Professional Documents
Culture Documents
On
Bachelor of Commerce
Semester – V
Submitted By
Roll No. 45
UNIVERSITY OF MUMBAI
(2009-2010)
Project on
Bachelor of Commerce
Semester – V
(2009-2010)
Submitted
By
Roll No. 45
Course Co-ordinator
Internal Examiner
External Examiner
TO WHOM IT MAY CONCERN
Akshai Kumar,
Asst. Manager,
IDBI Bank Ltd.
Kalyan
Nivara Complex, Opposite Mahalakshmi Temple, Tilak Chowk, Kalyan (West), Thane 421301.
Tel.: 91-0251-2203327. Fax: 91-0521-2201738
IDBI Tower, WTC, Complex, Cuffe Parade, Mumbai 400 005. Website: www.idbi.com
DECLARATION
Signature of Student
(Mr. Freddy Savio D’souza)
ACKNOWLEDGEMENT
It is the most pleasant part of any project to express gratitude towards all those
who helped me out to complete this project.
My deepest thanks to my project guide Prof. Hema Tahilramani for guiding and
correcting various documents of mine with attention and care. She has taken pain
to go through the project and make necessary correction as and when needed.
I thank Mr. Anil Narkende the Branch Manager of IDBI Bank, Kalyan Branch
for being instrumental in the completion of the project with his complete guidance.
I would also like to thank to all those who supported me directly or indirectly in
completing this project.
INDEX
Executive Summary
Preface
Types of Banks
Grievance Redressal
Types of Ombudsman
Conclusion 74
Bibliography
Wibliography
Annexure ‘A’
Annexure ‘B’
EXECUTIVE SUMMARY
The aim of this project is to introduce the reader to the topic of “THE BANKING
OMBUDSMAN”. The project also deals with the policy adopted by the RBI and
the excess of case laws.
The ability of the banking industry to achieve the socio-economic objectives and
in the process bringing more and more customers into its fold will ultimately
depend on the satisfaction of the customers. Banks have a strong belief that a
satisfied customer is the foremost factor in developing our business.
Sensing the need for a easy, expeditious and inexpensive mechanism for redressal
of unresolved grievances of customers, the RBI initially formulated the Scheme of
Ombudsman, 1995, which became operational in June 1995, providing an
institutional and legal framework to bank customers to resolve all their complaint
The scheme is applicable to all scheduled commercial banks having business in
India and scheduled primary co-operative banks except Regional Rural Banks.
Fifteen offices of Banking Ombudsman at important centres were set up to cover
the entire country.
OBJECTIVES
METHODLOGY
Banking services are extremely important in a free market economy such as that
found in Canada and the United States. Banking services serve two primary
purposes. First, by supplying customers with the basic mediums-of-exchange
(cash, checking accounts, and credit cards), banks play a key role in the way goods
and services are purchased. Without these familiar methods of payment, goods
could only be exchanged by barter (trading one good for another), which is
extremely time-consuming and inefficient. Second, by accepting money deposits
from savers and then lending the money to borrowers, banks encourage the flow of
money to productive use and investments. This in turn allows the economy to
grow. Without this flow, savings would sit idle in someone’s safe or pocket,
money would not be available to borrow, people would not be able to purchase
cars or houses, and businesses would not be able to build the new factories the
economy needs to produce more goods and grow. Enabling the flow of money
from savers to investors is called financial intermediation, and it is extremely
important to a free market economy.
TYPES OF BANKS
2. Commercial Banks
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:
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
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.
For example: The Jammu and Kashmir Bank Ltd., Bank of Rajasthan Ltd.,
Development Credit Bank Ltd, Lord Krishna Bank Ltd., Bharat Overseas Bank
Ltd., Global Trust Bank, Vysya Bank, etc.
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, Grindlay’s Bank, etc. The
number of foreign banks operating in our country has increased since the financial
sector reforms of 1991.
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 Finance
Corporation of India (IFCI) and State Financial Corporation’s (SFCs) are
examples of development banks in India.
4. Co-Operative 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 banking business, 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:
Primary Credit Societies
These are formed at the village or town level with borrower and non-borrower
members residing in one locality. The operations of each society are restricted to a
small area so that the members know each other and are able to watch over the
activities of all members to prevent frauds.
These banks operate at the district level having some of the primary credit
societies belonging to the same district as their members. These banks provide
loans to their members (i.e., primary credit societies) and function as a link
between the primary credit societies and state co-operative banks.
These are the apex (highest level) co-operative banks in all the states of the
country. They mobilize funds and help in its proper channelization among various
sectors. The money reaches the individual borrowers from the state co-operative
banks through the central co-operative banks and the primary credit societies.
5. Specialized 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.
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.
Bank will treat all complaints efficiently and fairly as they can damage
the bank’s 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 bank’s 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 appointment of Banking Ombudsman under the above Clause may be made
for a period not exceeding three years at a time.
CHARACTERISTICS OF BANKING OMBUDSMAN
The Banking Ombudsman does not charge any fee for resolving
customers’ complaints.
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-
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.
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.
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.
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.
TYPES OF OMBUDSMAN
TYPES OF OMBUDSMAN
Banking Ombudsman
The Reserve Bank of India (RBI) first introduced the Banking Ombudsman
Scheme In1995, which has been revised in 2002 and 2005. The latest revised
Scheme has come into force from 1st Jan 2006.
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 21st August 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.
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 11th March,
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.
Telecom Ombudsman
The Telecom Regulatory Authority of India Act, 1997, empowers the Telecom
Regulatory 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 telecom 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 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.
Income Tax Ombudsman
Insurance Ombudsman
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.
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.
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..
The complainant shall before making a complaint to the Banking Ombudsman, make a
written representation to the bank.
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.
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.
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.
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.
The complaint should be made before the expiry of the period of limitation prescribed under
the Indian Limitation Act, 1963 for such claims.
INTRODUCTION
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 Ombudsman Offices 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.
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 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. The grounds of complaints have been enumerated in
Clause 8 of the Banking Ombudsman Scheme, 2006.
OPERATIONALISATION
Reserve Bank of India operationalised the Banking Ombudsman Scheme by
establishing 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.
PERFORMANCE OF THE OFFICES OF BANKING
OMBUDSMAN
The performance of the Offices of the Banking Ombudsman was analyzed on the
aspects such as the quantum of complaints handled by them, the timeliness in
handling the issues, and appropriateness of the decisions given against the
complaints.
The increase in the number of complaints received during the years 2005-06
and2006-07 can be attributed to new areas such as credit card complaints included
and to facilitation of complaint submission by allowing complaint submission in
any form including by online and by email allowed in the Banking Ombudsman
Scheme, 2006. Per month receipt in the number of complaints received under the
BO Scheme 2006 was more than thrice the number of complaints received under
the Banking Ombudsman Scheme, 2002.
Disposal of Complaints
During the year 2007-08, the Banking Ombudsman Offices disposed of 49100
complaints (including from the complaints pending at the beginning of the year
and those received during the year). Of these, 21747 complaints (49%) were
settled to the satisfaction of the complainants, 15914 complaints (36%) could not
be considered under the scheme owing to several reasons like being outside the
purview of the scheme, time-barred, without sufficient cause, frivolous, pending in
other fora, etc. A sample analysis of 756 complaints that could not be considered
under the scheme disclosed that 42% of such complaints fell outside the purview
of the scheme and 23% were first resort complaints and could not be taken up by
the Banking Ombudsmen. In 11% of the complaints, deficiency of service could
not be established and the remaining 24% complaints could not be considered for
reasons like they were pending in other fora or the complaints required
consideration of elaborate documentary and oral evidence etc. Details of disposal
of complaints over the last five years are furnished in the following table:
The Banking Ombudsmen disposed of complaints, other than the complaints that
could not be considered, either by mutual settlement or by issuing an Award.
During the period reviewed, the ratio of complaints disposed by settlement to the
complaints disposed by award was around 99:1 clearly indicating the effectiveness
of the Banking Ombudsmen in arriving at mutually agreed consensus between
bankers and complainants. During the period above, only 563 awards were issued
which formed less than 2% of the total 49,253 complaints disposed of. From the
year 2006-07, the number of awards issued and the percentage of disposal through
award issuance have come down despite huge increase in the complaints received.
Details are as given table below. The fact that the Banking Ombudsmen could
dispose of more than 98% of the complaints by mutual settlement between the
complainant and the concerned banks to their satisfaction indicates that they took
appropriate decisions taking into consideration all the relevant and extant legal and
banking instructions and practice.
However, during the year 2006-07, the maximum number of complaints received
pertained to credit cards at 20%. Complaints pertaining to deposit accounts, loans
and advances and remittances occupied the next three places in the number of
complaints received. The details are shown below.
Complaints received in 2007-08: Category-wise
Complaints received in 2006-07 & 2007-08: Category-wise
2006-07 2007-08
The Aim of Consumer Protection Act (CPA) is to address the grievances of the
consumers and protecting them from the unethical practices/ behavior or unfair
trade practices of the manufacturer/ supplier. All the provisions of the Act have
come into force from 1 July 1987. The Act was amended in 1991 and 1993. To
make the Consumer Protection Act more functional and purposeful, a
comprehensive amendment was carried out in December 2002 and brought into
force from 15 March 2003. As a sequel, the Consumer Protection Rules, 1987
were also amended and notified on 5 March 2004.
Earlier though there were several legislations to protect the consumer, but the
same never proved adequate to protect consumer and compensate them for their
compliances. The act not only enhances the awareness and educate the consumer
but also provide compensation to them by summary and inexpensive proceedings.
Unlike existing laws which are punitive or preventive in nature, the provisions of
this Act are compensatory in nature. The act is intended to provide simple, speedy
and inexpensive redressal to the consumers' grievances, and relief of a specific
nature and award of compensation wherever appropriate to the consumer. It
confers upon consumers eight rights i.e.: basic needs, safety, information, choice,
representation, redress, consumer education, healthy environment. It provides
remedies to the aggrieved customer in form Replace, Remove, Refund, Redress.
CONSUMER
“Consumer” means any person who,-
Buy any goods for a consideration which has been paid or promised or partly paid
and partly promised, or under any system of deferred payment and includes any
user of such goods other than the person who buys such goods for consideration
paid or promised or partly paid or partly promised or under any system of deferred
payment when such use is made with the approval of such person, but does not
include a person who obtains such goods for resale or for any commercial purpose,
or Hires any services for a consideration which has been paid or promised or
partly paid and partly promised, or under any system of deferred payment and
includes any beneficiary of such services other than the person who hires the
services for consideration paid or promised, or partly paid and partly promised, or
under any system of deferred payment, when such services are availed of with the
approval of the first mentioned person.
COMPLAINT
“Complaint” means any allegation in writing made by a complaint that: -
The goods mentioned in the complaint suffer from one or more defects.
A trader has charged for the goods mentioned in the complaint a price in excess of
the price fixed by or under any law for the time being in force or displayed on the
goods or any package containing such goods, with a view to obtaining any relief
provided by this Act.
Remedies Granted under the Consumer Protection Act, 1986
against unfair Trade Practices.
The District Forum / State Commission / National Commission may pass one or
more of the following orders to grant relief to the aggrieved consumer :-
2. to replace the goods with new goods of similar description which shall be
free from any defect;
3. to return to the complainant the price, or, as the case may be, the charges
paid by the complainant;
RIGHTS OF CONSUMERS
Right to
Safety
Right to Right to
be Heard Information
The right to be protected against the marketing of goods and services which are
hazardous to life and property Consumer right to safety applies to all possible
consumption patterns and to all goods and services. In the context of the new
market economy and rapid technological advances affecting the market, the right
to safety has become a pre-requisite quality in all products and services. For e.g.
some Indian products carry the ISI mark, which is a NB symbol of satisfactory
quality of a product? Similarly, the FPO and AGMARK symbolize standard
quality of food products.
Right to Information
Right to information means the right to be given the facts needed to make an
informed choice or decision about factors like quality, quantity, potency, purity
standards and price of product or service. The right to information now goes
beyond avoiding deception and protection against misleading advertising,
improper labeling and other practices. For e.g. when you buy a product or utilize a
service, you should be informed about;
a) How to consume a product.
b) The adverse health effects of its consumption.
c) Whether the ingredients used are environment- friendly or not etc.
Right to Redress
The right to seek redressal against unfair trade practices or restrictive trade
practices or unscrupulous exploitation of consumers. It is to protect consumer
interests that consumers have been given the right to obtain redress. In India, we
have a redress machinery called Consumer Courts constituted under the Consumer
Protection Act (1986), functioning at national state and district levels. But it has
not been made complete use of under due to lack of awareness of basic consumer
rights among consumers themselves. While in the developed world, right to
redress is perhaps the most commonly exercised consumer right, in developing
countries, consumers are still wary of getting involved in legal redress system.
There are consumer courts in India where any consumer can lodge a case if s/he
thinks he or she has been cheated.
This right is the right to basic goods and services which guarantee dignified living.
It includes adequate food, clothing, health care, drinking water and sanitation,
shelter, education, energy and transportation. Access to food, water and shelter are
the basis of any consumer's life. Without these fundamental amenities, life cannot
exist. The right to basic needs means that availability of articles which are the
basic need of every consumer must be ensured.
Right to Safe Environment
It means the right to a physical environment that will enhance the quality of life. It
includes protection against environmental damage. It acknowledges the need to
protect and improve the environment for future generations as well. This right
involves protection against environmental problems over which the individual
consumer has control. It acknowledges the need to protect and improve the
environment for present and future generations.
Right to Choice
The right is to be assured, wherever possible, access to a variety of products and
services at competitive prices. It means the right to have access to a variety of
products and services at competitive prices and in the case of monopolies, to have
an assurance of satisfactory quality and service at a fair price. The right to choose
has been reformulated to read: the right to basic goods and services. This is
because the unrestrained right of a minority to choose can mean for the majority a
denial of its fair share.
Right to be Heard
This means the right to be represented so that consumers’ interests receive full and
sympathetic consideration in the formulation and execution of economic policy.
This right is being broadened to include the right to be heard and represented in
the development of products and services before they are produced or set up; it
also implies a representation, not only in government policies, but also in those of
other economic powers.
THE BANKING OMBUDSMAN SCHEME, 2006
The Scheme is introduced with the object of enabling resolution of complaints
relating to certain services rendered by banks and to facilitate the satisfaction or
settlement of such complaints.
DEFINITIONS
1) ‘Award’ means an award passed by the Banking Ombudsman in
accordance with the Scheme.
2) ‘Appellate Authority’ means the Deputy Governor in charge of the
Department of the Reserve Bank implementing the Scheme.
3) ‘Authorized representative’ means a person duly appointed and authorized
by a complainant to act on his behalf and represent him in the proceedings
under the Scheme before a Banking Ombudsman for consideration of his
complaint.
4) ‘Banking Ombudsman’ means any person appointed under Clause 4 of the
Scheme.
5) ‘Bank’ means a ‘banking company’, a ‘corresponding new bank’, a
‘Regional Rural Bank’, ‘State Bank of India’ a ‘Subsidiary Bank’ as
defined in Section 5 of the Banking Regulation Act, 1949 (Act 10 of 1949),
or a ‘Primary Co-operative Bank’ as defined in clause (c) of Section 56 of
that Act and included in the Second Schedule of the Reserve Bank of India
Act, 1934 (Act 2 of 1934), having a place of business in India, whether
such bank is incorporated in India or outside India.
6) ‘Complaint’ means a representation in writing or through electronic means
containing a grievance alleging deficiency in banking service as mentioned
in clause 8 of the Scheme.
7) ‘Reserve Bank’ means the Reserve Bank of India constituted by Section 3
of the Reserve Bank of India Act, 1934 (2 of 1934).
8) ‘The scheme’ means the Banking Ombudsman Scheme, 2006.
9) ‘Secretariat’ means the office constituted as per sub-clause (1) of clause 6
of the Scheme.
10)‘Settlement’ means an agreement reached by the parties either by
conciliation or mediation under clause 11 of the Scheme.
ESTABLISHMENT OF OFFICE OF BANKING OMBUDSMAN
SECRETARIAT
1) The Reserve Bank shall depute such number of its officers or other staff to
the office of the Banking Ombudsman as is considered necessary to
function as the secretariat of the Banking Ombudsman.
2) The cost of the Secretariat shall be borne by the Reserve Bank.
JURISDICTION, POWERS AND DUTIES OF BANKING
OMBUDSMAN
GROUNDS OF COMPLAINT
1) Any person may file a complaint with the Banking Ombudsman having
jurisdiction on any one of the following grounds alleging deficiency in
banking including internet banking or other services.
j) Refusal to open deposit accounts without any valid reason for refusal;
u) Any other matter relating to the violation of the directives issued by the
Reserve Bank in relation to banking or other services.
3) The Banking Ombudsman may also deal with such other matter as may be
specified by the Reserve Bank from time to time in this behalf.
PROCEDURE FOR FILING COMPLAINT
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. 3Provided that a complaint arising out
of the operations of credit cards and other types of services with centralized
operations, shall be filed before the Banking Ombudsman within whose
territorial jurisdiction the billing address of the customer is located.
ii. The name and address of the branch or office of the bank against which the
complaint is made,
iv. The nature and extent of the loss caused to the complainant, and
b) The complainant shall file along with the complaint, copies of the
documents, if any, which he proposes to rely upon and a declaration that
the complaint is maintainable under sub-clause (3) of this clause.
b) The complaint is 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;
c) The complaint is not in respect of the same cause of action 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 cause of action ;
d) The complaint does not pertain to the same cause of action, 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;
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
any other bank concerned with the complaint to provide any information or
furnish certified 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.
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.
SETTLEMENT OF COMPLAINT BY AGREEMENT
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
way of compensation for any loss suffered by the complainant, arising
directly out of the act or omission of the bank.
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.
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.
REJECTION OF THE COMPLAINT
The Banking Ombudsman may reject a complaint at any stage if it appears to him
that the complaint made is;
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.”
d) Modify the Award and pass such directions as may be necessary to give
effect to the Award so modified; or
3) 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.
BANKS TO DISPLAY SALIENT FEATURES OF THE SCHEME
FOR COMMON KNOWLEDGE OF PUBLIC
1) 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.
2) The banks covered by the Scheme shall ensure that a copy of the Scheme is
available with the designated officer of the bank for perusal in the office
premises of the bank, if anyone, desires to do so and notice about the
availability of the Scheme with such designated officer shall be displayed
along with the notice under sub-clause (1) of this clause and shall place a
copy of the Scheme on their websites.
3) The banks covered by the Scheme shall appoint Nodal Officers at their
Regional/Zonal Offices and inform the respective Office of the Banking
Ombudsman under whose jurisdiction the Regional/Zonal Office falls. The
Nodal Officer so appointed shall be responsible for representing the bank
and furnishing information to the Banking Ombudsman in respect of
complaints filed against the bank. Wherever more than one zone/region of a
bank are falling within the jurisdiction of a Banking Ombudsman, one of
the Nodal Officers shall be designated as the 'Principal Nodal Officer' for
such zones or regions.
REMOVAL OF DIFFICULTIES
If any difficulty arises in giving effect to the provisions of this Scheme, the
Reserve Bank may make such provisions not inconsistent with the Banking
Regulation Act, 1949 or the Scheme, as it appears to it to be necessary or
expedient for removing the difficulty.
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.
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, levying service 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.
Is the New Banking Ombudsman Scheme 2006 differs from its
previous schemes?
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
lodged various 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;
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.
Amendment 1:
The Reserve Bank of India today announced the revised Banking Ombudsman
Scheme 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.
The new scheme provides a forum to bank customers to seek redressal of their
most 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.
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 Ombudsmen’s awards against banks by the Reserve Bank. The Banking
Ombudsmen currently have their offices in 15 centers.
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
appeal only 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
Ombudsman Scheme, 2006 to extend the appeal option also to the decisions of the
Banking Ombudsman.
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
As per the amended Scheme, the Banking Ombudsman can award compensation
not exceeding Rupees one lakh to the complainant in the case of 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 honour bank guarantee or letter of credit, etc. Complaints on
these areas of banking services are insignificant in number.
INTRODUCTION
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 bank’s name and image. The Bank’s policy on
grievance redressal follows the under noted principles.
Bank will treat all complaints efficiently and fairly as they can damage the
bank’s reputation and business if handled otherwise.
The Bank employees must work in good faith and without prejudice to
the interests of the customer.
The customer is having full right to register his complaint if he is not satisfied with
the services provided by the bank. He can give his complaint in writing, orally or
over telephone. If customer’s complaint is not resolved within given time or if 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.
Bank would appoint a Nodal Officer who will be responsible for the
implementation of customer service and complaint handling for the entire bank.
The bank may also appoint such other officials as it deems necessary.
In case of any complaint, the matter may be first brought to the notice of
concerned Branch Manager for immediate redressal. If the complaint is not
redressed to the satisfaction of the customer, the matter may be taken up with the
Regional Manager / Zonal Manager concerned. The Bank has also nominated
concerned Regional Manager as Nodal Officer for handling the complaint
grievances in respect of the branches under their jurisdiction. If the complainant
still feels unsatisfied with the responses received, he/she can address the complaint
to the bank’s Nodal Officer at Head Office designated to deal with customers’
Complaints relating to non-compliance with the Code may be referred to the Code
Compliance officers, who shall ensure speedy disposal of all such complaints.
TIME FRAME
Complaint has to be seen in the right perspective because they indirectly reveal a
weak spot in the working of the bank. Complaint received should be analyzed
from all possible angles. The first level of receiving complaints is at the branch.
Branch Head should try to resolve the complaint within 8 working days. In case
the customer does not receive a revert / response within 8 working days from the
branch, he can escalate the complaint to the Nodal Officer, who shall strive to
revert / answer the complaint within a period of 15 working days. If the customer
does not receive a satisfactory response from the Bank within a period of one
month, he may be provided information about how he can take his complaint
further i.e. to the Ombudsman.
The complainant, Mr.XYZ was holding a current account with ABC Bank. On
11.09.1990, following a raid conducted on his premises by the Income Tax Dept.,
jewellery, FDRs, chequebooks, passbooks pertaining to his bank accounts with
various banks including that with ABC Bank were seized. The credit balance in
his current account with ABC Bank at the time of seizure of the documents was
Rs.44,769.10. He stated that it had taken thirteen years for the Income Tax Dept.
to finalize his case and to exonerate him. The Income Tax Dept. did not to return
the chequebook and passbook seized by them, as they were not traceable. The
complainant had approached the ABC Bank for withdrawing the amount lying in
his current account but the bank refused to allow him to withdraw the amount
without chequebook and the passbook. The Income Tax Dept. by its letter No.
GIR No.V- 715 dated 11.09.2003 addressed to ABC Bank certified that during
search operations conducted in the premises of Mr.XYZ on 11.09.1990, the
department had seized a chequebook in respect of current account No.929 in the
name of Mr.XYZ showing a credit balance of Rs.44,647.10 as on the date of
seizure adding that the chequebook and passbook were not readily traceable and
the department had no objection in allowing operations in the account by the
complainant.
DECISION
When the complainant had approached the bank on 12.09.2003 for refund of the
amount lying to his credit, the bank had refused to allow him to withdraw the
amount. Article 90 of the Limitation Act clearly mentions that limitation would
start running from the date of demand. The complaint filed with the office of the
Banking Ombudsman is not barred by limitation and is maintainable in law. It is a
general rule that the party who affirms any proposition shall prove it. It is also a
general rule that the onus lies upon the party who seeks to support his case by a
particular fact to prove it. If this basic principle of law of evidence is applied, it is
for the bank to prove conclusively as to when and how the account was closed and
to produce the documents supporting such payment and closure, which ought to
have been in its custody. It may also be pertinent to note that the Asst. Director of
Income Tax [Inv.] had served an order under Sec.132 [3] of the Income Tax on the
branch manager directing him not to part with the funds lying to the credit of the
complainant in current account No.929. When the bank asserts that the account
was closed it is for the bank to bring proof of such closure and it cannot excuse
itself stating that records were destroyed or its tapes were not readable. The
submission that the bank had permitted closure when there was prohibitory order
against it is not credible as in the normal course there is no chance of any bank
allowing operations in an account when there is a prohibitory order in force. All
the facts and circumstances of the case point out to an irrefutable conclusion that
there was no chance that the complainant could have received the refund of the
current deposit prior to 2003. Therefore it was decided to direct the bank that it
should refund to the complainant Rs.44,647.10 which was lying to his credit as on
11.09.1990 when the passbook and chequebook were seized by Income Tax
authorities.
ANALYSIS OF THE CASE
This case is about a customer Mr.XYZ, who is a current account holder with the
ABC Bank. Mr.XYZ was having a balance of Rs.44,647/- in his current account
when the income tax department conducted a raid in his premises. While the
investigations the income tax department confiscated his passbook, chequebook,
FDR’s and other document of all the banks including the ABC Bank. After
thirteen years the income tax department was not able to trace his documents. So
he decided to withdraw his balance amount and close the account, but the the bank
refused to close the account without the cheque book and the passbook.
Mr.XYZ was able to prove his statement by providing the letter from the income
tax department mentioning that Mr.XYZ’s passbook having a balance of
Rs. 44,647/- as on 11.09.1990 was misplaced by them. The bank refused to refund
of the amount lying to his credit even after showing the evidence to them.
In the system of Banking Ombudsman, the results are delivered very soon, the
procedures are fair together with cost, and proportionate to the nature of the issues
involved. The system deals with cases at reasonable speed, is understandable to
those who use it, is responsive to the needs of those who use it, and provides as
much certainty as the nature of particular cases allows. This is true because over
the past five years nearly 36000 complaints are being resolved by the Banking
Ombudsman under this Banking Ombudsman Scheme. Though the Banking
Ombudsman is eligible enough to deliver the bank customer complaints at the
earliest yet the Consumer Redressal Forum/Commission is being taken resort of
by most of the bank customers for their redressal of grievances with the bank. The
reason is they are well popular among the common public which is lacking with
the banking ombudsman and its working. Definitely the Scheme needs popularity
in the society for its more appropriateness and effectiveness so that the aggrieved
bank customer with the services of the bank prefers to knock the door of the
banking ombudsman for redressal. The scheme should provide more powers and
levy more duties on the banking ombudsman so that they can easily be
approachable by the aggrieved bank customer.
Annual Report by the Reserve Bank of India – Banking Ombudsman
Scheme 2007-2008.
Annexure ‘A’
To
The Banking Ombudsman
(*Territorial jurisdiction,
Place of BO’s office……)
Dear Sir,
ACCEPTED
(Signature of Representative)
(Signature of Complainant)
Annexure ‘B’
13. ‘Biscomaun Towers’ Bihar & Jharkhand Tel. No. C/o 236453(NCC)
2nd Floor, West
Fax No.0612-2206308
Gandhi Maidan
Patna-800 001