay in closing the accounts;

Non-adherence to the fair practices code as adopted by the bank; and

Any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other

services.

3.Analysis Of Customer Complaints Received By Banking Ombudsman In India

3.1.Profile Of Customer Complaints Handled By The Obos Over The Years The analysis has been done in Table 1. One would observe that RBI is very serious with regards to meticulous observation of each

and every complaint. It is mad it mandatory for all scheduled commercial banks to maintain records of each and every complaint

and do the reporting in the annual reports. The point of segregating each complaint on a vintage basis probably indicates the

graveness of some complaints; RBI understands that certain complaints might entail substantial time by the member banks to

solve or come up with a reason or logic. In the recent years, 2009-10 saw the largest number of complaints being filed along with

the largest number of disposals also.

3.2.OBO-Wise Receipt Of Complaints

The 15 OBOs handle the complaints on deficiency of banking services received from the bank customers within their jurisdiction.

The details for the last 4 Financial Years are mentioned in Table 2 (i). Bhubaneswar saw the highest % wise increase in number of

complaints i.e. 62% between 2010-11 to 2011-12. The number of complaints was low for Bhubaneswar, Trivandrum, Guwahati & Patna had low number of complaints but they saw the highest % wise increase. Chennai, New Delhi and Ahmedabad saw decrease

in the number of complaints substantially. Bhopal, Guwahati and Kanpur are seeing increase in their complaints every year.

3.3.Average No. Of Complaints Received

There has been no specific trend in the last four years. However the increment of 2009-10 vs that of 2008-09 has been the highest.

The figure is arrived at by taking into account the total number of complaints and the number of OBOs across the country. The

numbers of offices have not changed over the past 4 years. May be with the increase in number of complaints, RBI might think of

increasing. Table 3 reflects the exact figures.



3.4.Population Group-Wise Distribution Of Complaints Received

There has been continuous increase in complaints from Semi-Urban and Urban areas over the years. The only areas from where

there has been depletion recently are in the Metro areas. A point to be noted out here is that the classification of an area may vary

any year. Since the classification is based on population, any increase in population in an area might attract change in

classification. Infact banks do have specific offerings across different categories and thus some complaints might emanate due to

change in charge structure and facilities. RBI issues a notification when such changes happen through its respective ZAOs.

3.5.Mode-Wise Complaints Received

Even with the advent of technology and internet connectivity, the complaints are being handled through the old modes i.e.

physical letters and fax. It seems individuals or corporates typically prefer to send it through the physical mode to keep a written record and also expecting that the reply would come in the same mode which can be easily recorded for the present or for any

future references. Table 5 (i) clearly shows the trend across each of the modes over the years.

3.6.Complainant Group-Wise Classification

Any individual or corporate who has a grievance against any of his / its bank may pursue the complaint with the Ombudsman.

There is no such trend across any of the segments like individuals, proprietorship firms, limited company, trust, association or

govt. entities. There is however a sharp decline in complaints filed by Proprietorship firms over the past 3 years. It is good to see

that govt. departments and PSU organisations also are conscious about their banking transactions and probably they have been

filing complaints against any service or charges related issue. The data provided by RBI however does not classify the PSUs as

state or Central govt.‟s. Individual complaints are the highest across every year for the past 4 years.

3.7.Bank Group-Wise Classification

One thing clearly comes out as per Table 7 is that there is a regular and substantial increase of complaints over the past 4 years in

nationalised banks; similar is the case of RRBs/UCBs for the past 3 years. For private sector banks, the number is however

declining continuously for the past 4 years and it declined 3 years for Foreign Banks. Despite having large branch networks, the

number of complaints for SBI & its associates and the nationalised banks is much lower in comparison to private sector banks.

A particular reason may be affixed for this trend namely; customers of private sector banks are more educated and conscious

about their rights as customers. Foreign banks however would score very high in number of complaints per branch as the numbers

are very high but the number of branches is very low.

3.8.Complaints Per Branch

As mentioned previously, the number of complaints per branch is highest for foreign banks followed by new generation private sector banks. This can surely be attributed to low number of branches and large number of complaints. It is the lowest for the old

generation private sector banks. Table 8 has all the details for the past 4 years.

3.9.Nature Of Complaints Handled

There was a sudden surge of complaints in the deposit accounts category in 2011-12. There has been continuous decline in

complaints related to remittances for the past 3 years. Charges levy without information cases seem to be declining as this

category has a declining trend for the past 4 years. Probably banks are going the extra mile to inform the customers; with the

increasing modes of communications like smses, emails, display on websites and letters, the decline is predictably going to

continue further. Card related complaints have been reducing for the past 3 years at a stretch. Table 9 provides all the details.

3.10.Comparative Position Of Disposal Of Complaints By OBOs

The number of cases being carried forward every year has been reducing for the past 3 years. The percentage of cases being disposed off every year is surprisingly fixed at 94% for the past 3 years. It speaks strongly about the efforts being taken by the

officers in the various OBOs in solving the cases. A substantial number of cases however continue to be carried forward to next

year. Table 10 has all the details.

3.11.Mode Of Disposal Of Maintainable Complaints

The governing principle of the OBOs is promoting settlement by mutual agreement between the customer and his bank. Only in

cases where both the parties do not come to an agreement on mutually acceptable terms, BO proceeds to pass an Award or give a

decision. Table 11 has all the break-ups of the cases settled.

3.12.Reasons For Rejection Of Complaints

The Banking Ombudsman Act 2006 empowers the BO to reject the complaint at any stage of the proceedings if it appears to him that the complaint made to him satisfies any of the conditions as laid down in the designated clause i.e. Clause 13. As per details

enlisted in Table 12, a substantial number of complaints made are incomplete and probably have been made without a serious

motive of arriving at a result, award or punitive action. Until and unless the OBOs are furnished with sufficient evidence of breach

of contract between the parties (read the ban and its customer), the said complaint can be is rejected.



4.Limitation of the data provided and the interpretations Done

4.1.Lack Of Clarity On Cases

In today‟s context, the complaints of customers are getting complex. Earlier for a simple savings account, the customer could have

a financial complaint relating to his interest, its calculation or may be any charge levied in his account but now a financial

complaint could also relate to mobile banking charges, debit card charges, bancassurance premium being debited without consent,

phishing attack happening in his account et al. It becomes difficult to segregate beyond a particular limit (categories of complaints

cannot be infinite).

4.2.Correlation Between Various Aspects Of Complaints Any of the statistics mentioned above cannot be used for making any strong inferences until clubbed with some other factor. For

eg: average complaints per branch are not complete until one segregates the bank‟s branches into rural, semi-urban or urban

categories.

5.Important Changes In The Provisions Of Banking Ombudsman Scheme 2006

Reserve Bank of India in 2007 modified the Banking Ombudsman Scheme allowing bank customers to appeal against an

ombudsman's decision to reject a complaint. It allowed bank customers to appeal against the decision of the Banking Ombudsman

where he had rejected the customer's complaint relating to matters falling within the grounds of complaints specified under the

scheme. The appellate authority under the scheme has been fixed as the designated deputy governor of RBI. Earlier, bank

customers were allowed to appeal against the order or award given by the Banking Ombudsman but they were not allowed if the

application was rejected.

6.Conclusion

The total number of banking transactions is growing because of inclusion, new modes of payments & settlements coming up and

banks increasingly bringing in newer products, offerings & services. This leaves a high scope for increasing complaints. The

resolution and more important the pace of resolution becomes very important because if the complaints rise and lie unsettled, the

customers would just move from banks to banks thus churning business from one bank to another.

More licenses are in the anvil; this will further aggravate the situation of maintaining the pace of complaint resolution. The

number of OBOs has not increased over the years; with the increasing complaints, RBI should give a thought towards increasing

the number of Ombudsmen. One thing is for sure, exciting times are ahead of the office of the OBOs.

2008-09 2009-10 2010-11 2011-12

Complaints brought forward from the previous year 5892 9433 5364 4618

Complaints received at the OBOs during the year 69117 79266 71274 72889

Total No. of complaints handled by the OBOs during the year 75009 88699 76638 77507

Complaints disposed during the year 65576 83335 72020 72885

Complaints pending at the close of the year at the OBOs 9433 5364 4618 4622

Complaints pending for less than 1 month 5041 2787 2888 2681

Complaints pending for one to 2 months 2751 1526 1397 1655

Complaints pending for two to 3 months 956 808 297 277

Complaints pending for more than 3 months 685 242 35 9

Appeals brought forward from the previous year 32 121 34 0

Appeals received by the Appellate Authority during the year 269 308 133 351

Total No. of Appeals handled during the year by the Appellate Authority 301 429 167 351

Appeals disposed of by the Appellate Authority 180 395 167 338

Appeals pending at the close of the year 121 34 0 13

Table 1: Profile Of Customer Complaints Handled By The Obos Over The Years

Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI



OBO No. of complaints received during % change in

2011-12 over

2010-11

% to total

complaints

(2011-12) 2008-09 2009-10 2010-11 2011-12

Ahmedabad 3732 4149 5190 4590 -11 6

Bangalore 3255 3854 3470 3486 1 5

Bhopal 3375 3873 5210 5953 14 8

Bhubaneswar 1159 1219 1124 1826 62 3

Chandigarh 2634 3234 3559 3521 -1 5

Chennai 10381 12727 7668 6614 -13 9

Guwahati 455 528 584 708 21 1

Hyderabad 3961 5622 5012 5167 3 7

Jaipur 3688 4560 3512 4209 20 6

Kanpur 7776 7832 8319 9633 16 13

Kolkata 3671 5326 5192 4838 -7 7

Mumbai 9631 10058 7566 7905 4 11

New Delhi 10473 12045 10508 9180 -13 13

Patna 2110 1707 2283 2718 19 4

Trivandrum 2816 2532 2077 2541 22 3

TOTAL 69117 79266 71274 72889 2 100

Table 2: OBO-Wise Receipt Of Complaints


Figure 1: OBO-Wise Receipt Of Complaints




Figure 2: Average No. Of Complaints Received


2008-09 2009-10 2010-11 2011-12

No. of OBOs 15 15 15 15

No. of complaints received 69117 79266 71274 72889

Avg.no. of complaints per OBO 4608 5284 4752 4859

Table 3: Average No. Of Complaints Received


Population

Group

No. of complaints received %

Increase 2008-09 2009-10 2010-11 2011-12

Rural 13915 25055 7816 8190 5

Semi-Urban 9817 10741 10816 11982 11

Urban 15723 16423 21218 24565 16

Metro 29662 27047 31424 28152 -10

TOTAL 69117 79266 71274 72889

Table 4: Population Group-Wise Complaints Received


Figure 3: Schematic Representation Of The Above Data


No. of complaints received

60000

70000

80000



0

5000

10000

15000

20000

25000

30000

35000

2008-09 2009-10 2010-11 2011-12


Rural

Semi-Urban

Urban

Metro



Mode No. of complaints received

2008-09 2009-10 2010-11 2011-12

e-mail 15927 9221 9736 9499

Online 9352 11400 9265 10026

Post/Fax 43838 58645 52273 53364

TOTAL 69117 79266 71274 72889

Table 5: Mode-Wise Bifurcation Of Complaints.


Figure 4: Graphical Representation Of Mode-Wise Bifurcation Of Complaints.


Complainant Group No. of complaints received

2008-09 2009-10 2010-11 2011-12

Individual 62327 71341 63064 66279

Individual-Business 1446 2742 2739 2635

Proprietorship / Partnership 329 367 306 253

Limited Company 930 1099 901 690

Trust 87 191 224 150

Association 222 519 667 461

Govt. Departments 262 477 523 521

PSU 429 115 120 80

Others 3085 2415 2730 1820

TOTAL 69117 79266 71274 72889

Table 6: Group-Wise Bifurcation Of Complaints


0

10000

20000

30000

40000

50000

60000

70000

2008-09 2009-10 2010-11 2011-12


e-mail

Online

Post/Fax



Bank Group No. of complaints received

2008-09 2009-10 2010-11 2011-12

Nationalised Banks 14974 19092 20417 22326

SBI & Associates 18167 22832 22307 25854

Private Sector Banks 21982 22553 17122 15084

Foreign Banks 11700 11450 7081 5068

RRBs/Scheduled Primary

Urban Coop. Banks

1148 968 1130 1439

Others 1146 2371 3217 3118

TOTAL 69117 79266 71274 72889

Table 7: Bank-Wise Bifurcation Of Complaints


Bank Group Complaints per branch

2009-10 2010-11 2011-12

Nationalised Banks 0.46 0.45 0.44

SBI & Associates 1.33 1.25 1.33

Old Private Sector Banks 0.28 0.25 0.28

New Private Sector Banks 4.17 2.35 1.72

Foreign banks 37.79 22.34 18.43

Table 8: Bankwise Complaints Per Branch


Ground of Complaint

concerning

No. of Complaints

2008-09 2009-10 2010-11 2011-12

Deposit Accounts 6706 3681 1727 8713

Remittances 5335 5708 4216 3928

Card Related (ATM / Debit /

Credit)

17648 18810 17116 14492

Loans & Advances 8174 6612 4564 6016

Levy of charges without prior

notice

4794 4764 4149 3806

Pension Payments 2916 4831 5927 5944

Failure to meet commitments /

BCSBI Codes / Non observance of fair practices of code

11824 11569 16302 18365

DSAs and recovery 3018 1609 1722 459

Notes & Coins 113 158 146 165

Others 8589 18840 7201 7327

Out of subject 0 2684 8204 3674

TOTAL 69117 79266 71274 72889

Table 9: Types Of Complaints




No. of complaints 2008-09 2009-10 2010-11 2011-12

Received during the year 69117 79266 71274 72889

Brought forward from previous year 5892 9433 5364 4618

Handled during the year 75009 88699 76638 77507

Disposed of during the year 65576 83335 72020 72885

Rate of disposal (%) 87% 94% 94% 94%

Carried forward to next year 9433 5364 4618 4622

Table 10: Break-Up Of The Disposal Of Cases Over The Years


Disposable of Maintainable Complaints 2008-09 2009-10 2010-11 2011-12

By mutual settlement 22315 31278 21269 20092

Disposal of Award 73 211 278 327

Maintainable Complaints rejected 6000 15066 13952 17036

Total Maintainable complaints disposed 28388 46555 35499 37455

Table 11: Segregation Of Disposition Of Maintainable Complains


Reasons 2009-10 2010-11 2011-12

Not on the grounds of complaint referred to the

concerned clauses of the Act

10920 9525 12216

Requiring consideration of elaborate documentary

and oral evidence and the proceedings before

Ombudsman are not appropriate for adjudication of

such complaint

2499 2867 4323

Beyond the pecuniary jurisdiction of the OBO 243 335 317

Without sufficient cause 278 751 76

Not pursued by the complainant with reasonable

diligence

622 219 62

In the opinion of the OBO, there is no loss or

damage to the complainant

504 255 42

TOTAL 15066 13952 17036

Table 12: Reasons Of Rejection


7. References

1. Annual Report on Banking Ombudsman Scheme, 2011-12, source Reserve Bank of India.

2. Annual Report on Banking Ombudsman Scheme, 2010-11, source Reserve Bank of India.

3. “Action through Banking Ombudsman” from International Consumer Rights Protection Council.

4. Banking Ombudsman Scheme, 2006, source Reserve Bank of India.

5. Banking Ombudsman-A pragmatic step in the banking sector by Anoop Kumar.

6. Success of banking ombudsmen scheme: Myth or reality by Malyadri, Pacha and Sirisha, S; International Journal of Research Studies in Management 2012 April, Volume 1 Number 1, 17-24

7. Customer complaints in banks: Nature, extent and strategies to mitigation by R K Uppal.

8. A Comprehensive Guide to approaching Banking Ombudsman in India by

9. Banking Ombudsman: Redressal for customer complaints against banks; a Financial Literacy Agenda for Mass

Empowerment (FLAME) initiative of IIFL.

10. “Customer complaints rise in 2011-12, led by public sector banks” – Live Mint on Thu, Nov 08 2012.

11. “Wanna appeal against Ombudsman‟s decision?” – Economic Times dated 24 May 2007.

Documents

Banking And Bank-Ombudsman; Requirement, Changes Complaint Analysis And The Way Forward