ombudsman services in banking industry1
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CHAPTER I
INTRODUCTION
1.1) BANKING AND ITS OVERVIEW1
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Banks are the businesses that deal in money. Bank customers can deposit their
money in bank accounts. Customers can also borrow money from banks. This
borrowed money is called a bank loan. When customers use the services of a bank,
they are doing their banking. Banks provide these services for many different
customers, including children, adults, and business.
Banks use the money that customers deposit in bank accounts to make more
money. They lend some of the money to other customers interest for using this
money. Banks pay some of the interest to the customers who made deposits. They
make a profit by keeping the rest.
Banks also invest some of their customers money to make more money. They
invest in other businesses, both local and overseas. Banking industry plays a major in
the Indian financial system and provides a wide range of services. It is a financial
institution dealing with deposits, advances and the other related service activities.
According to The Banking Companies Act, 1949 Banking means the
accepting for the purpose of lending or investment, of deposits of money from the
public repayable on demand or otherwise, and withdrawable by cheques, drafts, and
pay order or otherwise.
1.2) FUNCTIONS OF BANK:
1) Receiving deposits:
This is the main function of commercial banks to collect savings of individuals
and firms. They offer different types of deposits for the facility of the customers.
i) Current account or demand deposits:
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Any sum of money can be withdrawn from this type of account any time
without any prior notice or such. No interest is allowed on this type of account.
ii) Savings account:
This type of account is maintained for the purpose of liquidity instantly by the
individuals. This type of account carries low interest rate.
iii)Fixed deposit:
This type of account is different from the above two types of accounts and is
maintained for a fixed period barring high interest rate which can be withdrawn either
on maturity date or before the date of maturity as per norms of banks.
2) Advancing loans:
This is the important function of the Commercial banks. Credit is given to the
people in different ways.
There are three types of loans:
i) Short term loans:
These loans are advanced for the period of 6 months to 1 year. Higher rate of
interest is charged.
ii) Medium term loans:
Loans advanced for a period of 1 year to 5 years are called medium term loans.
iii)Long term loans:
Loans which are advanced for a period of more than 10 years are called long
term loans.
3) Bank Overdraft:
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Banks allows their trustful customers to draw more than the deposit they have
in the banks. A higher rate of interest is charged on Overdraft.
4) Cash Credit:
Banks also advances credit against immovable properties and charge interest on
credit advanced.
5) Discounting of bills:
Banks provide short-term finance by discounting bills, i.e. making payment
before the due date of the bills after deducting certain rate of discount. In case anybill is dishonored on the due date, the bank can recover the amount from the
customer.
1.3) TYPES OF BANKS
There are various types of banks which operate in our country to meet the
financial requirements of different categories of people engaged in agriculture,
business, profession, etc. On the basis of functions, the banking institutions in Indiamay be divided into the following types:
TYPES OF BANKS
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CENTRAL BANK DEVELOPMENT BANKS SPECIALIZED BANKS
COMMERCIAL BANKS COOPERATIVE BANKS
PUBLIC SECTOR BANKS PRIMARY CREDIT SOCIETIES
PRIVATE SECTOR BANKS CENTRAL COOPERATIVE BANKS
FOREIGN BANKS STATE COOPERATIVE BANK
1.3.1) Central Bank
A bank which is entrusted with the functions of guiding and regulating the
banking system of a country is known as its Central bank. Such a bank does not deal
with the general public. It acts essentially as Governments banker; maintain deposit
accounts of all other banks and advances money to other banks, when needed. The
Central Bank provides guidance to other banks whenever they face any problem. It is
therefore known as the bankers bank. It advises the Government on monetary and
credit policies and decides on the interest rates for bank deposits and bank loans.
Another important function of the Central Bank is the issuance of currency notes,
regulating their circulation in the country by different methods. No other bank than the
Central Bank can issue currency.
1.3.2) Commercial Banks
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Commercial Banks are banking institutions that accept deposits and grant
short- term loans and advances to their customers. In addition to giving short-term
loans, commercial banks also give medium-term and long-term loan to business
enterprises. Commercial banks are of three types:
i) Public Sector Banks:
These are banks where majority stake is held by the Government of India or
Reserve Bank of India.
Examples of public sector banks are: State Bank of India, Corporation Bank, Bank
of Baroda and Dena Bank, etc.
ii) Private Sectors Banks:
In case of private sector banks majority of share capital of the bank is held by
private individuals. These banks are registered as companies with limited liability.
Examples of Private Sector Banks are: Jammu and Kashmir Bank Ltd., Bank of
Rajasthan Ltd., Development Credit Bank Ltd., Bharat Overseas Bank Ltd., Oriental
Bank of Commerce, Vysya Bank, Axis Bank., etc.
iii) Foreign banks:
These banks are registered and have their headquarters in a foreign country but
operate their branches in our country. Some of the foreign banks operating in our
country are Hong Kong and Shanghai Banking Corporation (HSBC), Citibank,
American Express Bank, Standard & Chartered Bank, Grindlays Bank, etc. The
number of foreign banks operating in our country has increased since the financial
sector reforms of 1991.
1.3.3) Development Banks
Business often requires medium and long-term capital for purchase of
machinery and equipment, for using latest technology, or for expansion and
modernization. Such financial assistance is provided by Development Banks. They
also undertake other development measures like Public Sector Banks comprise 19
nationalized banks and State Bank of India and its 7 associate banks. Industrial
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Finance Corporation of India (IFCI) and State Financial Corporations (SFCs) are
examples of development banks in India.
1. 3.4) Cooperative Banks
People who come together to jointly serve their common interest often form a
co- operative society under the Co-operative Societies Act. When a co-operative
society engages itself in banking business it is called a Co-operative Bank. The society
has to obtain a license from the Reserve Bank of India before starting banking
business. Any co-operative bank as a society is to function under the overall
supervision of the Registrar, Co-operative Societies of the State. As regards bankingbusiness, the society must follow the guidelines set and issued by the Reserve Bank of
India. There are three types of co-operative banks operating in our country:
a) Primary Credit Societies
b) Central Cooperative Banks
c) State Cooperative Banks
1. 3.5) Speciqalized Banks
There are some banks, which cater to the requirements and provide overall
support for setting up business in specific areas of activity. EXIM Bank, SIDBI and
NABARD are examples of such banks. They engage themselves in some specific area
or activity and thus, are called specialized banks.
i) Export Import Bank of India (EXIM Bank)
If you want to set up a business for exporting products abroad or importing
products from foreign countries for sale in our country, EXIM bank can provide you
the required support and assistance. The bank grants loans to exporters and importers
and also provides information about the international market.
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ii) Small Industries Development Bank of India (SIDBI)
If you want to establish a small-scale business unit or industry, loan on easy
terms can be available through SIDBI. It also finances modernization of small-scale
industrial units, use of new technology and market activities. The aim and focus of
SIDBI is to promote, finance and develop small-scale industries.
iii) National Bank for Agriculture and Rural Development (NABARD)
It is a central institution for financing agricultural and rural sectors. If a person
is engaged in agriculture or other activities like handloom weaving, fishing, etc.
NABARD can provide credit, both short-term and long-term, through regional rural
banks. It provides financial assistance, especially, to co-operative credit, in the field of
agriculture, small scale industries, cottages and village industries in rural areas.
1.4) OBJECTIVES OF THE STUDY
1. To ascertain the services of the Banking Ombudsman offered to the
customer(s).
2. To find out Banking Ombudsman Scheme & its functioning mechanism.
3.To show how the Ombudsman machinery helps in resolving customer(s)complaints.
4. To analyze the changes in Banking Ombudsman Scheme enactments and their
benefits in redressing customer(s) grievances.
5. To explain the duties, functions & powers of the Ombudsman in Banking
Sector.
6. To examine the role of law in the protection of the consumer of financial
services.
1.5) SCOPE OF STUDY
The present study covers the aspect of bankig services in India with special
reference to Ombudsman mechanism. It also deals precicsly the orign of banking in
India. The failure of the Banking Ombudsman can be known after the detailed and
careful examination of the aspects related on the performance as mentioned above.The
policies and procedures of Banking Ombudsman are governed by Reserve Bank of
India. It is regarding the registering of complaints from the prospective customers and
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providing a solution according to the purview of the board without any favoritism
neither to the bank nor the customer. The performance of the Banking Ombudsman
can be analyzed on the aspects such as:
i) The quantum of complaints handled by them,
ii) The timeliness in handling the issues, and
(iii) Appropriateness of the decisions of the Banking Ombudsman.
1.6) METHODOLOGY OF STUDY
The data is collected from books, magazines and websites concerning to
Banking Services, Banking Ombudsman and its services.
1.7) PERIOD OF STUDY
The period of study taken from 2007 to 2010.
1.8) DURATION OF STUDY
The duration of study is for 2 months.
1.9) IMPORTANCE OF THE STUDY
1. It explains the role of RBI acting as grievance redressal agency in banking
sector.
2. It shows the awareness of customer(s) in getting their problems and difficulties
redressed by the concerned banks.
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3. It shows upto what extent the policies and procedures of Banking Ombudsman
Scheme are reaching to the outright customer(s).
4. It explains how all the banks in the country are bound to abide by the policies
and procedures framed by RBI.
5. It explains the functioning of all types of banks in accordance to the rules and
regulations of Central Bank Of India.
6. It aids to know whether the services of bank(s) are satisfying the targeted
customer(s) or not.
1.10) LIMITATION OF STUDY
1. The period of study is limited.
2. It requires lot of analysis on the overall subject matter.
3. The data collected cannot be generalized as it is only secondary data.
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CHAPTER II
MODERN TRENDS IN
BANKING INDUSTRY
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2.1) INTRODUCTION
In India, the banks are being segregated in different groups. Each group has its
own benefits and limitations in operating in India and its own dedicated target market.
Only few of them work in the rural and urban sectors. Some of these banks are of
Indian origin and some are foreign players.
With years, banks are also adding services to their customers. The Indian
banking industry is passing through a phase of customers market. The customers have
more choices in choosing their banks. A competition has been established within thebanks operating in India. With stiff competition and advancement of technology, the
services provided by banks have become more easy and convenient. The past days are
witness to an hour wait before withdrawing cash from accounts or a cheque from the
north of the country being cleared in one month in the south.
Today, we are having a fairly well developed banking system with different
classes of banks public sector banks, foreign banks, private sector banks both old
and new generation, regional rural banks and co-operative banks with the Reserve
Bank of India as the fountain Head of the system.
In the banking field, there has been an unprecedented growth and
diversification of banking industry has been so stupendous that it has no parallel in the
annals of banking anywhere in the world.
2.2) INFORMATION TECHNOLOGY IN BANKING
India Vision-2020 is the Vision envisaged by the former Honble Presidentof India, Dr A.P.J. Abdul Kalam touching upon very sensitive issues requiring urgent
attention for implementation by banking and finance community, in an effective andefficient way. Banks have to be proactive to support the innovative products for
enabling wealth generation by young entrepreneurs by setting aside the conventional
tangible asset syndrome. The dynamics of banking in relation to national
development vis--vis role of banks are briefly discussed hereunder.
Indian banking industry, today is in the midst of an IT revolution. A
combination of regulatory and competitive reasons has led to increasing importance of
total banking automation in the Indian Banking Industry. Information Technology has
basically been used under two different avenues in Banking. The bank which used the
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right technology to supply timely information will see productivity increase and
thereby gain a competitive edge.
Following are the innovative services offered by the industry in the recent
past:
2.2.1) Electronic Payment Services E Cheques
Nowadays we are hearing about e-governance, e-mail, e-commerce, e-tail etc.
In the same manner, a new technology is being developed in US for introduction of e-
cheque, which will eventually replace the conventional paper cheque. India, as
harbinger to the introduction of e-cheque, the Negotiable Instruments Act has already
been amended to include; Truncated cheque and E-cheque instruments.
2. 2.2) Real Time Gross Settlement (RTGS)
Real Time Gross Settlement system, introduced in India since March 2004, is a
system through which electronics instructions can be given by banks to transfer funds
from their account to the account of another bank. The RTGS system is maintained
and operated by the RBI and provides a means of efficient and faster funds transfer
among banks facilitating their financial operations. As the name suggests, funds
transfer between banks takes place on a Real Time' basis. Therefore, money can
reach the beneficiary instantaneously and the beneficiary's bank has the responsibility
to credit the beneficiary's account within two hours.
2. 2.3) Electronic Funds Transfer (EFT)
Electronic Funds Transfer (EFT) is a system whereby anyone who wants to
make payment to another person/company etc. can approach his bank and make cash
payment or give instructions/authorization to transfer funds directly from his own
account to the bank account of the receiver/beneficiary. Complete details such as the
receiver's name, bank account number, account type (savings or current account),
bank name, city, branch name etc. should be furnished to the bank at the time of
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requesting for such transfers so that the amount reaches the beneficiaries' account
correctly and faster. RBI is the service provider of EFT.
2. 2.4) Electronic Clearing Service (ECS)
Electronic Clearing Service is a retail payment system that can be used to
make bulk payments/receipts of a similar nature especially where each individual
payment is of a repetitive nature and of relatively smaller amount. This facility is
meant for companies and government departments to make/receive large volumes of
payments rather than for funds transfers by individuals.
2. 2.5) Automatic Teller Machine (ATM)
Automatic Teller Machine is the most popular devise in India, which enables
the customers to withdraw their money 24 hours a day 7 days a week. It is a devise
that allows customer who has an ATM card to perform routine banking transactions
without interacting with a human teller. In addition to cash withdrawal, ATMs can be
used for payment of utility bills, funds transfer between accounts, deposit of chequesand cash into accounts, balance enquiry etc.
2. 2.6) Point of Sale Terminal
Point of Sale Terminal is a computer terminal that is linked online to the
computerized customer information files in a bank and magnetically encoded plastic
transaction card that identifies the customer to the computer. During a transaction, the
customer's account is debited and the retailer's account is credited by the computer for
the amount of purchase.
2. 2.7) Tele Banking
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Tele Banking facilitates the customer to do entire non-cash related banking on
telephone. Under this devise Automatic Voice Recorder is used for simpler queries
and transactions. For complicated queries and transactions, manned phone terminals
are used.
2. 2.8) Electronic Data Interchange (EDI)
Electronic Data Interchange is the electronic exchange of business documents
like purchase order, invoices, shipping notices, receiving advices etc. in a standard,
computer processed, universally accepted format between trading partners. EDI can
also be used to transmit financial information and payments in electronic form.
2.3) IMPLICATIONOF INFORMATION TECHNOLOGY IN
BANKING
The banks were quickly responded to the changes in the industry; especially the
new generation banks. The continuance of the trend has re-defined and re-engineered
the banking operations as whole with more customization through leveraging
technology. As technology makes banking convenient, customers can access banking
services and do banking transactions any time and from any ware. The importance of
physical branches is going down.
2.4) CHALLENGES FACED BY BANKS, vis--vis, IT
IMPLEMENTATION
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It is becoming increasingly imperative for banks to assess and ascertain the
benefits of technology implementation. The fruits of technology will certainly taste a
lot sweeter when the returns can be measured in absolute terms but it needs
precautions and the safety nets.
It has not been a smooth sailing for banks keen to jump onto the IT bandwagon.
There have been impediments in the path like the obduracy once shown by trade
unions who felt that IT could turn out to be a threat to secure employment. Further, the
expansion of banks into remote nooks and corners of the country, where logistics
continues to be a handicap, proved to be another stumbling stock. Another challenge
the banks have had to face concerns the inability of banks to retain the trained andtalented personnel, especially those with a good knowledge of IT.
The increasing use of technology in banks has also brought up security'
concerns. To avoid any pitfalls or mishaps on this account, banks ought to have in
place a well-documented security policy including network security and internal
security. The passing of the Information Technology Act has come as a boon to the
banking sector, and banks should now ensure to abide strictly by its covenants. An
effort should also be made to cover e-business in the country's consumer laws.
Some are investing in it to drive the business growth, while others are having
no option but to invest, to stay in business. The choice of right channel, justification of
IT investment on ROI, e-governance, customer relationship management, security
concerns, technological obsolescence, mergers and acquisitions, penetration of IT in
rural areas, and outsourcing of IT operations are the major challenges and issues in the
use of IT in banking operations. The main challenge, however, remains to motivate
the customers to increasingly make use of IT while transacting with banks. For small
banks, heavy investment requirement is the compressing need in addition to theircapital requirements. The coming years will see even more investment in banking
technology, but reaping ROI will call for more strategic thinking.
In the days to come, banks are expected to play a very useful role in the
economic development and the emerging market will provide ample business
opportunities to harness. Human Resources Management is assuming to be of greater
importance. As banking in India will become more and more knowledge supported,
human capital will emerge as the finest assets of the banking system. Ultimately
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Information technology (IT) plays an important role in the banking sector as it
would not only ensure smooth passage of interrelated transactions over the electric
medium but will also facilitate complex financial product innovation and product
development. The application of IT and e-banking is becoming the order of the day
with the banking system heading towards virtual banking.
As an extreme case of e-banking World Wide Banking (WWB) on the pattern
of World Wide Web (WWW) can be visualized. That means all banks would be
interlinked and individual bank identity, as far as the customer is concerned, does not
exist. There is no need to have large number of physical bank branches, extension
counters. There is no need of person-to-person physical interaction or dealings.Customers would be able to do all their banking operations sitting in their offices or
homes and operating through internet. This would be the case of banking reaching the
customers.
Banking landscape is changing very fast. Many new players with different
muscle powers will enter the market. The Reserve Bank in its bid to move towards the
best international banking practices will further sharpen the prudential norms and
strengthen its supervisor mechanism. There will be more transparency and disclosures.
2.5) FUTURE OUTLOOK OF BANKING SYSTEM IN INDIA
Everyone today is convinced that the technology is going to hold the key to
future of banking. The achievements in the banking today would not have make
possible without IT revolution. Therefore, the key point is while changing to the
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current environment the banks has to understand properly the trigger for change and
accordingly find out the suitable departure point for the change.
Although, the adoption of technology in banks continues at a rapid pace, the
concentration is perceptibly more in the metros and urban areas. The benefit of
Information Technology is yet to percolate sufficiently to the common man living in
his rural hamlet. More and more programs and software in regional languages could
be introduced to attract more and more people from the rural segments also.
Standards based messaging systems should be increasingly deployed in order to
address cross platform transactions. The surplus manpower generated by the use of IT
should be used for marketing new schemes and banks should form a brains trust'
comprising domain experts and technology specialists.
2.6. CONCLUSION
The banking today is re-defined and re-engineered with the use of Information
Technology and it is sure that the future of banking will offer more sophisticated
services to the customers with the continuous product and process innovations. Thus,there is a paradigm shift from the seller's market to buyer's market in the industry and
finally it affected at the bankers level to change their approach from "conventional
banking to convenience banking" and "mass banking to class banking". The shift has
also increased the degree of accessibility of a common man to bank for his variety of
needs and requirements.
In any banking system, no bank -- public or private -- can survive unless it
continuously strives to transform its organization into a self-governing, self-correcting
and self-adjusting entity. For banks to grapple with these problems and manage the
future, structural and institutional rigidities need to be eased in two critical areas:
comprehensive legal support for recovery of bad debts and a fundamental change in
the pattern of governance for the PSBs.
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While public sector banks are in the process of restructuring, private sector
banks are busy consolidating through mergers and acquisitions (the sector has been
recently opened up for foreign investments). PSBs need to improve in the services
like ATMs, Credit and Debit cards. They lack behind in providing facilities like loans
and other accounts. These branches are not interlinked with each other and workinghours are less.
In case of Private sector banks customers are not aware of the facts and hidden
costs in view, as there are various products and facilities provided by the banks. The
charges that are been taken are also too high. Challenges and Opportunities exist for
both the public sector as well as the private sector banks, their nature however differs.
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The word Ombudsman (ahm bedz man), in general, means a public official
who is appointed to investigate the citizens complaints against the Administration. He
is to intervene for the ordinary citizens in his dealings with the complex machinery of
the establishment.
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 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 is in operation since 1995 and has been revised
during the years 2002 and 2006. The Scheme is being executed by Banking
Ombudsmen appointed by Reserve Bank at 15 centers covering the entire country. As
mandated by the Banking Ombudsman Scheme, the Banking Ombudsmen submit an
Annual Report on the functioning of their offices every year. Based on such reports,
an Annual Report for the Banking Ombudsman Scheme in a whole is prepared at
Reserve Bank of India, Central Office. As is being the practice, the Annual Report
covers the last five-year period with focus on the current year. Further, as a result of
computerization of the functioning of Banking Ombudsman Offices through the
Complaint Tracking Software, detailed analysis was possible on the information
pertaining to year 2006-07. With the decision to merge the Banking Ombudsman
Offices with that of RBI offices, the accounting period for the Banking OmbudsmanOffices was changed from April 1-March 31 to July 1-June 30 to be in congruent with
that of RBI offices. Accordingly, the information analysed for the year 2006-07
pertains to the period July 1, 2006 to June 30, 2007.
3.2) GENERAL PARTICULARS ON THE SCHEME
The word Ombudsman in general means a grievance man, a public official
who is appointed to investigate complaints against the administration. He is to
intervene for the ordinary citizen in his dealings with the complex machinery of the
establishment. In India, any person whose grievance against a bank is not resolved to
his satisfaction by that bank within a period of one month can approach the Banking
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Ombudsman if his complaint pertains to any of the matters specified in the Scheme.
Banking Ombudsmen have been authorized to look into complaints concerning
deficiency in banking service , sanction of loans and advances in so far as they relate
to non-observance of the Reserve Bank directives on interest rates, delay in sanction
or non-observance of prescribed time schedule for disposal of loan applications ornonobservance of any other directions or instructions of the Reserve Bank as may be
specified for this purpose, from time to time, and such other matters as may be
specified by the Reserve Bank. The Scheme envisages expeditious and satisfactory
disposal of customer complaints in a time bound manner.
The Banking Ombudsman on receipt of any complaint endeavors to promote a
settlement of the complaint by agreement between the complainant and the bank
named in the complaint through conciliation or mediation. For the purpose of
promoting a settlement of the complaint, the Banking Ombudsman has been allowed
to follow 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 timeand such other factors, which in his opinion are necessary in the interest of justice.
3.3) SCOPE OF THE SCHEME
The Banking Ombudsman Scheme, 2002 covered all the Regional Rural Banks
in addition to all Commercial Banks and Scheduled Primary Co-operative Banks,which were already covered by earlier Banking Ombudsman Scheme, 1995. There is
no change in this regard in the Banking Ombudsman Scheme, 2006.
In 2006, the Reserve Bank of India announced the revised Banking
Ombudsman Scheme with enlarged scope that included customer complaints on
certain new areas, such as, credit card complaints, deficiencies in providing the
promised services even by banks' sales agents, levying service charges without prior
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notice to the customer and non adherence to the fair practices code as adopted by
individual banks. The important new grounds of complaints added include credit card
issues, failure in providing the promised facilities, non-adherence to fair practices
code, levying of excessive charges without prior notice and issues pertaining to
accepting payment towards taxes and issuing/servicing of Government securities. Thegrounds of complaints have been enumerated in Clause 8 of the Banking Ombudsman
Scheme, 2006.
3.4) OPERATIONALISATION
Reserve Bank of India operationalised the Banking Ombudsman Scheme byestablishing Banking Ombudsman Offices at 15 centers all over the country. The
names, addresses and area of operation of the Banking Ombudsmen have been given
in to Annexure A. Reserve Bank frames the guidelines for operationalizing the
Scheme and supervises the running of the Scheme. It also supervises the running of
the Scheme and administrative arrangements, budget and expenditure of the Banking
Ombudsman Offices.
3.5) POLICY FOR THE GRIEVANCES REDRESSAL OF THE
CUSTOMER COMPLAINTS
In the present scenario of competitive banking, excellence in customer service
is the most important tool for sustained business growth. Customer complaints are part
of the business life of any corporate entity. This is more so for banks because banks
are service organizations. As a service organization, customer service and customer
satisfaction should be the prime concern of any bank. The bank believes that
providing prompt and efficient service is essential not only to attract new customers,
but also to retain existing ones. This policy document aims at minimizing instances of
customer complaints and grievances through proper service delivery and review
mechanism and to ensure prompt redressal of customer complaints and grievances.
The review mechanism should help in identifying shortcomings in product features
and service delivery. Customer dissatisfaction would spoil banks name and image.
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The Banks policy on grievance redressal follows the under noted principles:
1) Customers are treated fairly at all times.
2) Complaints raised by customers are dealt with courtesy and on time.
3) Customers are fully informed of avenues to escalate their complaints/grievances
within the organization and their rights to alternative remedy, if they are not fully
satisfied with the response of the bank to their complaints.
4) Bank will treat all complaints efficiently and fairly as they can damage the
banks reputation and business if handled otherwise. The Bank employees must work
in good faith and without prejudice to the interests of the customer.
In order to make banks redressal mechanism more meaningful and effective, a
structured system needs to be built up towards such end. Such system would ensure
that the redressal sought is just and fair and is within the given frame-work of rules
and regulation. The policy document would be made available at all branches. All
employees of the Bank should be made aware about the Complaint handling process.
The customer complaint arises due to:
1) The attitudinal aspects in dealing with customers.
2) Inadequacy of the functions/arrangements made available to the customers or
gaps in standards of services expected and actual services rendered.
The customer is having full right to register his complaint if he is not satisfied
with the services provided by the bank. Customer can give his complaint in writing,
orally or over telephone. If customers complaint is not resolved within given time orif he is not satisfied with the solution provided by the bank, he can approach Banking
Ombudsman with his complaint or other legal avenues available for grievance
redressal.
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KIND S OF OMBUDSMAN
BANKING OMBUDSMAN
INSURANCE OMBUDSMAN
INCOME TAX OMBUDSMAN
TELECOM OMBUDSMAN
ELECTRICITY OMBUDSMAN
S.E.B.I OMBUDSMAN
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3.6) KINDS OF OMBUDSMAN
3.6.1) S.E.B.I. Ombudsman
The Securities Exchange Board of India (SEBI) under section 30 read with sub-
section (1) of section 11 of the SEBI Act, 1992, has framed the SEBI (Ombudsman)
Regulations, 2003, which were notified on 21stAugust 2003. The Regulations
provided for the establishment of the office of Ombudsman to redress the Grievance
of investors in securities and connected matters. The listed companies and registered
stock intermediaries have to disclose the name address and other particulars of
ombudsman in their for the benefit of the investors.
3.6.2) Electricity Ombudsman
The Electricity Regulatory Commission, under section 181 read with sub-section
(5) of section 42 of the Electricity Act, 2003, issues guidelines for establishment of
forum and Ombudsman for redressal of grievances of Electricity consumers. The
Delhi Regulatory Commission (DERC) vide its Notification dated 11thMarch, 2006
has issued DERC (Guidelines for establishment of Forum of redressal of grievance of
the consumer and Ombudsman) Regulations, 2003. It may be noted that the
Ombudsman is the Appellate Authority under the Electricity Act 2003, and the DERC
Regulations, 2003 and therefore an electricity consumer has to first approach the
Consumer Grievance Redressal Forum established under the DERC Regulations,
2003.
3.6.3) Tele Communication Ombudsman
The Telecom Regulatory Authority of India Act, 1997, empowers the TelecomRegulatory Authority of India Act 1997, empowers the Telecom Regulatory Authority
of India (TRAI) to make the recommendations on laying down the standards of
quality of services to be provided by the services providers and conduct the interest of
the periodical surveys of Telecom services so as to protect the interest of the
consumers. The telecoms operators frequently threaten to disconnects the phones and
with draw the numbers given t o subscribers if the deadline for payment is missed by a
day or there is miscalculation of the tiniest amount. The TRAI is, however, neither
empowered to look into the grievances of individual customers nor take action against
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the operators who do not meet quality of standards As there is no specialized body to
redress the grievance of telecom customers, they have to approach consumer forum
setup under THE Consumer Protection Act, 1986, or civil courts for Resolutions
adjudication of disputes.
3.6.4) Income-Tax Ombudsman
The government is considering creating an office of Income Tax Ombudsman to
protect individual taxpayers right. The Ombudsman will identify issues that increase
the compliance burden or create problems for taxpayers and bring those issues to the
attention of the ministry of Finance. The Ombudsman will make appropriatelegislative proposal where necessary and send periodical reports to the Department of
Revenue, suggesting appropriate action. It is proposed to initially setup offices of
Ombudsman at Delhi, Mumbai, Kolkata and Chennai.
3.6.5) Insurance Ombudsman
The Government of India, Minister of Finance, Department of Economics Affairs,
Insurance Division under section 114 (1) of Insurance Act, 1938, has framed the
Redressal of Public Grievance Rules, 1998, for appointment of Insurance
Ombudsman, which comes into force with effect from 11thNovember 1998. The
Insurance Ombudsman has started functioning from 1999, to provide for efficient,
cost effective and impartial settlement of claims and grievance of any person against a
Life or General Insurance in Public and private sector. The meaning of expression
any other person is wider than consumer and therefore, even third party having
grievance with respect to an Insurance contract can approach the Ombudsman.
3.6.6) BANKING OMBUDSMAN (BO)
The Reserve Bank of India (RBI) first introduced the Banking Ombudsman
Scheme In1995 in terms of Section 35(A) of Banking Regulation Act 1949 and it was
revised in 2002 and 2006 to provide a system of quick and inexpensive redress of
customer grievances against banks.
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Now let us discuss in detail about Banking Ombudsman and its mechanism as a
grievances redressal agency in next chapter.
3.7) BANKING OMBUDSMAN SCHEME 2006
This Scheme may be called the Banking Ombudsman Scheme, 2006and shall
extend to the whole of India to the business in India of a bank as defined under the
Scheme. The Reserve Bank, if it is satisfied that it is expedient so to do, may by order
suspend for such period as may be specified in the order, the operation of all or any of
the provisions of the Scheme, either generally or in relation to any specified bank.
The office of the Banking Ombudsman shall be located at such places as
maybe 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. The Reserve Bank shall depute such number of its officers or
other staff to the office of the Banking Ombudsman as is considered necessary tofunction as the secretariat of the Banking Ombudsman.
3.7.1) SHORT TITLE, COMMENCEMENT, EXTENT AND
APPLICATION
(1) This Scheme may be called the Banking Ombudsman Scheme, 2006.
(2) It shall come into force on such date as the Reserve Bank may specify.
(3) It shall extend to the whole of India.
(4) The Scheme shall apply to the business in India of a bank as defined under
the Scheme.
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(1) The Reserve Bank, if it is satisfied that it is expedient so to do, may by
order suspend for such period as may be specified in the order, the operation of
all or any of the provisions of the Scheme, either generally or in relation to any
specified bank.
(2) The Reserve Bank may, by order, extend from time to time, the period of any
suspension ordered as aforesaid by such period, as it thinks fit
3.7.3) APPOINTMENT AND TENURE OF BO
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 Ombudsman to carry
out the functions entrusted to them by or under the Scheme.
The appointment of Banking Ombudsman under the above Clause may be
made for a period not exceeding three years at a time.
3.7.4) POWERS AND JURISDICTION
(1) The Reserve Bank shall specify the territorial limits to which the authority
of each Banking Ombudsman appointed under Clause 4 of 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
Clause 8 and facilitate their satisfaction or settlement by agreement or through
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
thereat.
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(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.
3.7.5) DUTIES AND FUNCTIONS OF BO
1) The Ombudsman shall enquire into and investigate in accordance with the
Provisions of the Act, and take action or steps as may be prescribed by the
Act and concerning:
a) Practices and actions by persons, enterprises and other private
institutions where complaints allege that violations of fundamental rights
and freedoms have taken place.
b) All instances or matters of alleged or suspected corruption and the
misappropriation of public moneys or other public property by officials.
2) Without derogating from the provisions, any request or complaint in
respect of instances or matters referred to in that provisions, may include
any instance or matter in respect of which the Ombudsman has reason tosuspect:
a) That the provisions of any law or under the authority of the State or by
any person in its employment, or that any practice is so followed, in a
manner which is not in the public interest.
b) That the powers, duties or functions which vest in the State or, body or
institution, or any person in its employment are exercised or performed
in an irregular manner.
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3) That moneys forming part of the funds of the State or body or institution, or
received or held by or on behalf of the State or body or institution are being
or have been dealt with an irregular manner.
4) Any person wishing to lay any instance or matter referred to in provisions
before the Ombudsman shall do so in such manner as the Ombudsman may
determine or allow.
5) The Ombudsman shall not be required to investigate any instance or matter
referred to in the provisions which has been laid before him or her under the
provisions when the grounds on account of which the inquiry is desired is in
the opinion of the Ombudsman.
The provisions shall not apply in respect of any decision taken in or in connection
with any civil or criminal case by a court of law.
3.7.6) GROUNDS OF COMPLAINTS LODGED UNDER BO
The type and scope of the complaints which may be considered by a Banking
Ombudsman is very comprehensive, and it has been empowered to receive and
consider complaints pertaining to the following :
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 notestendered for any purpose, and for charging of commission for this service;
3) Non-acceptance, without sufficient cause, of coins tendered and for charging of
commission for this service;
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;
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7) Failure to honor guarantee or letter of credit commitments;
8) 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;
9) 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 ;
10)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;
11)Refusal to open deposit accounts without any valid reason for refusal;
12)Levying of charges without adequate prior notice to the customer;
13)Non-adherence by the bank or its subsidiaries to the instructions of Reserve
Bank on ATM/debit card operations or credit card operations;
14)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);
15)Refusal to accept or delay in accepting payment towards taxes, as required by
Reserve Bank/Government;
16)Refusal to issue or delay in issuing, or failure to service or delay in servicing or
redemption of Government securities.
17)Forced closure of deposit accounts without due notice or without sufficient
reason;
18)Refusal to close or delay in closing the accounts;
19)Non-adherence to the fair practices code as adopted by the bank; and
20)Any other matter relating to the violation of the directives issued by the
Reserve Bank in relation to banking or other services.
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Vide their Circular No.CSD.BOS.4638/13.01.01/2006-07 dated May 24, 2007, the
Reserve Bank of India has amended their Banking Ombudsman Scheme, 2006 and the
scheme shall be operative with amended effect.
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 Banks 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.
3.7.7) COMPLAINTS NOT TO BE CONSIDERED BY BO
Ones complaint will not be considered by Banking Ombudsman 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 bank 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 deal
with at any other forum like court of law, consumer court etc.
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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.
3.7.8) PROCEDURE FOR FILING A COMPLAINT BEFORE BO:
1) Any person who has a grievance against a bank on any one or more of the
grounds mentioned in Clause 8 of the Scheme may, himself or through his
authorized representative (other than an advocate), make a complaint to the
Banking Ombudsman within whose jurisdiction the branch or office of the
bank complained against is located.
2) Complaints arising out of the operations of credit cards, shall be filed before
the Banking Ombudsman within whose territorial jurisdiction the billing
address of the card holder is located and not the place where the bank
concerned or the credit card processing unit is located.
3) The complaint shall be made in writing duly signed by the complainant or his
authorized representative and shall as far as possible be in the form and shall
contain such particulars as specified in the Scheme.
4) The complainant shall file along with the complaint, copies of the documents,
if any, which he proposes to rely upon and also a declaration that the
complaint is maintainable as per clause 9(3) of the Scheme.
5) A complaint can also be made through electronic means.
6) The complainant shall before making a complaint to the Banking Ombudsman,
make a written representation to the bank.
7) The complaint can be filed if the bank has rejected the complaint or the
complainant had not received any reply within a period of one month after
the bank received his representation or if the complainant is not satisfied with
the reply given to him by the bank.
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8) The complaint to the Banking Ombudsman is to be made not later than one
year after the complainant has received the reply of the bank to his
representation or, where no reply is received, not later than one year and one
month after the date of the representation to the bank.
9) The complaint should not be in respect of the same subject matter which was
settled or dealt with on merits by the Banking Ombudsman in any previous
proceedings whether or not received from the same complainant or along with
one or more complainants or one or more of the parties concerned with the
subject matter.
10) The complaint should not pertain to the same subject matter, for which
any proceedings before any court, tribunal or arbitrator or any other forum is
pending or a decree or Award or order has been passed by any such court,
tribunal, arbitrator or forum.
11) The complaint should not be frivolous or vexatious in nature.
12) The complaint should be made before the expiry of the period of
limitation prescribed under the Indian Limitation Act, 1963 for such claims.
3.7.9) POWER TO CALL FOR INFORMATION
(1) For the purpose of carrying out his duties under this Scheme, a Banking
Ombudsman may require the bank against whom the complaint is made or anyother
bank concerned with the complaint to provide any information or furnishcertified
copies of any document relating to the complaint which is or is alleged to be in its
possession.
Provided that in the event of the failure of a bank to comply with the
requisition without sufficient cause, the Banking Ombudsman may, if he deems fit,
draw the inference that the information if provided or copies if furnished would be
unfavorable to the bank.
(2) The Banking Ombudsman shall maintain confidentiality of any information
or document that may come into his knowledge or possession in the course of
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discharging his duties and shall not disclose such information or document to any
person except with the consent of the person furnishing such information or
document.
Provided that nothing in this clause shall prevent the Banking Ombudsman
from disclosing information or document furnished by a party in a complaint to the
other party or parties to the extent considered by him to be reasonably required to
comply with any legal requirement or the principles of natural justice and fair play in
the proceedings.
3.7.10) SETTLEMENT OF COMPLAINT BY AGREEMENT
(1) As soon as it may be practicable to do, the Banking Ombudsman shall send
a copy of the complaint to the branch or office of the bank named in the complaint,
under advice to the nodal officer referred to in Sub Clause (3) of Clause 15, and
endeavour to promote a settlement of the complaint by agreement between the
complainant and the bank through conciliation or mediation.
(2) For the purpose of promoting a settlement of the complaint, the Banking
Ombudsman may follow such procedure as he may consider just and proper and he
shall not be bound by any rules of evidence.
(3) The proceedings before the Banking Ombudsman shall be summary in
nature.
3.7.11) AWARD BY THE BANKING OMBUDSMAN
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(1) 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 allow the parties, he may, after affording the parties a reasonable
opportunity to present their case, pass an Award or reject the complaint.
(2) The Banking Ombudsman shall take into account 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 relevant to the complaint.
(3) The award shall state briefly the reasons for passing the award.
(4) The Award passed under Sub Clause (1) shall contain the direction/s, if any,
to the bank for specific performance of its obligations and in addition to or otherwise,
the amount, if any, to be paid by the bank to the complainant by wayof compensationfor any loss suffered by the complainant, arising directly out of the act or omission of
the bank.
(5) Notwithstanding anything contained in Sub Clause (4), the Banking
Ombudsman shall not have the power to pass an award directing payment of an
amount which is more than the actual loss suffered by the complainant as a direct
consequence of the act of omission or commission of the bank, or ten lakh rupees
whichever is lower.
(6) In the case of complaints, arising out of credit card operations, the Banking
Ombudsman may also award compensation not exceeding Rs. 1 lakh to the
complainant, taking into account the loss of the complainant's time, expenses incurred
by the complainant, harassment and mental anguish suffered by the complainant.
(7) A copy of the Award shall be sent to the complainant and the bank.
(8) An award shall lapse and be of no effect unless the complainant furnishes to
the bank concerned within a period of 30 days from the date of receipt of copy of theAward, a letter of acceptance of the Award in full and final settlement of his claim.
Provided that no such acceptance may be furnished by the complainant if he
has filed an appeal under Sub Clause (1) of clause 14.
(9)The bank shall, unless it has preferred an appeal under Sub Clause (1) of
Clause 14, within one month from the date of receipt by it of the acceptance in writing
of the Award by the complainant under Sub Clause (8), comply with the Award and
intimate compliance to the Banking Ombudsman.
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3.7.12) GROUNDS FOR REJECTION OF COMPLAINT BY BO:
The Banking Ombudsman may reject a complaint at any stage if it appears to him
that a complaint made to him is:
(a) Not on the grounds of complaint referred to in Clause 8 or otherwise not in
accordance with Sub Clause (3) of clause 9; or
(b) Beyond the pecuniary jurisdiction of Banking Ombudsman prescribed
under Clause 12 (5) and 12 (6) or
(c) Requiring consideration of elaborate documentary and oral evidence and the
proceedings before the Banking Ombudsman are not appropriate for
adjudication of such complaint; or
(d) Without any sufficient cause; or
(e) That it is not pursued by the complainant with reasonable diligence; or
(f) In the opinion of the Banking Ombudsman there is no loss or damage or
inconvenience caused to the complainant.
3.7.13) APPEAL BEFORE THE APPELLATE AUTHORITY:
If one is not satisfied with the decision passed by the Banking Ombudsman, one
can approach the appellate authority against the Banking Ombudsmans 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.
Any person aggrieved by an Award under clause 12 or rejection of a complaint for
the reasons referred to in sub clauses (d) to (f) of clause 13, may within 30 days of the
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date of receipt of communication of Award or rejection of complaint, prefer an appeal
before the Appellate Authority;
Provided that in case of appeal by a bank, the period of thirty days for filing an
appeal shall commence from the date on which the bank receives letter of acceptance
of Award by complainant under Sub Clause (6) of clause 12;
Provided that the Appellate Authority may, if he is satisfied that the applicant had
sufficient cause for not making the appeal within time, allow a further period not
exceeding 30 days;
Provided further that appeal may be filed by a bank only with the previous
sanction of the Chairman or, in his absence, the Managing Director or the Executive
Director or the Chief Executive Officer or any other officer of equal rank.
The Appellate Authority shall, after giving the parties a reasonable opportunity of
being heard:
a) Dismiss the appeal; or
b) Allow the appeal and set aside the award; or
c) 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
d) Modify the award and pass such directions as may be necessary to give
effect to the modified award; or
e) Pass any other order as it may deem fit.
The order of the Appellate Authority shall have the same effect as the Award
passed by Banking Ombudsman under clause 12 or the order rejecting the complaint
under clause 13, as the case may be.
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The banks covered by the Scheme shall ensure that the purpose of the Scheme
and the contact details of the Banking Ombudsman to whom the complaints are to be
made by the aggrieved party are displayed prominently in all the offices and branches
of the bank in such manner that a person visiting the office or branch has adequate
information of the Scheme.
CHAPTER IV
DIFFERENCE BETWEEN
BANKING OMBUDSMAN
SCHEME 1995, 2002 & 2006
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4.1) INTRODUCTION
The Ombudsmans task is to provide citizens with a means of redress for
maladministration. By performing this role, the Ombudsman helps, first, to relieve the
burdens of litigation by promoting friendly settlement and making recommendations
to avoid the need for proceedings in courts; and second, to promote the effective
implementation of citizen's rights. The Ombudsman is impartial and has a conciliatoryapproach.
In India, any person whose grievances against a bank are not resolved to his
satisfaction by that bank within a period of two months then he can approach the
Banking Ombudsman for redressal. This is however subject to the complaint
pertaining to any of the matters specified in the Banking Ombudsman Scheme.
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Reserve Bank of India (RBI) which assumes the role similar to that of quasi-
legal machinery as it is established by a competent authority to provide for an
additional but optional legal remedy for effective, expeditious and inexpensive
redressal of customer grievances. Towards effective compliance of this optional legal
remedy it introduced the Banking Ombudsmen Scheme in 1995 and got it further
amended in 2002 and in 2006.
The Reserve Bank of India notified the revised Banking Ombudsman Scheme,
2006 which came into effect from January 1, 2006. The new scheme widens its scope
thereby to include customer complaints on certain areas like credit card complaints,
deficiencies in providing the promised services even by banks sales agents, levyingservice charges without prior notice to the customer and non- adherence to the fair
practices code as adopted by the individual banks. It is made applicable to all
commercial banks, regional rural banks and scheduled primary cooperative banks
whose principal place of business is in India.
The Revised Scheme with well-equipped staff is wholly funded by the Reserve
Bank of India. This new scheme allows the complainants to file a complaint in any
form, including online and the bank customers are entitled to file an appeal with the
Reserve Bank of India. It provides a forum for bank customers for redressal of their
common complaints against banks. On the basis of the new Banking Ombudsman
Scheme, 2006 the customers are also privileged to complain about non-payment or
any inordinate delay in payments or collection of cheques towards bills or remittances
by banks, as also non acceptance of small denomination notes and coins or charging
of commission for acceptance of small denomination notes and coins by banks. The
Banking Ombudsmen currently have their offices in 15 centers covering the entire
country.
4.2) IS THE NEW BANKING OMBUDSMAN SCHEME 2006
DIFFERS FROM ITS PREVIOUS SCHEMES?
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The vision behind the emergence of Banking Institution is to evolve into a
strong, sound and globally competitive financial system, providing integrated services
to customers from all segments, leveraging on technology and human resources,
adopting the best accounting and ethical practices and fulfilling corporate and social
responsibilities towards all stakeholders. As a part of this vision, the RBI lodgedvarious Ombudsman schemes till today which forms a part of our discussion.
Yes, the new scheme 2006 differs from its previous schemes. The extent and
scope of the scheme, 2006 is much wider than its earlier schemes of 1995 and 2002.
Because the new scheme introduces for the first time;
1)Includes complaints relating to credit cards, deficiencies in providing the
promised services by banks and its marketing agents, levying of service charges
without prior notice to the customers and non-compliance of fair practice codes by the
banks;
2) Facilitates the submission of complaints through online;
3) Establishes an appellate authority to facilitate appeals against the awards
rendered by the Banking Ombudsmen instead of filing with the Review Authority for
review of such awards.
The extent and scope of the new Scheme is wider than the earlier Scheme of 2002.
The new Scheme also provides for online submission of complaints. The new Scheme
additionally provides for the institution of an 'appellate authority' for providing scope
for appeal against an award passed by the Ombudsman both by the bank as well as the
complainant.
In exercise of the powers conferred by Section 35A of the Banking Regulation
Act, 1949 and in partial modification of its Notification dated December 26, 2005,
Reserve Bank of India hereby amends the Banking Ombudsman Scheme 2006 to the
extent specified in the Annex hereto. The Reserve Bank hereby directs that all
commercial banks, regional rural banks and scheduled primary co-operative banks
shall comply with the Banking Ombudsman Scheme, 2006 as amended hereby. The
amendments in the Scheme shall come into force from January 1, 2006.
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4.3) AMENDMENT PASSED BY RBI FOR THE CHANGES IN
BANKING OMBUDSMAN SCHEME, 2006:
Amendment 1:
RBI expands Scope of Banking Ombudsman Scheme; Includes Fair
Banking Practices.
Date: 26 Dec 2005
The Reserve Bank of India today announced the revised Banking OmbudsmanScheme with enlarged scope to include customer complaints on certain new areas,
such as, credit card complaints, deficiencies in providing the promised services even
by banks' sales agents, levying service charges without prior notice to the customer
and non adherence to the fair practices code as adopted by individual banks.
Applicable to all commercial banks, regional rural banks and scheduled primary
cooperative banks having business in India, the revised scheme will come into effect
from January 1, 2006.
In order to increase its effectiveness, the revised Banking Ombudsman Scheme
will be fully staffed and funded by the Reserve Bank instead of the banks. Under the
revised Banking Ombudsman Scheme, the complainants will be able to file their
complaints in any form, including online. The bank customers would also be able to
appeal to the Reserve Bank against the awards given by the Banking Ombudsmen.
The new scheme provides a forum to bank customers to seek redressal of theirmost common complaints against banks, including those relating to credit cards,
service charges, promises given by the sales agents of banks, but not kept by banks, as
also, delays in delivery of bank services. The bank customers would now be able to
complain about non-payment or any inordinate delay in payments or collection of
cheques towards bills or remittances by banks, as also non- acceptance of small
denomination notes and coins or charging of commission for acceptance of small
denomination notes and coins by banks.
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The Reserve Bank had first introduced the Banking Ombudsman Scheme in
1995 to provide expeditious and inexpensive forum to bank customers for resolution
of their complaints relating to deficiency in banking services. The Scheme was revised
in 2002 mainly to cover Regional Rural Banks and to permit review of the Banking
Ombudsmens awards against banks by the Reserve Bank. The Banking Ombudsmen
currently have their offices in 15 centers.
The Reserve Bank is also in an advanced stage of setting up an independent
Banking Codes and Standards Board of India to ensure that comprehensive code of
conduct for fair treatment to customers are formulated by banks and adhered to. The
Reserve Bank of India had announced setting up of the Board in its Annual Policy for2005-2006 announced by the Governor, Dr Y V Reddy in April 2005.
Amendment 2:
Customers can now appeal against the Banking Ombudsman's
Decision.
Date: 24 May 2007
Bank customers can now appeal against the decision of the Banking
Ombudsman where he has rejected the customer's complaint relating to matters falling
within the grounds of complaints specified under the scheme. The Reserve Bank of
India has amended the Banking Ombudsman Scheme, 2006 to enable the customers to
appeal against the Banking Ombudsman's decision. The amendments are available on
the RBI website. Before the scheme was amended, the bank customers could appealonly against the awards given by the Banking Ombudsman. The appellate authority
for the Banking Ombudsman Scheme is the Deputy Governor of Reserve Bank of
India.
It may be recalled that in the Annual Policy for 2007-2008, the Reserve Bank
had announced that based on customer feedback, it would amend the Banking
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Ombudsman Scheme, 2006 to extend the appeal option also to the decisions of the
Banking Ombudsman.
Originally introduced in 1995, the Banking Ombudsman Scheme enables
speedy and cost effective resolution of complaints of bank customers relating to
deficiency in bank services. The Scheme now covers all Scheduled Commercial
Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks. The
customers can also now complain to the Banking Ombudsman against deficiency in
almost any banking services, including credit cards, after exhausting the channel
available with the bank concerned for resolving their complaints. The Reserve Bank
has appointed 15 Banking Ombudsmen who are located mostly in State Capitals under
the Scheme. The Banking Ombudsman tries to resolve the complaint through
conciliation or mediation and even passes an award if it is not resolved through such
settlement.
Amendment 3:
RBI amends Banking Ombudsman Scheme: includes complaints
relating to Internet Banking and Non-adherence to BCSBI Code.
Date: 05 Feb 2009
The Reserve Bank of India has widened the scope of its Banking Ombudsman
Scheme 2006, to include deficiencies arising out of internet banking. Under the
amended Scheme, a customer would also be able to lodge a complaint against the
bank for its non-adherence to the provisions of the fair practices code for lenders or
the Code of Bank's Commitment to Customers issued by the Banking Codes and
Standards Board of India (BCSBI). The BCSBI is an independent and autonomous
watchdog set up by the Reserve Bank to monitor and ensure that the codes and
standards adopted by the banks for rendering banking services are adhered to in true
spirit.
As per the amended Scheme, the Banking Ombudsman can award
compensation not exceeding Rupees one lakh to the complainant in the case of
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complaints arising out of credit card operations, taking into account the loss of the
complainant's time, expenses incurred by him as also, harassment and mental anguish
suffered. Further, non-observance of the Reserve Bank's guidelines on engagement of
recovery agents by banks has also been brought specifically under the purview of the
Scheme.
Any customer who has a grievance against a bank can complain to the Banking
Ombudsman in whose jurisdiction the branch of the bank complained against is
located. Some banks have centralized certain transactions, like housing loans, credit
cards, etc. If there are complaints regarding such transactions, complaints would have
to be made to the Banking Ombudsman in the State in which the bank customer
receives the bill.
In addition, the Reserve Bank has simplified the format for lodging complaint
to the Banking Ombudsman. Though the complainant need not lodge his complaint in
a specific format, the Scheme now provides for an easy-to-fill format for lodging
complaints, in case complainants prefer to use it. The jurisdictions of the Banking
Ombudsman at Kanpur, New Delhi, Chandigarh, Chennai and Thiruvananthapuram
have been rationalized to include/exclude certain areas taking into account the
geographical proximity of those areas to the Office of the Banking Ombudsman.
The amended Scheme however, does not include certain banking transactions,
such as, failure to honor bank guarantee or letter of credit, etc. Complaints on these
areas of banking services are insignificant in number.
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CHAPTER V
CONSUMER GRIEVANCES
DURING 2007 2010
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5.1) NUMBER OF COMPLAINTS RECEIVED
The Banking Ombudsman Offices receive complaints pertaining to deficiency
in service provided by banks. The number of complaints received has increasedsubstantially over the years and this trend is maintained during the year 2009-10 also
by recording an increase of 15% over the previous year.
Table 1 - Number of complaints received by the BO Offices
Period No. of BO offices No. of complaints
received during theyear
Rate of increase (%
over previous year)
2005-06 15 31,732 20
2006-07 15 38,638 22
2007-08 15 47,887 24
2008-09 15 69,117 44
2009-10 15 79,266 15
The number of complaints received has recorded substantial increase since
2006 as new grounds of complaints such as credit card issues, failure in providing the
promised facilities, non-adherence to fair practices code and levying of excessive
charges without prior notice, etc were included in the Scheme. Further, internet
banking related complaints were added as a new ground for complaint as per the
February 3, 2009 amendment of the Scheme. Increased awareness among the public
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OMBUDSMAN SERVICES IN BANKING INDUSTRY AN OVERVIEW
about the BOS and online accessibility to BO office through internet also contributed
to the increase in receipt of complaints.
Chart 1 - Number of complaints received
5.2) BO OFFICE WISE RECEIPT OF COMPLAINTS
The 15 Offices of the Banking Ombudsman receive and consider complaints from
customers relating to the deficiencies in banking services in respect to their territorial jurisdiction.
The current territorial jurisdiction is given in Annex1.
Table 2- BO Office-wise Receipt of ComplaintsBO
Office
No. of complaints received during %
increase
in 2009-
10 over
% to
total
complain
ts
2007
-08
2008-
09
2009-10 2008-
09
Ahmeda
bad
2855 3732 4149 11 5.2
Bangalore 2975 3255 3854 18 4.9
Bhopal 3402 3375 3873 15 4.9
Bhubane
swar
998 1159 1219 5 1.5
Chandig
arh
2331 2634 3234 23 4.1
Chennai 4545 10381 12727 23 16.10
Guwahat
i
282 455 528 16 0.6
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Hyderab
ad
2843 3961 5622 42 7.1
Jaipur 3369 3688 4560 24 5.8
Kanpur 5340 7776 7832 1 9.9
Kolkata 2815 3671 5326 45 6.7Mumbai 6070 9631 10058 5 12.7
New 6742 10473 12045 15 15.20
Delhi
Patna 1480 2110 1707 - 2.2
Thiruvan
an-
thapura
m
1840 2816 2532 - 3.2
Total 47887 69117 79266 15% 100%
Four BO offices at Chennai, New Delhi, Mumbai and Kanpur accounted for
54% of all the complaints in that order, with Chennai at 16.10%, followed by New
Delhi 15.20%, Mumbai 12.7% and Kanpur at 9.9%. Among other BO offices,
Hyderabad accounted for 7.1% of the complaints followed by Kolkata 6.7%.
Percentage wise, Kolkata office witnessed the highest increase in the number of
complaints 45% during the year, followed by Hyderabad 42%.
Chart 2 - BO Office wise Receipt of Complaints
5.3) AVEARAGE NUMBER OF COMPLAINTS RECEIVED
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Average number of complaints received per BO office is also on the increase
due to enlargement of the scope of the Scheme coupled with the awareness
programmes undertaken by the BO offices on a regular basis.
Table 3 - Average Number of Complaints received per BO Office
Period No. of BO offices No. of
complaints
received during
the year
Average No. of
complaints
received per BO
office
2005-06 15 31732 2115
2006-07 15 38638 2576
2007-08 15 47887 3192
2008-09 15 69117 4608
2009-10 15 79266 5284
On an average, each BO office handled 5284 complaints during the current
year as compared to just 2115 complaints during the year 2005-06, indicating the
popularity of the Scheme.
Chart 3 Average number of Complaints received per BO Office
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OMBUDSMAN SERVICES IN BANKING INDUSTRY AN OVERVIEW
5.4) REGION WISE RECEIPT OF COMPLAINTS
The offices of the Banking Ombudsman received maximum number of
complaints from rural and metropolitan areas during the year 2009-10. This is a
testimony to the success of the awareness efforts undertaken by the Offices of the
Banking Ombudsman as well as the RBI Regional Offices through personal/village
visits, media campaign etc. During the year, the RBI had celebrated its platinum
jubilee and all offices including Central Office Departments had conducted outreach programmes. Further, Top Executives of the Bank had visited very remote and
moffusil areas of the country as a part of outreach activity of Platinum Jubilee year
celebrations. The detailed region wise position of complaints is given below:
Table 4- Region-wise receipt of Complaints at the BO Offices
Region No of
complaints
receivedduring
2007-08
No of
complaints
receivedduring
2008-09
No of
complaints
receivedduring
2009-10
% increase
Rural 8418 13915 25,055 (32%) 80%
Semi Urban 6641 9817 10,741(14%) 9%
Urban 10,978 15,723 16,423 (20%) 5%
Metropolita 21,850 29,662 27,047(34%) (-) 9%
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OMBUDSMAN SERVICES IN BANKING INDUSTRY AN OVERVIEW
n
Total 47,887 69,117 79,266
(100%)
15%
While the number of complaints from rural areas increased by 80 % during the
year 2009-10, complaints from the semi-urban areas increased by 9 % only. On the
other hand, complaints from the metros had decreased by 9%. These figures can be
well compared against the total increase in the number of complaints by 15 %.
Chart 4 Region wise receipt of Complaints
5.5) MODEWISE RECEIPT OF COMPLAINTS
Complainants can log on to the RBI web site at www.rbi.org.in and complain
about deficiency in banks services by using the online complaint form. The email ids
of the Banking Ombudsmen are also available in the public domain and complainants
can send emails to them. For those who have no access to internet, complaints can be
sent by post. During the year 2007-08, 2008-09 and 2009-10 the complaints received
by different modes are as under:
Table 5 - Mode wise Receipt of Complaints at the BO Offices
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Mode No. of Complaints
received during
2007-08
No. of Complaints
received during
2008-09
No. of Complaints
received during
2009-10
No. % No. % No. %
Email 7183 15% 15,927 23% 9221 12%
On line 7662 16% 9352