the banking ombudsman scheme · 2008-12-24 · reserve bank of india banking ombudsman scheme 2006...

THE BANKING OMBUDSMAN

SCHEME

Annual Report

2007-08

Reserve Bank of IndiaCustomer Service Department

Central OfficeMumbai

ReserveBank of India

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Scheme2006

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Contents

Particulars Page No.

Foreword ......................................................................................................... i

Vision and Goals of the Banking Ombudsman Offices .................................... iii

Profile of Complaints ....................................................................................... iii

1. The Banking Ombudsman Scheme.................................................................. 1

2. Complaint handling procedure ......................................................................... 1

3. Receipt of Complaints ..................................................................................... 3

4. Nature of complaints handled .......................................................................... 9

5. Disposal of Complaints ................................................................................. 11

6. Disposal of Complaints – Staff wise .............................................................. 14

7. Cost of running the Scheme .......................................................................... 15

8. Appeal against the decisions of Banking Ombudsmen ................................... 16

9. Other Information .......................................................................................... 16

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Tables

Table No. Nomenclature

Table 1 Number of complaints received by the Banking Ombudsman Offices

Table 2 Mode wise Receipt of complaints at the Offices of BankingOmbudsman during 2007-08.

Table 3 Population segment-wise receipt of complaint at the Offices ofBanking Ombudsman during 2007-08.

Table 4 Complainant group-wise classification of complaints received at theOffices of Banking Ombudsman during 2007-08.

Table 5 Banking Ombudsman Office wise complaints receipt during 2006-07and 2007-08

Table 6 Bank Group wise complaints received by Banks

Table 7 Bank-group-wise complaints received by Banking Ombudsmanduring 2003-04 to 2007-08

Table 8 Bank Group-wise complaints in the years 2006-07 & 2007-08 inrelation to number of accounts

Table 9 Category-wise receipt of complaints received in 2006-07 & 2007-08.

Table 10 Disposal of Complaints by Banking Ombudsman Offices

Table 11 Mode of disposal of complaints (other than rejected complaints)during the years 2003-04 to 2007-08

Table 12 Reasons for Rejection of complaints received in 2007-08

Table 13 Details of complaints pending at the end of the year 2006-07 and2007-08 (indicating the pending period)

Table 14 Banking Ombudsman Office Staff-wise complaints dealt with during2006-07 and 2007-08

Table 15 Cost of handling complaints received at Banking OmbudsmanOffices

Table 16 Number of Appeals Received during 2007-08 and disposed andpending as on 30 June 2008.


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Charts

Chart 1 Number of Complaints received during the years 2003-04 to2007-08

Chart 2 Mode-wise Receipt of Complaints

Chart 3 Population-segment-wise Receipt of Complaints

Chart 4 Banking Ombudsman Office-wise Receipt of Complaints

Chart 5 Category-wise receipt of complaints received in 2006-07 &2007-08 – % to total

Chart 6 Mode of disposal of complaints (other than rejected complaints)during the years 2003-04 to 2007-08

Chart 7 Reasons for Rejection of complaints received in 2007-08

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Annex

Annex 1 The Addresses and area of operation of the Banking Ombudsman

Annex 2 The important notifications relating to Customer Service and BankingOmbudsman Scheme in 2007-08

Annex 3 Cases dealt with by the Banking Ombudsman

Annex 4 The break-up of bank wise (scheduled commercial banks)complaints received in the year 2007-08


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Foreword

In the area of treating customers fairly, thecherished principles are transparency andreasonableness in pricing, customerappropriateness, confidentiality, andeffective grievance redressal machinery.The Reserve Bank as the bankingregulator has been actively engaged in thereview, examination and evaluation ofcustomer service rendered by banks. Ithas been continually nudging the Indianbanking industry to become morecustomer-friendly and customer-centric inits conduct and business practices. Thebroad approach of RBI has been toempower the common person whilestrengthening the customer-servicedelivery systems in banks by engaging in aconsultative process with them.

The Reserve Bank introduced theBanking Ombudsman Scheme in 1995 toprovide an expeditious and inexpensiveforum to bank customers for resolution oftheir complaints relating to bankingservices. The Scheme covered bankingservices rendered by scheduledcommercial banks and scheduled primarycooperative banks. The objective of theBanking Ombudsman Scheme is to be avisible and reliable system of disputeresolution mechanism for bankcustomers. The Ombudsmen generallyresort to conciliation or mediation forsettlement of complaints.

The Banking Ombudsman Scheme wasrevised in 2002 to cover Regional RuralBanks and to permit a review of theBanking Ombudsman’s Awards againstthe banks by the Reserve Bank. The

Scheme was further revised in 2006 givingit a much wider scope by includingseveral new areas of customercomplaints. The Banking Ombudsmencurrently have their offices in 15 Centersspread across the country and are fullyfunded by the Reserve Bank. TheBanking Ombudsmen are serving Officersof Reserve Bank in the rank of ChiefGeneral Managers and GeneralManagers.

Two major challenges in effectiveimplementation of Banking OmbudsmanScheme are creating widespreadawareness about the Scheme andproviding easy access to grievanceredressal under the Scheme. BankingOmbudsmen have been touring across thecountry to popularize the Scheme. Thereis a steady increase in the number ofcomplaints under the scheme indicatingthe growing awareness among the people.It is observed that more and morecomplaints are being received reflectingthe increased awareness andempowerment of customers. The use ofinternet by complainants is steadily pickingup with the Banking Ombudsmenreceiving as much as 30% of allcomplaints in electronic mode (e-mail/online).

The Annual Report 2007-08 covers theactivities of the 15 Banking OmbudsmanOffices, with specific reference to thenumber and nature of complaintsreceived, the banks complained againstand the manner of disposal of complaints.The Report also highlights certainexemplary decisions given by BankingOmbudsman. i

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During the year 2007-08, the BankingOmbudsmen received 47887 complaintsas against 38638 received in the previousyear (an increase of 24%) and disposedof 89% of the total complaints (84% inthe previous year), with only 11% carriedforward to the next year. Of the 11% ofcomplaints carried forward to the nextyear, only 6 % were more than 2 monthsold. The Banking Ombudsmen have beengenerally effective in redressal ofcomplaints.

One of the challenges that bank customerscontinue to face is ensuring fair treatmentfrom banks. The cases handled by theBanking Ombudsmen reveal that bankersneed to deal with customers in a moretransparent manner, particularly in makingthem aware of the terms and conditions ofsanction and the specific connotation

associated with them right at thebeginning. Reasonableness in pricing ofproducts by banks and their dealing withdefault situations are other areas whichrequire added focus, as complaints onthese fronts continue to come to theBanking Ombudsman.

The Office of the Banking Ombudsmanhas evolved over the years in ensuringbetter customer service in the bankingindustry. The Office would continue toplay lead role in customer empowermentand in creating a customer-centricenvironment in banks.

Usha ThoratDeputy Governor &Appellate Authority

November 20, 2008

ii


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Vision and Goals of the

Banking Ombudsman

Offices

Vision Statement:

� To be a visible and credible system ofdispute resolution mechanism forcommon persons utilizing the bankingservices.

Goals:

� To ensure redressal of grievances ofusers of banking services in aninexpensive, expeditious, fair andreasonable manner that will provideimpetus to improved customerservices in the banking sector on acontinuous basis.

� To provide valuable feedback/suggestions to Reserve Bank of Indiatowards framing appropriate andtimely guidelines to banks to improvethe level of customer service and tostrengthen their internal grievanceredressal systems.

� To enhance the awareness of theBanking Ombudsman Scheme.

� To facilitate quick and fair (non-discriminatory) redressal of grievancesthrough use of IT systems,comprehensive and easily accessibledatabase and enhanced capabilities ofstaff through training.

iii

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Figure in brackets show % of pending* Appeals against decisions were allowed only from May 2007

PROFILE OF COMPLAINTS

Sr.Subject

As on

No. 30.06.07 30.06.08

1 Complaints brought forward from the previous year 6128 7105

2 Complaints received during the year 38638 47887

3 TOTAL 44766 54992

4 Complaints disposed during the year 37661 49100

5 Complaints pending at the close of the year 7105 5892

- Less than one month 2262 2712(32) (46)

- One to two months 1936 1394(27) (24)

- Two to three months 943 861(13) (15)

- More than 3 months 1964 925(28) (15)

6 Appeals received during the year 15 186

Appeals against Awards 15 17

Appeals against Decisions * 0 169

7 Appeals disposed of during the year 13 154

8 Appeals pending at the close of the year 2 32

Less than one month 0 17

One to two months 0 10

Two to three months 2 3

More than three months 0 2


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The Banking Ombudsman

Scheme

1. The Banking Ombudsman Scheme,1995 was notified by RBI on June 14,1995 in terms of the powers conferred onthe Reserve Bank by Section 35A of theBanking Regulation Act, 1949 (10 of1949) to provide for a system of redressalof grievances against banks. The Schemesought to establish a system of expeditiousand inexpensive resolution of customercomplaints. The Scheme has been inoperation since 1995 and revised duringthe years 2002 and 2006. As enumeratedin clause 8, the Banking OmbudsmanScheme, 2006 covers a wide range ofcomplaints concerning deficiency inbanking services. Since May 2007, theScheme allows appeals from complainantsand banks in respect of decisions given bythe Banking Ombudsman in matters fallingwithin the grounds of complaint specifiedunder the Scheme. The Scheme covers allcommercial banks, scheduled primary co-operative banks and the regional ruralbanks. Reserve Bank frames the guidelinesfor operationalizing the Scheme andadministers the running of the Scheme. Inorder to make the Scheme independentand effective, since January 2006, the 15Banking Ombudsmen Offices are fullyfunded by the Reserve Bank with servingofficers of Reserve Bank in the rank ofChief General Managers and GeneralManagers posted as Banking Ombudsmen.The names, addresses and area ofoperation of the Banking Ombudsmanhave been given as an annex (Annex I) tothe Report.

Complaint handling

procedure

2. Any person, whose grievanceagainst a bank is not resolved to his/hersatisfaction by that bank within a periodof one month, can approach the BankingOmbudsman if his complaint pertains toany of the matters specified in the Scheme.The matters include (a) non-payment orinordinate delay in the payment orcollection of cheques, drafts, bills etc.;(b)non-acceptance, without sufficient cause,of small denomination notes tendered forany purpose, and for charging ofcommission in respect thereof; (c) non-acceptance, without sufficient cause, ofcoins tendered and for charging ofcommission in respect thereof; (d) non-payment or delay in payment of inwardremittances ; (e) failure to issue or delay inissue of drafts, pay orders or bankers’cheques; (f) non-adherence to prescribedworking hours ; (g) failure to provide ordelay in providing a banking facility (otherthan loans and advances) promised inwriting by a bank or its direct sellingagents; (h) delays, non-credit of proceedsto parties’ accounts, non-payment ofdeposit or non-observance of the ReserveBank directives, if any, applicable to rateof interest on deposits in any savings,current or other account maintained witha bank ; (i) complaints from Non-ResidentIndians having accounts in India in relationto their remittances from abroad, depositsand other bank-related matters; (j) refusalto open deposit accounts without anyvalid reason for refusal; (k) levying ofcharges without adequate prior notice tothe customer; (l) non-adherence by thebank or its subsidiaries to the instructionsof Reserve Bank on ATM/Debit card

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operations or credit card operations; (m)non-disbursement or delay indisbursement of pension (to the extent thegrievance can be attributed to the actionon the part of the bank concerned, butnot with regard to its employees); (n)refusal to accept or delay in acceptingpayment towards taxes, as required byReserve Bank/Government; (o) refusal toissue or delay in issuing, or failure toservice or delay in servicing orredemption of Government securities; (p)forced closure of deposit accountswithout due notice or without sufficientreason; (q) refusal to close or delay inclosing the accounts; (r) non-adherence tothe fair practices code as adopted by thebank and (s) any other matter relating tothe violation of the directives issued by theReserve Bank in relation to banking orother services. In respect of loans andadvances complaints relating to (a) non-observance of Reserve Bank Directiveson interest rates; (b) delays in sanction,disbursement or non-observance ofprescribed time schedule for disposal of

loan applications; (c) non-acceptance ofapplication for loans without furnishingvalid reasons to the applicant; and (d)non-observance of any other direction orinstruction of the Reserve Bank as may bespecified by the Reserve Bank for thispurpose from time to time.

2.2 Generally on receipt of anycomplaint, the Banking Ombudsmanendeavors to resolve the complaint byagreement between the complainant andthe bank named in the complaint through aprocess of conciliation or mediation. Forthe purpose of such resolution of thecomplaint, the Banking Ombudsmanfollows such procedures as he mayconsider appropriate and he is not boundby any legal rule of evidence. If acomplaint is not settled by agreementwithin a period of one month from the dateof receipt of the complaint or such furtherperiod as the Banking Ombudsman mayconsider necessary, he may pass an Awardafter affording the parties reasonableopportunity to present their case. He shall

The Banking Ombudsman on receipt of complaint considers the following issues:

i Is the complaint against a bank/ entity covered under If yes handle the complaint. Ifthe scheme ? no advise the complainant to

approach the appropriateauthority.

ii Is it a first resort complaint ? If yes, the complainant isadvised to approach the bank’sredressal mechanism.

iii Has the complainant approached the Banking Ombudsman If yes, handle the complaint. Ifwithin a year of receipt of reply from the bank ? Has the no, advise the complainant ofcomplaint been made before the expiry of the Indian other alternatives.Limitation Act, 1963 ?

iv Has the complaint been handled earlier ? If no, handle the complaint. Ifyes, advise the complainant ofother alternatives.

v Is the complaint before any court or tribunal or arbitrator If yes, advise the complainantor any other forum or has the decision been given by these the rules of jurisdiction offora ? Banking Ombudsman


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be guided by the evidence placed beforehim by the parties, the principles of bankinglaw and practice, directions, instructionsand guidelines issued by the Reserve Bankfrom time to time and such other factors,which in his opinion are necessary in theinterest of justice. Therefore the stepsinvolved in complaint handling are:

� Receipt of complaints� Decision to handle or not� Acknowledgement of those covered

under the Scheme� Return of those that cannot be

handled under the Scheme� Call for comments from Banks� Promote a settlement through

conciliation or pass an award

Receipt of Complaints

3.1 The Banking Ombudsman Officesreceive complaints pertaining to deficiencyin service provided by banks. Thenumber of complaints received hasincreased phenomenally since the revisedBanking Ombudsman Scheme 2006came into force (Chart 1).

The number of complaints increased asnew grounds of complaints such as creditcard issues, failure in providing thepromised facilities, non-adherence to fairpractices code and levying of excessivecharges without prior notice were included.Increased awareness and accessibility alsocontributed to the increase in receipt ofcomplaints. (Table-1)

Chart 1 - Number of complaints received during the years 2003-04 to 2007-08

Table 1 - Number of complaints received by the Banking Ombudsman Offices

Period No. of No. of Rate of increase Average No.Offices of Banking complaints received (% over of complaints

Ombudsman during the year previous year) per office

2003-04 15 8246 — 550

2004-05 15 10560 28 704

2005-06 15 31732 200 2115

2006-07 15 38638 22 2576

2007-08 15 47887 24 3192

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Mode-wise Receipt

3.2 Complainants can log on to theReserve Bank web site at www.rbi.org.in and complain about deficiency inbank’s services by using the onlinecomplaint form. The email ids of theBanking Ombudsmen are also available inthe public domain and complainants cansend emails to them. For those who haveno access to internet, complaints can besent by post and in any language.Complaints received are acknowledgedand tracked till they are closed in thebook of the Office of the BankingOmbudsman.

During the year 2007-08, thecomplaints received by these differentmodes are as under (Table 2, Chart 2):

Table 2 - Mode wise receipt of complaints as apercentage to total

Number of Complaints

Email 7183

On line 7662

Others 33042

TOTAL 47887

Chart 2

Mode wise receipt of Complaints (% to total)

Though 69% of complaints received are inhard copy, the receipt in the electronicmode has been slowly picking up. It islearnt that those who require quick

response use this mode. The ComplaintTracking Software in place in the BankingOmbudsman Office gives acknowledge-ment automatically and complaint numberis given as soon as it is taken into thebook of the Banking Ombudsman.

Population-segment wise Receipt

3.3 The offices of the BankingOmbudsman received complaints fromalmost all the regions of the country. Theregion wise position of complaints is givenin Table 3 Chart 3:

Table 3 - Population-segment—wisereceipt of complaint at the Offices ofBanking Ombudsman during 2007-08

Sr. No. Region No. of complaints received

1 Rural 8418

2 Semi Urban 6641

3 Urban 10978

4 Metropolitan 21850

TOTAL 47887

Chart 3

Population-segment wise receipt of complaints(% to total)

The reasons for larger number ofcomplaints from the urban andmetropolitan regions are increasedpenetration of banking, increasedawareness and increased expectations ofcustomers in such areas. There is however


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evidence that there is increase in the receiptof complaints from rural and semi-urbanareas, as the Banking Ombudsman havecreated more awareness in such areasthrough personal visits, media coverageand advertisements.

Complainant group-wise Receipt

3.4 The majority of complaints are fromindividuals as seen from the break upgiven in Table 4:

Table 4 - Complainant group-wise classifi-cation of complaints received at the Offices

of Banking Ombudsman during 2007-08

Sr. Complainants No. of % ofNo. category received complaints complaints

1 Individual 42294 88

2 Individual - 1602 3Business

3 Proprietorship 336 1

4 Limited Company 743 2

5 Trust 102 0

6 Association 267 1

7 Government 318 1Department

8 Public Sector 114 0Undertaking

9 Others 2111 4

TOTAL 47887 100

Banking Ombudsman-wise receipt

3.5 The 15 Offices of the Banking Om-budsman receive and consider complaintsfrom customers relating to the deficienciesin banking services in respect to theirterritorial jurisdiction. The territorial juris-diction is given in Annex 1. It is observedthat in 2007-08, the largest number ofcomplaints was received by the BO officesin New Delhi, Mumbai, Kanpur andChennai followed by Bhopal and Jaipur(Table 5 Chart 4).

Table 5 - Banking Ombudsman wise complaintreceipt during 2006-07 and 2007-08

Banking Ombudsman Office 2006-07 2007-08

Ahmedabad 2107 2855Bangalore 2406 2975Bhopal 2731 3402Bhubaneswar 689 998Chandigarh 2006 2331Chennai 2387 4545Guwahati 170 282Hyderabad 2767 2843Jaipur 2976 3369Kanpur 4321 5340Kolkata 2011 2815Mumbai 5525 6070New Delhi 5481 6742Patna 1481 1480Thrivananthapuram 1580 1840

2006-07

2007-08

Chart 4 - Banking Ombudsman Office wise Receipt of Complaints

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received, (ii) identify frequent sources ofcomplaint, (iii) identify systemicdeficiencies and (iv) makerecommendations for initiating appropriateaction to make the grievance redressalmechanism more effective. Details ofcomplaints received and disposed off,awards passed and unimplementedawards of the Banking Ombudsman arerequired to be disclosed along withfinancial results. Banks were also advisedin May 2008 to (i) Ensure that thecomplaint registers are kept at prominentplace in their branches which would makeit possible for the customers to enter theircomplaints, (ii) Have a system ofacknowledging the complaints, where thecomplaints are received through letters /forms, (iii) Fix a time frame for resolvingthe complaints received at different levels,(iv) Ensure that redressal of complaintsemanating from rural areas and thoserelating to financial assistance to PrioritySector and Government’s PovertyAlleviation Programmes also form part ofthe above process, (v) Prominentlydisplay at the branches, the names of theofficials who can be contacted forredressal of complaints, together with theirdirect telephone number, fax number,complete address (not Post Box No.) ande-mail address etc. for proper and timelycontact by the customers and forenhancing the effectiveness of theredressal machinery.

3.6.3Bank Group wise receipt ofcomplaints at Banking OmbudsmanOffices

The complaints received by BankingOmbudsman against different bankgroups are indicated in Table 7:

Bank Group-Wise Receipt atBanks

3.6.1 All complaints received by the banksare not expected to reach the BankingOmbudsman Offices. The data oncomplaints received by banks is given inTable 6:

Table 6 - Bank Group wise-complaintsreceived by Banks

Name of the bank group Received Receivedduring the during the

2006-07 2007-08

State Bank Group 21909 21736

Nationalised Banks 45794 59708

Old Private Sector Banks 1100 1770

New Private Sector Banks 828903 738942

Foreign Banks in India 342599 357516

TOTAL 1240305 1179672

The above data does not include complaintsredressed within a day. It may be seen thatin the year 2007-08, bulk of the complaintsat 92.95% has been received by the newprivate sector banks and foreign banks.However, there has been a fall in thenumber of complaints received by banks in2007-08 compared to 2006-07 mainly dueto reduction in complaints against newprivate sector banks.

3.6.2 Bankers are required to place acomplaint form in their home page. With aview to enhance the effectiveness of thegrievance redressal mechanism, bankswere advised to place a statement ofcomplaints before their Boards/CustomerService Committees along with ananalysis of the complaints received witheffect from February 2007. The analysisshould (i) identify customer service areasin which the complaints are frequently


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3.6.4 Instead of considering complaints inisolation, the number of complaints is seenwith reference to the bank’s business size

and the number of accounts is given inTable 8.

Table 7 - Bank-group-wise complaints received by Banking Ombudsman during 2003-04 to 2007-08

Bank group 2003-04 2004-05 2005-06 2006-07 2007-08 Total

Nationalized Banks 4049 5124 10137 10543 12033 41886(46) (45) (33) (30) (26) (32)

SBI Group 2779 3359 9892 11117 13532 40679(31) (29) (34) (33) (29) (31)

Private Sector Banks 1325 1863 6754 9036 14077 33055(14) (15) (20) (23) (29) (23)

Foreign Banks 406 577 2997 3803 6126 13909(5) (5) (10) (11) (13) (10)

Scheduled Primary Co-op. Banks 166 256 198 313 295 1228(2) (2) (1) (1) (1) (1)

RRBs 232 359 794 536 826 2747(3) (3) (3) (2) (2) (2)

Subtotal 8957 11538 30772 35348 46889 133504(100) (100) (100) (100) (100) (100)

Others* 526 496 2591 3290 998 7901

TOTAL 9483 12034 33363 38638 47887 141405

* Institutions not covered under the Scheme � Complaints dealt with.Figures in brackets indicate percentage to total complaints against banks covered under the Scheme

Table 8 - Bank Group-wise complaints in the years 2006-07 & 2007-08 in relation to number of accounts

Bank group No. of deposit No. of complaints No. of deposit No. of complaintsand loan received by and loan received byaccounts Banking accounts Banking

(in millions) Ombudsmen (in millions) Ombudsmen

As on During As on DuringMarch 2006 2006-07 March 2007 2007-08

Nationalized Banks 2925 10543 3126 12033(52) (30) (51) (26)

SBI Group 1279 11117 1347 13532(22) (32) (22) (29)

Private Sector Banks 640 9036 708 14077(11) (25) (12) (30)

Foreign Banks 130 3803 153 6126(2) (11) (2) (13)

RRBs 732 536 800 826(13) (2) (13) (2)

TOTAL 5706 35035 6134 46594(100) (100) (100) (100)

Figures in brackets indicate percentages.

� � �

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It may be observed from the above theprivate sector banks, foreign banks andto a certain extent SBI Group have largershare in the number of complaints than inthe total number of deposit and loanaccounts.

3.6.5 The break-up of bank wise(scheduled commercial banks) complaintsreceived in the year 2007-08 is given inAnnex 4.

Initiatives taken by BankingOmbudsman

3.7.1 As awareness regarding theBanking Ombudsman Scheme and easeof access to its grievance resolutionmechanism are major planks for theempowerment of the bank customers andthe success of the Scheme, a number offocused initiatives were taken during theyear to reach out, facilitate and spread themessage of the Scheme across the lengthand breadth of the country. Theseinitiatives were in the shape of organizingawareness camps, participation inexhibitions and Kisan melas, passing oninformation to students visiting ReserveBank’s premises, news paperadvertisements, etc. One BankingOmbudsman office had set a target oftaking the awareness campaign about theBanking Ombudsman Scheme 2006 toall the districts in the State and this wasachieved. The Banking OmbudsmanScheme - 2006 in regional languages,“Frequently Asked Questions” and ‘Dosand Don’ts’ were brought out by theBanking Ombudsman Offices anddistributed through Lead District Officersand Government officials to generateawareness amongst people in rural andsemi urban areas. One Banking

Ombudsman office adopted an innovativeapproach by utilizing the services of thepostal department network on paymentbasis for the purpose of spreadingawareness regarding the scheme. A smallmessage indicating “If you have anycomplaint against your bank, pleasecontact Secretary, Office of the BankingOmbudsman,” was embossed on ametallic stamp and was affixed by thepostal department employees in allincoming and outgoing letters from certainmajor post offices of the city for aparticular period of time. Broadcast ofadvertisements on All-India Radio wasanother means of awareness campaign.One Banking Ombudsman Office’s publicoutreach initiative was a periodical featurepublished in a vernacular daily newspaperwith substantial circulation in the Statewhere the Banking Ombudsman respondsto public queries on banking servicesrelated issues.

3.7.2Sensitization of banks to customerrights, the imperatives of dealing withcustomers in a fair and transparentmanner and the adoption of best practicesin customer relationship managementcomprised the parallel prong of theawareness strategy of BankingOmbudsmen. Periodic meetings with nodalofficers led to such dissemination of thisimportant message of being customer-centric banks. Participation in seminarsorganized by banks, taking classes tobankers in in-house bankers’ traininginstitutions were also means of reachingthe bankers.


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Nature of complaints

handled

4.1 The grounds of complaint have beenenumerated in Clause 8 of the BankingOmbudsman Scheme 2006. The Table 9& Chart 5 gives the category wisecomplaints received during the year underreview.

4.2 Complaints relating to credit cardsform an important part of the complaints.The type of complaints pertain to issuanceof unsolicited Credit Cards andunsolicited insurance policy and recoveryof premium charges, charging of annualfee in spite of being offered as ‘free’cards and issuance of loans over phone,disputes over wrong billing, settlement

Table 9 - Category-wise receipt of complaints received in 2006-07 & 2007-08

Sr. No. Nature of complaint Received during Received during2006-07 2007-08

1 Deposit accounts 5803 5612

2 Remittances 4058 5213

3 Credit cards 7688 10129

4 Loans and advances - General 4442 5297

5 Loans and advances - Housing 709 757

6 Charges without notice 2594 3740

7 Pension 1070 1582

8 Failure to meet commitments 1469 6388

9 DSAs and recovery agents 1039 3128

10 Notes and coins 130 141

11 Others 9636 5900

TOTAL 38638 47887

Chart 5 - Category-wise receipt of complaints received in 2006-07 & 2007-08(% to total)

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offers conveyed telephonically, non-settlement of insurance claims after thedemise of the card holder, abusive callsetc. A general feature of these complaintsacross the board is the problem inaccessing the Credit Card issuers and thepoor response from the call centers.Further, it has been observed that oftenthe card issuers attribute their mistakes inbilling, accounting and reporting totechnical snags. On pursuing thecomplaints with the Card Issuers, thecharges debited are reversed in mostcases without demur. The ATM-relatedcomplaints primarily involved disputes inrespect of alleged short payment or non-receipt of cash by customers though theirsaving accounts were debited. Thesecomplaints were primarily against publicsector banks which do not have CCTVsinstalled at their ATMs. Other areas ofcomplaint in this regard relate to the timetaken to solve these problems and lack ofsensitivity in rectification of errors in billingattributed to technical snags.

4.3 Misrepresentation and misleadinginformation provided by Direct SellingAgents (DSAs)/Direct Marketing Agents(DMAs) as also non-fulfillment of suchoral promises made by these agents orbank officials at the time of marketing ofproducts leads to a number of complaints.Complaints relating to failure oncommitments made ranked second amongthe complaints received at the offices ofthe Banking Ombudsman.

4.4 A number of complaints relate todeposits and remittances. Typically theyrelate to (i) non-payment or delay in

collection of cheques, bills and drafts, (ii)delay in crediting the inward remittancesand (iii) delay in issue of pay orders,drafts and bankers cheques. Complaintsconcerning delays in NEFT transfers wereseen to be on the increase with customerscomplaining that despite their accountshaving been debited, the correspondingcredit had not reached the beneficiaryaccount and the remitting bank’s callcentre simply provided the transactionnumber reference for follow-up with thebeneficiary bank, which in turn, did notgive much credence to the complainant, asit simply stated that the remittance had notbeen received.

4.5 Notwithstanding several initiativestaken by the Reserve Bank to bring abouttransparency in imposition and applicationof various charges by banks includingdisplay of these charges in bankbranches/offices and on the websites ofbanks, complaints relating to charges fornon-maintenance of average quarterlybalance, revision in locker charges,processing/renewal/pre-closure chargesbeing levied without due notice to thecustomers were received.

4.6 The issue of harassment by bank’srecovery agents had assumed suchserious regulatory dimensions, that theReserve Bank issued regulatoryinstructions to all scheduled commercialbanks as it felt that the adverse publicitysuffered by banks on account of disputesand litigations involving recovery agentswould cause serious reputational risk forthe banking sector as a whole. Complaintson this front continue to reach the Officesof the Banking Ombudsman.


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4.7 The rude and indifferent attitude ofbank officials and staff often causeddissatisfaction among the complainants.Delays in providing services and lack ofknowledge among the bank staff irkedcomplainants to a degree where theywere compelled to file their grievanceswith the Office of the BankingOmbudsman. Demand of gratifications bybranch officials/ agents was also a causefor complaint.

4.8 Complaints relating to allegedinclusion of name in defaulters list anddelay / time-lag in removal of their namesfrom the list even after settling theaccounts with banks are being received inlarge numbers. Complaints are receivedregarding non-sanction of education loansby banks and insistence on collateralsecurity. A number of complaints arereceived from customers regarding floatingrates of interest on loans and they relateto lack of comprehension regarding theimplication of bench marks and margins.

Disposal of Complaints

5.1 On receipt of a complaint, thedetails are sent to the concerned branch/department under advice to the NodalOfficers. Endeavors are made to resolvethe complaints through conciliation ormediation efforts, if necessary, to theultimate satisfaction of the complainant onall the points/issues referred to the office.These mediation efforts include interactionwith both parties over phone, in personor in writing. The conciliation meetings areheld for arriving at amicable settlement. Ifthis does not yield results then theBanking Ombudsman passes an Award,which becomes binding on the bank oncethe complainant agrees to it. Few caseswhere Awards were issued and a fewcases where the Banking Ombudsman hasaccepted the action of the bank as inorder are given in Annex 3.

5.2 Banking Ombudsman Officesdisposed of more than 80% of thecomplaints dealt on an annual basis.During the year 2007-08, 89% of thecomplaints dealt were disposed off.

Table 10 - Disposal of Complaints by Banking Ombudsman Offices

Particulars 2003-04 2004-05 2005-06 2006-07 2007-08

Complaints received* 9483 12034 33363 44766 54992

Complaints disposed No. 4011 4963 12304 15511 19735by rejection % 42 41 37 35 36

Complaints disposed by No. 3998 5440 14889 22150 29365mutual settlement/ award % 42 45 45 49 53

Total number of complaints No. 8009 10403 27193 37661 49100disposed of % 84 86 82 84 89

Complaints that are carried No. 1474 1631 6170 7105 5892forward to the next year % 16 14 18 16 11

* Includes previous year’s pending complaints.

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Around 53% of the complaints dealt havebeen disposed by mutual settlement or byaward while around 36% of thecomplaints dealt have been rejected.(Table 10)

5.3 The Banking Ombudsmen disposedof complaints, other than the rejectedcomplaints, either by settlement or byissuing an Award. During the periodreviewed, the ratio of complaints disposedby settlement to the complaints disposedby award was around 0.28 clearlyindicating the effectiveness of the BankingOmbudsmen in arriving at mutually agreed

consensus between bankers andcomplainants. During the above period,only 70 awards were issued. From theyear 2005-06, the number of awardsissued and the percentage of disposalthrough award issuance have come downdespite huge increase in the complaintsreceived. The fact that the BankingOmbudsmen could dispose of 99.72 %of the complaints by settlement betweenthe complainant and the concerned banks,indicates that the conciliation approachwas effective, and there was no need forthe Banking Ombudsman to pass anyaward. (Table 11 & Chart 6)

Table 11 - Mode of disposal of complaints (other than rejected complaints)during the years 2003-04 to 2007-08

Sr. Year No. of complaints Disposal by Disposal byNo. disposed of Award settlement

No. % No. %

1 2003-2004 3998 121 3.00 3877 97.00

2 2004-2005 5440 165 3.03 5275 96.97

3 2005-2006 14889 146 0.98 14743 99.02

4 2006-2007 22150 84 0.38 22066 99.62

5 2007-2008 29365 70 0.24 29295 99.76

Chart 6 - Mode of disposal of complaints other than rejected complaintsduring years 2003-04 to 2007-08


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5.4 Conciliation meetings played animportant role in the process of resolutionof complaints. A conciliation meetingenables the two parties to meet “face toface”. Often this turned out to be the firsttime that the parties discuss the cause ofcomplaint with a view to resolving theissue. The aim of the conciliation meetingis to allow the parties to discuss issuesrelating to the complaint or the disputeand to find a mutually acceptable way ofresolving the complaint. BankingOmbudsman does not force the parties tosettle but a conciliation meeting gives achance to the parties to come to theirown solution rather than have a solutionimposed upon them. Most of thecomplainants have conveyed that no

officer in the bank was designated tolisten to their woes.

5.5 Of the 54,992 complaints (47,887complaints received during the year and7105 brought forward from the previousyear), 29,365 (53%) were settled, 19, 735complaints (36%) were rejected and5,892 (11%) were carried forward to thenext year.

5.6 As observed from Table 12 andchart 7 below, as much as 40 % of thecomplaints were not considered by theBanking Ombudsmen as they were firstresort cases i.e. where the complainantshad approached BOs without seekingreddressal from the banks concerned.Such complaints reflected lack of

Table 12 - Reasons for Rejection of complaints received in 2007-08

Sr. No. Manner Number Percentage

Rejection on technical grounds

1 First resort complaint 7950 40

2 Time barred complaint 260 1

3 Complaint dealt earlier 333 2

4 Pending in other forum 476 2

5 Frivolous complaint 137 1

6 Not signed, incomplete address 434 2

7 Without sufficient cause 3249 16

8 Not pursued by the complainant 706 4

9 Complicated requiring alaborate evidence 478 2

10 No loss to the complainant 547 3

11 Complaint subject matter outside scheme scope 2537 13

12 Unrelated complaint 1136 6

13 Bank branch outside jurisdiction 1492 8

3796 13

TOTAL 19735 100

Table 12 - Reasons for Rejection of complaints received in 2007-08

Sr. No. Reasons Number Percentage

1 First resort complaint 7950 40

2 Time barred complaint 260 1

3 Complaint dealt earlier 333 2

4 Pending in other forum 476 2

5 Frivolous complaint 137 1

6 Not signed, incomplete address etc. 434 2

7 Without sufficient cause 3249 16

8 Not pursued by the complainant 706 4

9 Complicated requiring alaborate evidence 478 2

10 No loss to the complainant 547 3

11 Complaint subject matter outside scheme scope 2537 13

12 Unrelated complaint 1136 6

13 Bank branch outside jurisdiction * 1492 8

TOTAL 19735 100

* Sent to the BO under whose jurisdiction it falls for actions.

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Table 13 - Details of complaints pending at the end of the year 2006-07 and 2007-08(Indicating the pending period)

2006-07 2007-08

Period of pending Number Percentage to total Number Percentage to total

Up to 1 month 2262 32 2712 46

1-2 months 1936 27 1394 24

2-3 months 943 13 861 15

More than 3 months 1964 28 925 15

TOTAL 7105 100.0 5892 100

awareness of the bank’s grievanceredressal mechanism among the customersor inept handling of customers by front linestaff or inaccessibility of staff. Also, thecomplaints made without sufficient cause(16%) indicated the need for customereducation and this is being addressed bythe banks and the Banking Ombudsmen.

5.7 As regards pendency, the number ofcomplaints pending is around 16% to19% of the total complaints dealt. Duringthe year 2006-07, 41% of the pendingcomplaints were pending for more than 2months and 28% of them were pendingfor more than 3 months. However, theposition has improved in the year underreview as seen from the Table 13:

Disposal of Complaints—

Staff wise

6. Till the year 2006, the BankingOmbudsman Offices had some staff fromthe Convenor Bank of the State LevelBankers Committee (SLBC). During theyear under review, the SLBC staff wasrepatriated back to their banks in aphased manner. Only few BankingOmbudsman Offices have been permittedto retain few staff from the Convenorbank. To handle the increased number ofcomplaints and as replacement for theSLBC staff, the offices of BankingOmbudsman were given additional staff.The staff wise position of complaintshandled is given in the Table 14:

Chart 7 - Reasons for Rejection of complaints received in 2007-08


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Cost of Running the

Scheme

7.1 The total expenditure inoperationalizing the Banking OmbudsmanScheme was shared by the banks, in theproportion of their working funds, up toDecember 2005. From January 1, 2006,the expenditure is fully borne by ReserveBank in terms of the BankingOmbudsman Scheme, 2006. The costs ofthe Scheme include the revenueexpenditure and capital expenditureincurred in running the BankingOmbudsman offices. The revenueexpenditure includes the establishmentitems like salary and allowances of thestaff attached to Banking Ombudsman

offices and non-establishment itemssuch as law charges, postage andtelegram charges, printing and stationeryexpenses, publicity expenses, depreciationand other miscellaneous items. Thecapital expenditure items include thefurniture, electrical installations, computers/related equipments, telecommunicationequipments and motor vehicle.

7.2 While the aggregate cost of runningthe fifteen Banking Ombudsman officeshas increased with the increase in thenumber of complaints dealt with, the costper complaint dealt has been steadilydecreasing. The details are given in Table15.

Table 14 - Banking Ombudsman Office Staff-wise complaints dealt withduring 2006-07 and 2007-08

Banking Ombudsman 2006-07 2007-08Office Total No. of No. of Total No. of No. of

number of officers complaints number of officers complaintscomplaints per officer complaints per officer

Ahmedabad 2107 7 301 2855 9 317

Bangalore 2406 6 401 2975 10 297

Bhopal 2731 5 546 3402 7 486

Bhubaneswar 689 4 172 998 3 333

Chandigarh 2006 5 412 2331 9 259

Chennai 2387 4 597 4545 20 227

Guwahati 170 2 85 282 6 47

Hyderabad 2767 8 341 2843 9 316

Jaipur 2976 6 496 3369 9 374

Kanpur 4321 15 288 5340 19 281

Kolkata 2011 8 251 2815 6 469

Mumbai 5525 8 691 6070 9 674

New Delhi 5481 12 457 6742 13 519

Patna 1481 6 247 1480 9 164

Thiruvananthapuram 1580 6 263 1840 7 262

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Appeal against the

decisions of the Banking

Ombudsmen

8. The Banking Ombudsman Scheme2006 permits banks and complainants toappeal against the decisions of theBanking Ombudsman. The appeal optionis exercised by banks on grounds that theAward appears to be patently in conflictwith the Reserve Bank’s instructions and/or the law and practice relating tobanking. Complainants can appeal againstthe decision of the Banking Ombudsmanin respect of complaints falling on suchgrounds specified in the Scheme. TheAppellate Authority is the DeputyGovernor in charge of the BankingOmbudsman Scheme. The number ofAppeals preferred by banks andcomplainants during the year 2007-08 isas in Table 16:

The Appellate Authority either dismissesthe appeal or allows the appeal and setsaside the Award or remands the matter tothe Banking Ombudsman for freshdisposal in accordance with suchdirections as the Appellate Authority mayconsider necessary or proper or modify

the Award and pass directions as may benecessary to give effect to the Award somodified or pass any other order as itmay deem fit.

Other Information

Meetings with the Banks

9.1.1The Banking Ombudsman Scheme2006 mandates that every bank nominatea Nodal Officer in every region/zone forfacilitating the functioning of the BankingOmbudsman Offices. Besides taking upindividual complaints, the BankingOmbudsman offices also periodically

Table 15 - Cost of handling complaints received at Banking Ombudsman Offices

Period Total Cost No. of Complaints dealt Cost per complaint (Rs.)(Rs. Cr.)

2003-04 7.03 9,483 7,413

2004-05 7.60 12,034 6,315

2005-06 10.16* 33,363 3,045

2006-07 9.81 38,638 2,538

2007-08 12.50 47,887 2,611

(*Approximate amount for the 15-month period from April 1, 2005 to June 30, 2006. The figures have beenarrived by simulating the amount pertaining to April-December 2005.)

Table 16 - Number of Appeals Receivedduring 2007-08

Particulars No. ofAppeals

Appeals against Awards 17

Appeals against Decisions 169

TOTAL 186

Appeals disposed of during the year 154

Appeals pending at the close of the 32year

Less than one month 17

One to two months 10

Two to three months 3

More than 3 months 2


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review the outstanding complaints with thenodal officers. This mechanism hasyielded good results in resolving thecomplaints expeditiously.

9.1.2The Customer Service Departmentalso holds half yearly meetings with the in-charges of customer service departments(grievance redressal officers) ofcommercial banks for an interaction andfor briefing them about the expectations ofReserve Bank. Issues relating togrievance redressal, response to BankingOmbudsmen, adherence to Bank’scirculars were discussed in the meetings.Advisories are issued to banks oncustomer service issues on matters whereit is felt that it is necessary to sensitisebanks.

Customer Service Meeting

9.2 In 2007, Reserve Bankinstitutionalized the process ofexamining important feedback emanatingout of the complaints received at theBanking Ombudsman Offices. Aquarterly meeting is conducted by theCustomer Service Department in whichsenior level representatives of regulatorydepartments of Reserve Bank, BankingCode and Standards Board of India(BCSBI), Indian Bank Association(IBA) and a few Banking Ombudsmenare invited. The meeting focuses onresolving systemic issues raised by anyparticipant and other customer servicerelated issues.

9.3 During 2007, half yearly RegionalConferences of Banking Ombudsmen

were held. Officers from Central Officeattended these Conferences. Thedeliberations in conferences and thesharing of experiences by the BankingOmbudsmen were mutually beneficial andhelped in sorting out problems of mutualinterest including those of processing ofcomplaints. The occasion was also used tomeet the Nodal Officers of banks tosensitize them on issues relating tocustomer service.

Studies / Working Group

9.4.1 Comprehensive Display Board

In order to promote transparency inthe operations of banks, variousinstructions were given to banks withregard to display of various key aspectssuch as service charges, interest rates,services offered, product information, timenorms for various banking transactionsand grievance redressal mechanism etc.However, during the course of inspection/visits to bank branches by Reserve Bankit was observed that many banks werenot displaying the required information dueto space constraints, lack ofstandardization of the instructions etc.Keeping in view the need to ensure thatessential information was provided tocustomers, while avoiding overcrowdingof the items requiring display, an InternalWorking Group was constituted byReserve Bank, to revisit all the existinginstructions relating to display boards bycommercial banks so as to rationalizethem. Based on the recommendations ofthe group, a comprehensive circular wasissued to all banks in August 2008.

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9.4.2 Banking Facility for visuallychallenged

Based on complaints received fromeducated visually challenged persons andon the feed back received from banksand IBA, certain suggestions were madeon the bases of which a circular onextension of banking facilities to thevisually challenged persons was issued inJune 2008.

9.4.3 A study on credit cardoperations of banks

Reserve Bank issued comprehensiveguidelines on November 21, 2005 (andMaster Circulars in July every year) for thecredit card operations by banks in India.However, complaints against credit cardoperations reaching the offices of theReserve Bank, Banking Ombudsman andthe Ministry of Finance steadily increased.The Standing Committee on Financeadvised Reserve Bank to undertake adetailed study on the credit card operationsof banks in India. Accordingly, theCustomer Service Department undertook a

study on credit card operations of banks.Based on the findings and suggestionsmade a detailed circular was issued by theregulatory department of Reserve Bank inJuly 2008.

Complaint Tracking Software

9.5 To monitor the performance of theBanking Ombudsman Offices as well asto facilitate their functioning, theComplaint Tracking Software wasintroduced in September 2005. Thesoftware facilitates viewing of the data bythe Reserve Bank as well as Ministry ofFinance. After introduction of the BankingOmbudsman Scheme 2006 in January2006, the existing package was revampedto incorporate the required changesincluding online complaint submissionfacility.

The important notifications issued byReserve Bank relating to CustomerService and Banking OmbudsmanScheme in 2007-08 (July 2007 to June2008) are given in Annex 2.


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Annex 1

Address and Area of Operation of Banking Ombudsmen

Centre Address of the Office of Area of OperationBanking Ombudsman

Ahmedabad C/o. Reserve Bank of India Gujarat, Union TerritoriesLa Gajjar Chambers, of Dadra and NagarAshram Road, Haveli, Daman and DiuAhmedabad - 380 009.Tel. No. : 26582357 / 26586718Fax No. : 079-26583325

Bangalore C/o. Reserve Bank of India Karnataka10/3/8, Nrupathunga Road,Bangalore - 560 001.Tel. No. : 22210771 / 22275629Fax No. : 080-22244047

Bhopal C/o. Reserve Bank of India Madhya Pradesh andHoshangabad Road, ChattisgarhPost Box No. 32,Bhopal - 462 011.Tel. No. : 2573772 / 2573776Fax No. : 0755-2573779

Bhubaneswar C/o. Reserve Bank of India OrissaPt. Jawaharlal Nehru Marg,Bhubaneswar - 751 001.Tel. No. : 2418007 / 2418008Fax No. : 0674-418006

Chandigarh C/o. Reserve Bank of India Himachal Pradesh,New Office Building, Punjab and UnionSector - 17, Central Vista, Territory of ChandigarhChandigarh - 160 017.Tel. No. : 2721109 / 2721011Fax No. : 0172-2721880

Chennai C/o. Reserve Bank of India Tamil Nadu, UnionFort Glacis, Territories of PondicherryChennai - 600 001. and Andaman andTel. No. : 25399170 / 25395963 Nicobar Islands / 25399159Fax No. : 044-25395488

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Guwahati C/o. Reserve Bank of India Assam, ArunachalStation Road, Pradesh, Manipur,Pan Bazar, Meghalaya, Mizoram,Guwahati - 781 001. Nagaland and TripuraTel. No. : 2542556 / 2540445Fax No. : 0361-2540445

Hyderabad C/o. Reserve Bank of India Andhra Pradesh6-1-56, Secretariat Road,Saifabad,Hyderabad - 500 004.Tel. No. : 23210013 / 23243970Fax No. : 040-23210014

Jaipur C/o. Reserve Bank of India, RajasthanRam Bagh Circle,Tonk Road, Post Box No. 12,Jaipur - 302 004.Tel. No. : 2570357 / 2570392Fax No. : 0141-2562220

Kanpur C/o. Reserve Bank of India Uttar Pradesh (excludingM. G. Road, District of Ghaziabad)Post Box No. 82, and UttaranchalKanpur - 208 001.Tel. No. : 2361191 / 2310593Fax No. : 0512-2362553

Kolkata C/o. Reserve Bank of India West Bengal and Sikkim15, Nethaji Subhas Road,Kolkata - 700 001.Tel. No. : 22206222 / 22205580Fax No. : 033-22205899

Mumbai C/o. Reserve Bank of India Maharashtra and GoaGarment House, Ground Floor,Dr. Annie Besant Road,Worli, Mumbai - 400 018.Tel. No. : 24924607 / 24960893Fax No. : 022-24960912


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New Delhi C/o. Reserve Bank of India, Delhi, Haryana, Jammu6 Sansad Marg, and Kashmir andNew Delhi - 110 001 Ghaziabad district ofTel. No. : 23725445 / 23710882 Uttar PradeshFax No. : 011-23725218

Patna C/o. Reserve Bank of India, Bihar and JharkhandPatna - 800 001.Tel. No. : 2201734 / 2206308Fax No. : 0612-2320407

Thiruvananthapuram C/o. Reserve Bank of India Kerala and UnionBakery Junction, Territory of LakshadweepThiruvananthapuram - 695 033.Tel. No. : 2332723 / 2329676Fax No. : 0471-2321625

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ANNEX 2

The important notifications relating to Customer Service andBanking Ombudsman Scheme in 2007-08

Date of announcement Policy Announcements

2007

July 3 Unsolicited Commercial Communication - National Do Not CallRegistry, July 3, 2007

Against the backdrop of complaints being received from credit cardsubscribers and the observations of the Hon’ble High Court ofDelhi in the context of a public interest litigation in this regard andthe consequent framing of guidelines by the Telecom RegulatoryAuthority of India for curbing unsolicited commercialcommunications, the Reserve Bank advised banks to initiate promptaction to ensure compliance with the “Telecom UnsolicitedCommercial Communications Regulations 2007” of TRAI within theprescribed time frame.

July 5 Acceptance of FCNR (B) Deposits by Regional Rural Banks, July5, 2007

RRBs, duly authorised for the purpose, by the Regional Office ofForeign Exchange Department, RBI, have been allowed to alsoaccept FCNR (B) deposits from NRIs/PIOs.

July 13 Issue of ATM-cum-Debit Cards by UCBs, July 13, 2007

Urban Co-operative Banks which are authorised to install on-site/off-site ATMs may introduce ATM-cum-Debit Cards (but not in tie-up with other non-bank entities) with the approval of their Boardkeeping in view the stipulated guidelines in this regard. Issuance ofoff-line debit cards is, however, not permitted.

August 22 Guidelines on Fair Practice Code for Lenders-Furnishing copy ofLoan Agreement, August 22, 2007

In order to reduce the instances of dispute between the bank andthe customer, banks/FIs have been advised to invariably furnish acopy of the loan agreement along with a copy each of all theenclosures quoted in the loan agreement to all the borrowers at thetime of sanction/disbursement of loans.

August 30 Settlement of PPF claims of subscribers, who go missing, August30, 2007In pursuance of the guidelines of Government of India circulatedvide its Office Memorandum No.7/7/2005-NS,II dated August 6, 2007,banks have been advised to settle the PPF accounts of subscriberswho go missing as per the provisions contained in Section 107/108of the Indian Evidence Act, 1872.


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September 3 Branch Level Customer Service Committees, September 3, 2007In order to encourage a formal channel of communication betweenthe customers and the bank at the branch level, banks have beenadvised to take necessary steps for strengthening the branch levelcommittees with greater involvement of customers. It is desirablethat branch level committees include their customers too. Further, assenior citizens usually form an important constituency in banks, asenior citizen may preferably be included therein.

September 19 Deduction of Tax at Source-8% Savings (Taxable) Bonds, 2003-Income Tax Act, 1961-Clarifications, September 19, 2007.Department of Govt. and Banks Accounts, Reserve Bank of Indiaissued clarifications on Deduction of Tax at source by the banks oninterest payable on bonds issued under 8% Savings (Taxable)Bonds, 2003 Scheme.

October 19 Unsolicited Commercial Communication - National Do Not CallRegistryDBOD.FSD.BC.35/24.01.011/2007-08 dated October 19, 2007.Reserve Bank decided in consultation with TRAI, that in addition toDSAs/DMAs, banks/their call centers, who make solicitation calls,are also required to be registered as Telemarketers with Departmentof Telecommunication. Banks/their call centres, while registeringthemselves as Telemarketers, will be required to give the details ofthe telephone numbers used for telemarketing.

October 25 Deposit Schemes with lock-in periodDBOD. No. Dir. BC. 39/13.03.00/2007-08 dated October 25, 2007.Reserve Bank advised banks to discontinue special term depositschemes ranging from 300 days to five years with lock-in periodsand other features which are not in conformity with instructionsissued vide Master Circular dated July 2, 2007 on Interest Rates onRupee Deposits held in Domestic Deposits, etc. with immediateeffect.

November 19 Legal Guardianship Certificate issued under the National TrustAct, 1999.DBOD No. Leg. BC.51/09.07.05/2007-08 dated November 19, 2007.Banks have been advised to rely upon the Guardianship Certificateissued either by the District Court under Mental Health Act or bythe Local committees under the National Trust Act, 1999 for thepurpose of opening / operating banks accounts of persons withAutism, Cerebral Palsy, Mental Retardation and multiple disabilities.

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November 30 Recovery agents engaged by banks - Drafts guidelines.DBOD No. Leg. 6723/09.07.005.2007-08 dated November 30, 2007.Keeping in view the number of litigations against banks in the recentpast for engaging recovery agents and the consequential reputationrisk not only for the bank concerned but also for the banking sectoras a whole, Reserve Bank issued draft guidelines relating to variousoperational aspects for adoption by commercial banks. Theseguidelines cover operational aspects relating to engagement ofrecovery agents, methods to be followed by recovery agents, trainingto be imparted to the recovery agents and the process to be followedfor taking possession of property mortgaged/hypothecated to banks.Banks have also been advised to use the forum of Lok Adalats forrecovery of personal loans, credit card loans or housing loans withless than Rs. 10 Lakh as suggested by the Hon’ble Supreme Court. Incase of complaints received by Reserve Bank regarding violation ofthe operational guidelines and adoption of abusive practice byrecovery agents, Reserve Bank may consider imposing a ban on abank from engaging recovery agents in a particular area, eitherjurisdictional or functional, for a limited period. In case of persistentbreach of these guidelines, Reserve Bank may consider extending theperiod of ban or the area of ban.

2008

February 18 Know Your Customer (KYC) Norms / Anti Money Laundering (AML)Standards / Combating of Financing of Terrorism (CFT)-DBOD.AML.BC. No. 63/14.01.001/2007-08 dated February 18, 2008Reserve Bank has reiterated that the adoption of customeracceptance policy and its implementation should not result in denialof banking services to general public. This is against the backdropof the feedback received by the Reserve Bank that the indicative listof the nature and type of documents to be relied upon by the banksfor customer identification is being treated by some banks as anexhaustive list as a result of which a section of public is beingdenied access to banking services. The Reserve Bank has furtherclarified that the permanent address can be taken as the address asmentioned in a utility bill or any other document accepted by thebank for verification of the address of the customer. In the case ofclose relative, banks can obtain an identity document and a utilitybill of the relative with whom the prospective customer is livingalong with a declaration from the relative that the said personwanting to open an account is a relative and is staying with him/her.Banks have also been advised to introduce a system of review ofrisk categorization of accounts and periodical updation of customeridentification data after the account is opened.


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March 10 Customer charges for use of ATMs for cash withdrawal andbalance enquiry - DPSS No.1405/02.10.02/2007-08 dated March10, 2008

In order to ensure greater transparency in levy of customer chargesfor use of ATMs for cash withdrawal and balance enquiry, theReserve Bank has announced a framework of service charges to beimplemented by all banks. It is stipulated that the use of own ATMsfor any purpose by the customer will be free of charge. In the caseof use of other bank ATMs, for balance enquiries, no charges willbe levied while for cash withdrawals, banks have been advised toreduce charges to a maximum of Rs. 20 per transaction by March 31,2008. This service will be free of charge with effect from April 1,2009.

March 10 Use of Electronic mode of payment for large value transactions

DPSS No. 1407/02.10.02/2007-08 dated March 10, 2008

It has been decided to make large value payments of Rs. 1 croreand above mandatory to be routed through electronic paymentmechanism with effect from April 1, 2008.

April 17 Senior Citizens Savings Scheme, 2005 (SCSS)- Transfer ofaccounts from one Agency Bank to another Agency Bank-DGBA.CDD.H-11029/15.15.001/2007-08 dated April 17, 2008.

On examination of the matter concerning accounting procedure tobe followed for transfer of accounts from one Agency bank toanother Agency Bank/Post Office, Ministry of Finance, GoI,conveyed their approval for adopting the same procedure for inter-Agency bank/Post Office transfer of accounts under SCSS as isbeing followed for PPF Scheme, subject to the payment of transferfee as applicable under the relevant rules of the captioned Scheme.

April 24 Mid-Term Review of the Annual Policy for the year 2007-08 -Recovery Agents engaged by banks.

The Reserve Bank issued final guidelines which inter alia stipulatedspecific considerations which should be taken into account by bankswhile engaging recovery agents. Banks have been advised to have adue diligence process in place for engagement of recovery agents.Banks should inform the borrower the details of recovery agencyfirms/companies while forwarding default cases to the recoveryagency. Details of the recovery agency firms/companies engaged bybanks may also be posted on the bank’s website.

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May 2 Grievance Redressal Mechanism in banks

DBOD. No. Leg BC.81/09.07.005/2007-08 dated May 2, 2008.

Reserve Bank has reiterated that the banks need to put in place aneffective machinery for redressal of grievances of their customers/constituents with specific emphasis on resolving their complaintsfairly and expeditiously. Banks are required to disclose the briefdetails regarding the number of complaints, received at the HeadOffice/Controlling Office level as also the complaints received at thebranch level, along with their financial results. Banks have also beenadvised that in case a complaint is redressed within the nextworking day, banks need not include the same in the statement ofcomplaints. This is expected to serve as an incentive to the banksand their branches to redress the complaints within the nextworking day.

May 2 Settlement of Claims in respect of missing persons-DBOD.No.Leg.BC.80/09.07.005/2007-08 dated May 2, 2008.

Banks have been advised to formulate a policy which would enablethem to settle the claims of a missing person after considering thelegal opinion and taking into account the facts and circumstances ofeach case. Further, keeping in view the imperative need to avoidinconvenience and undue hardship to the common person, bankshave been advised to fix a threshold limit, up to which claim inrespect of missing persons could be settled without insisting on theproduction of any documentation other than (i) FIR and the non-traceable report issued by public authorities and (ii) letter ofindemnity.

June 4 Banking Facilities to the visually challenged- DBOD. No. LegBC.91 /09.07.005/2007-08 dated June 4, 2008.

Banks have been advised to ensure that all the banking facilitiessuch as cheque book facility including third party cheques, ATMfacility, Net banking facility, locker facility, retail loans, credit cards,etc. are invariably offered to the visually challenged without anydiscrimination. Banks may also advise their branches to render allpossible assistance to the visually challenged for availing thevarious banking facilities.


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A. Important cases dealt with by theBanking Ombudsman, wherecustomers were right

1. Debit for invalid ATM transaction

The complainant had a savings bankaccount in the ABC Bank. On December3, 2005, he operated his account throughhis ATM card at XYZ Bank forwithdrawal of Rs. 10,000/- in cash andthe same was not dispensed with by themachine. However, his account at ABCBank was debited for Rs. 10,020. Ascomplainant had not received anypayment, he requested ABC Bank toreverse this entry. The complainantsubmitted application to XYZ Bankthrough ABC Bank in this regard on April20, 2006. ABC Bank did not reverse theentry. The case was brought before theBanking Ombudsman.

The Banking Ombudsman observedthat XYZ bank in their letter addressed tothe ABC bank on February 28, 2007 hadclearly stated that the transactionsequence No.8243 for Rs. 10,000/- wasan ‘invalid’ transaction and accordinglythe same was not appearing in the audittrail. The complainant had alsocomplained that no cash was dispensedwith from the machine. Even after receiptof the XYZ Bank’s letter, ABC Bank didnot reverse the debit entry amounting toRs. 10,020 from the complainant’s savingsbank account nor bothered to reply to thequeries of the Banking Ombudsman inthis regard, which indicated that itprobably had no concern for thecustomer’s complaint despite deficiency atits end.

The Banking Ombudsman, therefore,directed the ABC Bank to reverse thedisputed debit entry dated December 3,2005 aggregating Rs. 10,020 and alsopay interest at fixed deposit rate fromDecember 3, 2005 to the date on whichthe reversal of the amount is effected. TheAward was implemented.

2. Loan installment debited toaccount without the availment ofloan

The complainant was sanctioned aused car loan amount of Rs. 2.45 lakh bythe bank on December 26, 2005. Theinstallment amount for repayment wasfixed at Rs. 6943/- and the repaymentwas to begin on/from January 7, 2006.The complainant alleged that the loan wasnot disbursed to him. The bank haddeducted seven installments of Rs. 6,943/-each from the complainant’s account. Thecomplainant requested the BankingOmbudsman to ask the bank to stoprecovery of installments of loan from hisaccount and to refund the amount alreadydeducted with interest as he had notavailed the loan. He also wanted NOC inthis regard from the bank.

According to the bank, the loan wasdisbursed to the Direct Selling Associate(DSA) of the bank on December 3,2005 with instruction to release thepayment in favour of the complainantonce all the papers for transfer ofownership and/or hypothecation in favourof the bank were received and found tobe in order by the RTO. As advised bythe DSA, the payment was released by

Annex 3

AnnualReport2007-08

28

them to their sub-agent, for onwardtransmission to the complainant.However, the cheques issued by the sub-agent were returned unpaid. A fresh set ofcheques were issued by the sub-agent,which were reportedly intercepted intransit and encashed by another individualwith an identical name. FIR was thenregistered following which non-bailablewarrants were issued in the name of theculprit, who was reported to beabsconding. The bank maintained that itwas in no way involved in the matter andcould not be held accountable for non-receipt of funds by the complainant. Asper the bank, the loans against used carswere disbursed through DSAs to exerciseproper control over the process oftransfer of ownership and recording ofhypothecation in favour of the bank.

Though the bank conceded that thecomplainant had not received the loanamount due to fault of its DSA, itcontinued to ignore the fact that thecomplainant was unnecessarily andunreasonably being harassed for no faultof his. To that extent, the bank’s internalgrievance redressal system wasconsidered weak, unreasonable and unfairto the complainant. Moreover, the bank’scontrols in respect of used car loansappeared to be one-sided as it did notbother to ensure that the loans disbursedactually reached the customers.

The Banking Ombudsman directed thebank to refund the amount of Seven EMIsof Rs. 6943/- each with interest @16%(compounding) to the complainant i.e. therate at which the loan was initiallysanctioned by the bank, pay to thecomplainant Rs. 1000/- for incurring

expenses relating to follow-up of thecomplaint with the bank and the BankingOmbudsman review its compensationpolicy to include such cases involvingomission or commission of its DSAs andaccepting bank’s responsibility with a viewto redress complaints through its internalgrievance redressal machinery. The Awardwas implemented.

3. Housing Loan - Interest Rate

The complainant who represented hisson alleged that his son had applied for ahousing loan at Fixed Rate of 7.5% butthe bank sanctioned the loan at floatingrate of 8% p.a. Subsequently the bankwithout any intimation to the partyincreased the rate of interest from 8% to11% at various stages. Since the partyhad applied for the loan from the bank ona fixed rate basis, he took up the matterwith the bank. The bank was notresponsive and did not furnish therequired clarification to him. Not satisfiedby the bank’s attitude, the partyapproached the Banking Ombudsman forredressal.

The Banking Ombudsman observedfrom the copy of the housing loanagreement that the loan was sanctioned ata fixed rate of interest of 8% whichwould continue for minimum period of 5years. Contrary to the terms of theagreement, the bank had charged theinterest at floating rate varying from 8% to11.5%. This action of the bank violatedthe terms of the agreement and had led tocollection of excess interest from thecomplainant. The bank was directed torefund the excess interest collected andcharge interest only as per the agreed


BankingOmbudsman

Scheme2006

29

terms. This was complied with by thebank by refunding Rs. 54,886/-.

4. Refund of excess interest chargedby a bank

A project under Khadi and VillageIndustry Board (KVIB) was financed bya bank. The bank loan of Rs. 4,34,021/-, included a KVIB sanctioned marginmoney of Rs. 2,22,175/-. Thecomplainant stated that the margin moneyshould have been interest free and thebank should have charged interest only onan amount of Rs. 2,11,846/-. However,the bank charged interest on total termloan amount and also imposed penalinterest without any default in the loanaccount of the complainant. Even afterseveral reminders and writtencommunication with the bank, it kept oncharging interest on the full amount of theterm loan.

The complainant wrote to the BankingOmbudsman for refund of overchargedinterest on term loan. The matter wastaken up with the bank and it informedthe Banking Ombudsman that it hadrefunded Rs. 75,296/- being the excessinterest amount.

5. Misrepresentation by the BankOfficials for opening an FDR

A complainant approached the bankwith an amount of Rs. 60,000/- for issueof fixed deposit of 46 days. He wasadvised by the bank official to open asavings fund account in the bank. Hedeposited the money and received thereceipt of Rs. 55,000/- and Rs. 5,000/-.After 46 days, the complainant visited thebank branch for withdrawal of the

maturity amount of the FDR. He was toldby the bank official that the amount wasinvested in an investment fund whichwould earn higher rate of return than thaton the FDR but it could only bewithdrawn only after six months. Thecomplainant lodged a complaint with thebank but failed to receive any response.The complainant was in urgent need ofmoney for school fees.

The complainant lodged a complaintwith the Banking Ombudsman becausethe bank was not responding to hiscomplaint. The bank was advised tosubmit its comments in the matter. It wasconfirmed that the money has beendeposited in some insurance scheme.However, the bank approached thecomplainant and resolved his grievance byrefunding the amount to him. Thecomplainant also forwarded hissatisfaction letter to the BankingOmbudsman

6. Withdrawal of Rs. 25,000/-through ATM Card

The complainant submitted that hewas availing services of the bank by usinga debit card issued by them. In the firstweek of September 2006, thecomplainant applied for a new Gold Cardwith zero liability and signed various formsat the instance of bank’s executive, whovisited his office. He did not receive thecard and Rs. 25,000/- was debited fromhis account on October 9, 2006. Onenquiry from the bank, it was gatheredthat the card was delivered to a securitystaff in his office building, withoutchecking the identification particulars. ThePIN was also delivered to some other

AnnualReport2007-08

30

staff in his office. The complainant,therefore, requested the bank to refundthe amount.

The bank submitted that the Proof ofDelivery (POD) depicted acceptance ofGold Card and PIN at the mailingaddress and it bore the rubber stamp ofthe company. One Ms.Sumita receivedthe PIN and one Shri Narender receivedthe debit card which proved correctdelivery of the Gold Card and PIN. Thebank also reiterated that the use of debitcard in the ATM indicated that thewithdrawal had been made by anauthorised person, using the Gold Cardand the relevant PIN and as such the saidtransactions were valid. As such, thebank was not liable or responsible for anyconsequences in this regard.

A conciliation meeting was held onDecember 5, 2007 where the BankingOmbudsman observed that the bankcould not escape its responsibility bystating that the card and PIN weredelivered at the mailing address of thecomplainant to ‘unauthorized’ personsincreasing the risk of misuse by them. Thecard and PIN should have been deliveredto the complainant in person or to hisauthorized representative only under hisproper acknowledgement.

Thus, the bank was directed toreimburse the complainant Rs. 25,000/-being the amount of withdrawal madethrough the use of card by anunauthorized person. The bank was alsoasked to pay to the complainant interestat savings bank rate and an additionalamount of Rs. 1000/- to meet theexpenses relating to follow-up of thecomplaint to the complainant. The bank

could approach appropriate authority forfixing the responsibility for recovery of theabove unauthorized withdrawal. TheAward was implemented.

B. Important cases dealt with by theBanking Ombudsman, wherebanks were right

7. Right of set off

The complainant was sanctioned aCash Credit limit by the R bank in 1990.As the loan became NPA, thecomplainant approached the bank forOTS which was sanctioned in 2007. Healso obtained ‘no- dues certificate’ fromthe bank. The documents kept asequitable mortgage was also returned tohim by the bank. Besides landed property,the complainant had pledged a few fixeddeposits as security for the said loan whichhe wanted to be returned to him afterOTS.

R bank clarified that when the loanbecame NPA due to non-servicing ofinterest as well as non-payment ofprincipal, all the liquid securities kept aslien were adjusted as per banking practiceunder bank’s “right of set-off” against theover dues before 2007, the year of OTSsettlement. More over the complainanthad not made this a condition in the OTSsettlement. On enquiry from the BankingOmbudsman office the complainant couldnot submit any evidence regardingexemption of the fixed deposits from theOTS amount.

No deficiency of service by the bankwas observed and the complaint wasrejected under Clause 13(d) of theBanking Ombudsman Scheme, 2006“without any sufficient cause”.


BankingOmbudsman

Scheme2006

31

8. Interest on matured Fixed Deposit

The complainant alleged that his FixedDeposit (FD) with the X bank has beenrenewed at a lower rate of interest for theoverdue period. The complainantdemanded for automatic renewal of theFDR and requested that interest shouldbe calculated and paid accordingly. Acompensation for Rs. 10,000/- was alsoclaimed by the complainant for mentalagony suffered in the matter.

The bank submitted that the FDmatured on February 19, 1993 and it waspresented with a request for renewal inthe month of December 2007 - January2008 approximately after 14 years. Asper guidelines in force, the deposit ceasesto earn interest from the due date of thedeposit and there was no system ofAutomatic Renewal of Term Deposits atthe time when the deposit was made.However, in good gesture, the bank hadpaid interest to the complainant at theprevailing rate. Regarding the claim of thecomplainant for compensation, the bankdenied any such harassment on the part ofthe officials and there was only a minordelay in renewing the deposit and interestwas paid for the above period also. Thebank, requesting dismissal of the case,also submitted copy of the FDR (bothside), Interest Calculation Sheet and copyof Bank’s guidelines in support of theirsubmissions.

After the perusal of the comments ofthe bank and the documentary evidencesubmitted, it was observed that it hasbeen clearly mentioned on the top of theDeposit Receipt that ‘Interest will notaccrue on the deposit amount from thedue date’.

Accordingly, the BankingOmbudsman accepted the submissions ofthe bank and rejected the complaint underclause 13(d) (without sufficient cause).

9. Dishonor of chequeComplainant stated that he had issued

a cheque of Rs. 1,094/- for payment ofhis electricity charges. The complainantalleged that the bank dishonored theabove mentioned cheque for the reasonthat the balance in his overdraft accountwas short by Rs. 719.67 only. He wantedthe reimbursement of penalty of Rs. 310/-charged by the electricity company andrefund of cheque bouncing charges of Rs.100/- imposed by the bank. The bankexplained that the cheque was dishonoredbecause the amount of cheque wasexceeding the overdraft limit (OD) grantedto the complainant.

It is the bank’s discretion to honor ordishonor a cheque of an amountexceeding the OD limit sanctioned.Therefore the complaint was treated ashaving made without sufficient cause andrejected under Clause 13(d) of theBanking Ombudsman Scheme, 2006.

DISCLAIMER

The Reserve Bank of India does not vouch the correctness, propriety or legalityof orders and awards passed by Banking Ombudsmen. The object of placing thiscompendium is merely for the purpose of dissemination of information on theworking of the Banking Ombudsman Scheme and the same shall not be treated asan authoritative report on the orders and awards passed by Banking Ombudsmenand the Reserve Bank of India shall not be responsible or liable to any personfor any error in its preparation.

AnnualReport2007-08

32

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11

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erna

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ndon

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Ban

k of

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rain

& K

uwai

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00

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Ban

k of

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Ban

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30

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1901

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173

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BankingOmbudsman

Scheme2006

37

Deu

tsch

e B

ank

AG

134

1.00

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HS

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3.58

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10

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Sta

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1310

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3128

141

5900

the banking ombudsman scheme · 2008-12-24 · reserve bank of india banking ombudsman scheme 2006...

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