Vivek College of Commerce THE BANKING OMBUDSMAN

NAME CLASS GUIDE

:::-

PRASAD K POOJARY T.Y.B.BI Prof. Debjani Roll No. 34

EXECUTIVE SUMMARY

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The aim of this project is to introduce the reader to the topic of T H E B A N K I N G 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. This project is focused in understanding the essentiality of the Banking Ombudsman in regards to the public interest and the interest of the banking policies to enable resolution of complaints related to deficiency in banking services. 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 cooperative banks except Regional Rural Banks. Fifteen offices of Banking Ombudsman at important centres were set up to cover the entire country.

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The Banking Ombudsman offers customers the opportunity to resolve disputes with their banks without needing to resort to the Courts.

PREFACE OBJECTIVES To present Banking Ombudsman Scheme & how does it works. To present the services of the Banking Ombudsman offered to the customer. To show how the Banking Ombudsman deals with customer complaints. To explain the duties, functions & powers of the

Ombudsman.

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METHODLOGY The methodology includes the information of the features of the Ombudsman in the form of primary data that had been received from the Branch Managers of the banks and the officers of the RBI. It also includes the informations from the related books & the related websites

Chp:-1 INTRODUCTION TO BANKING OMBUDSMAN INTRODUCTION An ombudsman is a person who has been appointed to look into complaints about an organization. Using an ombudsman is a way of trying to resolve a complaint w i th o u t g o i n g to c o u r t. Banking Ombudsman is a quasi judicial authority functioning under Indias Banking Ombudsman Scheme, and the authority was created pursuant to the a decision by the Government of India to enable resolution of complaints of customers of banks relating to certain services rendered by the banks. The Banking Ombudsman Scheme was first introduced in India in 1995,and was revised in 2002 and 2006. In the wake of the failure in the efficient services of the banks, the RBI brought a scheme for the prompt, efficient and courteous services and also to protect the rights of the customers.

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The Banking Ombudsman is an official authority to investigate the complaint from the customers and address the complaint and thereby bring the solution among the aggrieved parties. So the Banking Ombudsman plays the role of a mediator and serves the purpose of reconciliation. The Banking Ombudsman has been defined under clause 4 of the Banking Ombudsman Scheme, 2006. APPOINTMENT & TENNURE The Reserve Bank may appoint one or more of its officers in the rank of Chief General Manager or General Manager to be known as Banking Ombudsmen to carry out the functions entrusted to them by or under the Scheme. The appointment of Banking Ombudsman under the above Clause may be made for a period not exceeding three years at a time. CHARACTERISTICS OF BANKING OMBUDSMAN The Banking Ombudsman is a quasi judicial authority. It has power to summon both the parties -bank and its customer, to facilitate resolution of complaint through mediation. All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

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The Banking Ombudsman has power to consider complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank-related matters. The Banking Ombudsman does not charge any fee for resolving customers complaints. Complaint can be made before a Banking Ombudsman on 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 a final order, has already been passed by any such competent court, tribunal, arbitrator or forum.

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DUTIES & FUNCTIONS OF BANKING OMBUDSMAN 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 Practices and actions by persons, enterprises and other private institutions where complaints allege that violations of fundamental rights and freedoms have taken place. All instances or matters of alleged or suspected corruption and them is appropriation of public moneys or other public property by officials.

Without derogating from the provisions, any request or complaint in respect of instances or matters referred to in that provisions, may include any instance or matter in respect of which the Ombudsman has reason to suspect 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.

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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. Any person wishing to lay any instance or matter referred to in provisions before the Ombudsman shall do so in such manner as the Ombudsman may determine or allow.

The Ombudsman shall not be required to investigate any instance or matter referred to in the provisions which has been laid before him or her under the provisions when the grounds on account of which the inquiry is desired is in the opinion of the Ombudsman. The provisions shall not apply in respect of any decision taken in or in connection with any civil or criminal case by a court of law

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C O M P L A I N T S C O N S I D E R E D BY BANKING OMBUDSMAN The Banking Ombudsman can receive and consider any complaint relating to the following deficiency in banking services (including internet banking): non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.; non-acceptance, without sufficient cause, of small

denomination notes tendered for any purpose, and for charging of commission in respect thereof; non-acceptance, without sufficient cause, of coins tendered and forcharging of commission in respect thereof; non-payment or delay in payment of inward remittances ; failure to issue or delay in issue of drafts, pay orders or bankers cheques; non-adherence to prescribed working hours ;

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failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its direct selling agents; complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank-related matters; levying of charges without adequate prior notice to the customer; non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/Debit card operations or credit card operations; refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government; refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of Government securities; forced closure of deposit accounts without due notice or without sufficient reason; refusal to close or delay in closing the accounts;

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non-observance of Reserve Bank guidelines on engagement of recovery agents by banks; and non-observance of Reserve Bank Directives on interest rates; delays in sanction, disbursement or non-observance of prescribed time schedule for disposal of loan applications; non-acceptance of application for loans without furnishing valid reasons to the applicant; and COMPLAINTS NOT CONSIDERED BY BANKING OMBUDSMAN Ones complaint will not be considered if: One has not approached his bank for redressal of

his grievance first. One has not made the complaint within one year from the date one has received the reply of the bank or if no reply is received if it is more than one year and one month from the date of representation to the bank.

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The subject matter of the complaint is pending for disposal / has already been dealt with at any other forum like court of law, consumer court etc. Frivolous or vexatious. The institution complained against is not covered under the scheme. The subject matter of the complaint is not within the ambit of the Banking Ombudsman. If the complaint is for the same subject matter that was settled through the office of the Banking Ombudsman in any previous proceedings The complaint should not be frivolous or vexatious in nature. The complaint should be made before the expiry of the period of limitation prescribed under the Indian Limitation Act, 1963 for such claims

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CHP:-2 SCHEME 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 April1-March 31 to July 1-June 30 to be in congruent INTRODUCTION TO BANKING OMBUDSMAN

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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. GENERAL PARTICULARS ON THE SCHEME The word Ombudsman in general means a grievance man, a public official who is appointed to investigate complaints against the administration. He is to intervene for the ordinary citizen in his dealings with the complex machinery of the establishment. In India, any person whose grievance against a bank is not resolved to his satisfaction by that bank within a period of one month can approach the Banking Ombudsman if his complaint pertains to any of the matters specified in the Scheme. Banking Ombudsmen have been authorized to look into complaints concerning deficiency in banking service , sanction of loans and advances in so far as they relate to non-observance of the Reserve Bank directives on interest rates, delay in sanction or non-observance of prescribed time schedule for disposal of loan applications or nonobservance of any other directions or instructions of the Reserve Bank as may be specified for this purpose, from time to time, and such other matters as may be specified by the Reserve Bank. The Scheme envisages expeditious and satisfactory disposal of customer complaints in a time bound manner. The Banking Ombudsman on receipt of any complaint endeavors to promote a settlement of the complaint by agreement between

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the complainant and the bank named in the complaint through conciliation or mediation. For the purpose of promoting a settlement of the complaint, the Banking Ombudsman has been allowed to follow such procedures as he may consider appropriate and he is not bound by any legal rule of evidence. If a complaint is not settled by agreement within a period of one month from the date of receipt of the complaint or such further period as the Banking Ombudsman may consider necessary, he may pas san Award after affording the parties reasonable opportunity to present their case. He shall be guided by the evidence placed before him by the parties, the principles of banking law and practice, directions, instructions and guidelines issued by the Reserve Bank from time to time and such other factors, which in his opinion are necessary in the interest of justice SCOPE OF THE SCHEME The Banking Ombudsman Scheme, 2002 covered all the Regional Rural Banks in addition to all Commercial Banks and Scheduled Primary Co-operative Banks, which were already covered by earlier Banking Ombudsman Scheme, 1995. There is no change in this regard in the Banking Ombudsman Scheme, 2006.In 2006, the Reserve Bank of India announced the revised Banking Ombudsman Scheme with enlarged scope that included customer complaints on certain new areas, such as, credit card complaints, deficiencies in providing the promised services even by banks' sales agents, levying service charges without prior notice to the

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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 complaints to have accepting been payment towards The Clause in taxes grounds 8 of and of the issuing/servicing of Government securities.

enumerated

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.

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Chp:-3

PERFORMANCE

OF

THE

OFFICES

OF

BANKINGOMBUDSMAN 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. Number of Complaints Received The number of complaints received by the Banking Ombudsman Offices had constantly increased in the last five years. There was more than threefold increase in the number of complaints received in the year 2006-07from the previous year after the Banking Ombudsman Scheme, 2006 was notified. The increasing receipt was also observed in the year 2007-08 with a 24% increase from the year 2006-07.The average number of complaints received per Banking Ombudsman Office has also increased from 550 in 2003-04 to 3192 in 2007-08.

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Number

of

complaints

received

by the

Banking

Ombudsman Offices

Period

No of Offices of Complaints Banking Ombudsman received the year

Average during No. ts per office of Complain

2003-2004

15

8246

+53%

550

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2004-2005 2005-2006 2006-2007 2007-2008 15 15 15 15 10560 31732 38638 47887 +28% +200% +22% +24% 704 2115 25760 3192

The increase in the number of complaints received during the years 2005-06and2006-07 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 Scheme2006 was more than thrice the number of complaints received under the Banking Ombudsman Scheme, 2002. The increase in the number of complaints received under the Banking Ombudsman Scheme 2006 as compared to the previous scheme clearly indicates the extent to which the scheme has benefited larger sections of of the banking customers. The comparative effects the Banking Ombudsman Schemes

2002and 2006 in complaint receipt are given as below: Number of complaints received in 2005-06 and 2006No. PERIOD SCHEME S RUNNIN FROM TO TOTAL G COMPLAINTS FROM TO TOTAL RECEIVED TOTAL PER OF

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MONTH 1080

01.04.2 005 01.01.2 006

31.12.2 005 30.06.2 007

9 MONTH S 18 MONTH S

B 2002 B 2006

O 9732

SCHEME O 606047 3370

SCHEME

Disposal of Complaints During the year 2007-08, the Banking Ombudsman Offices disposed of 49100complaints (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 for a, 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. In11% of the complaints, deficiency of service could not be established and the remaining24% complaints could not be considered for reasons like they were pending in other for a or the

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complaints required consideration of elaborate documentary and or all evidence etc. Details of disposal of complaints over the last five years are furnished in the following table: Disposal of Complaints by Banking Ombudsman Offices PARTICULARS Total complaints dealt with 3998 5440 (45%) 14931 (45%) 21747 (49%) 29365 (53%) during the year Complaints satisfaction of 4011 4963 (41%) 12304 (37%) 15914 (36%) 19735 (36%) 20032004 9489 20042005 12034 20052006 33363 20062007 44766 20072008 54992

settled to the (42%) complaints (a) Complaints That be under consider the

couldnt (42%)

scheme (b) Total number 8009 of complaints (84%) of disposed (a+b)

10403 (86%)

27235 (82%)

37661 (84%)

49100 (89%)

Mode of Disposal of Complaints

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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. Mode of disposal of complaints (Other than complaints that could not be considered) Sr. No. Year No. of Disposal % By Disposal Settlement No. % by Complain Award No. ts Disposed

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of 1 2 3 4 5 20032004 20042005 20052006 20062007 20072008 3998 5440 14931 21747 29365 121 165 146 84 70 2.21 3.03 0.98 0.39 0.24 3877 5275 97.78 96.97

14785 99.02 21662 99.61 29295 99.76

Analysis of Complaints:

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The analysis of complaints received at the Banking Ombudsman offices includes analysis of subject category of complaints and the bank-groups against which the complaints were made. Computerization of the functioning of Banking Ombudsman Offices through the Complaint Tracking Software has enabled detailed analysis in this regard. The maximum number of complaints pertained collection dealt to with during the last five-year deposit the period complaints regarding etc, besides accounts,

deficiency in servicing of loans and advances and delay in of cheques/bills, miscellaneous complaints. The details are given in the following table:

Analysis of complaints dealt with -category-wise Category Deposit 20022003 1789 20032004 2500 (26%) 1226 (13%) 1001 (11%) 20042005 3239 (27%) 2291 (19%) 1245 (10%) 20052006 6733 (20%) 5215 (16%) 3058 (9%) 20062007 5803 (15%) 5151 (13%) 4058 (11%)

Amount (27%) Loans & 1651 Advances Collection of Cheques & Bills Others 2158 (34%) (25%) 908 (14%)

4756 (50%)

5299 (44%)

18357 (55%)

23626 (61%)

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Total 6506 9483 12034 33363 38638

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.

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Complaints received in 2007-08: Category-wise

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Complaints received in 2006-07 & 2007-08: Category-wise Sr. No. 20061 2 3 4 5 6 7 8 9 10 11 Deposits account Remittance Credit Cards Loans & Advances General Loans & Advances Housing Charges Without Notice Pension Failure On commitments made DSAs and Recovery Agents Notes & Coins Others Total 2007 5803 4058 7688 4442 709 2594 1070 1469 1039 130 9636 38638 20072008 5612 5213 10129 5297 757 3740 1582 6388 3128 141 5900 47887 Nature Of Complaints Received During

Analysis of complaints-Bank-group-wise Group-wise, the majority of the complaints pertain to the Nationalized Banks followed by the State Bank Group. However, over the years, the percentage of complaints against public sector banks, including the SBI Group, showed a decline vis--vis the number of complaints received against private sector banks and foreign banks Break-up of complaints dealt with -Bank-group-wise

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Bank group 2003- 200 2004 4200 Nationaliz ed Banks SBI Group Private Sector Banks Foreign 406 4049 2779 1325 5 512 4 335 9 186 3 577 256 2997 198 3803 313 1013 7 9892 6754 2005- 2006 2006 2007 1054 3 1111 7 9036 1203 3 1353 2 1407 7 6126 295 14222 10 1340 1 45031 30 42593 29 33773 23 2007- Total 2008 No. %

Banks Scheduled 166 Primary Cooperative Banks RRB Others Total 232 526 9483

359 496 120 34

794 2561 3336 3

536 3290 3863 8

826 998 4788 7

2780 2 8127 5 14791 100 1

COST DETAILS OF RUNNING THE SCHEME

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The costs of the Scheme include the revenue expenditure and capital expenditure incurred in running the Banking Ombudsman offices. The revenue expenditure includes the establishment items like salary and allowances of the staff attached to Banking Ombudsman offices and non-establishment items such as rent, taxes, insurance, law charges, postage and telegram charges, printing and stationery expenses, publicity expenses, depreciation and other miscellaneous items. The capital expenditure items include the furniture, electrical installations, computers/related equipments, telecommunication equipments and motor vehicle. Cost details of Banking Ombudsman Offices Period Total Cost (Rs. Cr) 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 7.03 7.60 10.16 9.81 12.50 No. of Complaints dealt 9483 12034 33633 38638 47887 Cost per Complaint (Rs) 7413 6315 3045 2538 2611

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Chp:-4 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. SHORT TITLE, COMMENCEMENT, EXTENT ANDAPPLICATION 1) This Scheme may be called the Banking Ombudsman Scheme, 2006. 2) It shall come into force on such date as the Reserve Bank may specify. 3) It shall extend to the whole of India. 4) The Scheme shall apply to the business in India of a bank as defined under the Scheme.

SUSPENSION OF THE SCHEME 1) The Reserve Bank, if it is satisfied that it is expedient so to do, may by order suspend for such period as may be specified in the order, the operation of all or any of the

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provisions of the Scheme, either generally or in relation to any specified bank. 2) The Reserve Bank may, by order, extend from time to time, the period of any suspension ordered as aforesaid by such period, as it thinks fit. CHP:-5 JURISDICTION, POWERS AND DUTIES OF

BANKINGOMBUDSMAN POWERS AND JURISDICTION 1) The Reserve Bank shall specify the territorial limits to which the authority of each Banking Ombudsman appointed under Clause 4 of the Scheme shall extend. 2) The Banking Ombudsman shall receive and consider

complaints relating to the deficiencies in banking or other services filed on the grounds mentioned in clause 8 and facilitate their satisfaction or settlement by agreement or through conciliation and mediation between the bank concerned and the aggrieved parties or by passing an Award in accordance with the Scheme.

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3) The Banking Ombudsman shall exercise general powers of superintendence and control over his Office and shall be responsible for the conduct of business thereat. 4) The Office of the Banking Ombudsman shall draw up an annual budget for itself in consultation with Reserve Bank and shall exercise the powers of expenditure within the approved budget on the lines of Reserve Bank of India Expenditure Rules, 2005. 5) The Banking Ombudsman shall send to the Governor, Reserve Bank, are port, as on 30th June every year, containing a general review of the activities of his Office during the preceding financial year and shall furnish such other information as the Reserve Bank may direct and the Reserve Bank may, if it considers necessary in the public interest so to do, publish the report and the information received from the Banking Ombudsman in such consolidated form or otherwise as it deems fit.

POWER TO CALL FOR INFORMATION

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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 is of or any is document relating to be in to its the complaint 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, unfavorable to the bank. 2) The Banking Ombudsman shall maintain confidentiality of any information or document that may come into his knowledge or possession in the course of discharging his duties and shall not disclose such information or document to any person except with the consent of the person furnishing such information or document. Provided that nothing in this clause shall prevent the Banking Ombudsman from disclosing information or document furnished by a party in a complaint to the other party or parties to the extent considered by him to be reasonably required to comply with any legal requirement or that the which alleged

information if provided or copies if furnished would be

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the principles of natural justice and fair play in the

proceedings. SETTLEMENT OF COMPLAINT BY AGREEMENT 1) As soon as it may be practicable to do, the Banking Ombudsman shall send a copy of the complaint to the branch or office of the bank named in the complaint, under advice to the nodal officer referred to in sub-clause (3) of c l a u s e the 15, and endeavor the bank to promote a s e t t l e m e n t o f t h e co m p l a i n t b y agreement between complainant and through conciliation or mediation. 2) For the purpose of promoting a settlement of the complaint, the Banking Ombudsman may follow such procedure as he may consider just and proper and he shall not be bound by any rules of evidence. 3) The proceedings before the Banking Ombudsman shall be summary in nature.

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REJECTION OF THE COMPLAINT The Banking Ombudsman may reject a complaint at any stage if it appears to him that the complaint made is; a) Not on the grounds of complaint referred to in clause 8 or otherwise not in accordance with sub clause (3) of clause 9; or b) Beyond or c) Requiring consideration of elaborate documentary and oral evidence and the proceedings before the Banking Ombudsman are not appropriate for adjudication of such complaint; or d) Without any sufficient cause; or e) That it is not pursued by the complainant with the pecuniary jurisdiction of Banking

O m b u d s m a n p r e s cr i b e d under clause 12 (5) and 12 (6)

reasonable diligence; or

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f) In the opinion of the Banking Ombudsman there is no loss or damage or inconvenience caused to the complainant.

APPEAL BEFORE THE APPELLATE AUTHORITY: 1) Any person aggrieved by an Award under clause 12 or rejection of a complaint for the reasons referred to in sub clauses (d) to (f) of clause 13,may within 30 days of the date of receipt of communication of Award or rejection of complaint, prefer an appeal before the Appellate Authority ; Provided that in case of appeal by a bank, the period of thirty days for filing an appeal shall commence from the date on which the bank receives letter of acceptance of Award by complainant under sub. clause (6) of clause12

BANKS

TO

DISPLAY

SALIENT

FEATURES

OF

THE

SCHEME FOR COMMON KNOWLEDGE OF PUBLIC 2) 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

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person visiting the office or branch has adequate information of the Scheme. 3) 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. 4) 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 bank and shall be responsible for information to representing the the Banking furnishing

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

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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

APPLICATION

OF

THE

BANKING

OMBUDSMAN

SCHEMES,1 9 9 5 A N D 2 0 0 2

The adjudication of pending complaints and execution of the Awards already passed, before coming into force of the Banking Ombudsman Scheme, 2006,shallcontinue to be governed by the provisions of the respective Banking Ombudsman Schemes and instructions of the Reserve Bank issued there under.

Chp:-6

AMDMENT

PASSED

BY

RB I

FOR

THE

C H A N G E S I N BANKE N ING OMBUDSMAN SCHEME, 2006: Amendment 1: RBI expands Scope of Banking Ombudsman Scheme; Includes Fair Banking Practices. Date:26 Dec 2005

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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. In order to increase its effectiveness, the revised Banking Ombudsman Scheme will be fully staffed and funded by the Reserve Bank instead of the banks. Under the revised Banking Ombudsman Scheme, the complainants will be able to file their complaints in any form, including online. The bank customers would also be able to appeal to the Reserve Bank against the awards given by the Banking Ombudsmen. The new scheme provides a forum to bank customers to seek redressal of 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

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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 1995to 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 centers. The Reserve Bank is also in an advanced stage of setting up an independent Banking Codes and Standards Board of India to ensure that comprehensive code of conduct for fair treatment to customers are formulated by banks and adhered to. The Reserve Bank of India had announced setting up of the Board in its Annual Policy for 2005-2006 announced by the Governor, Dr Y V Reddy in April 2005 Amendment 2 : Customers can now appeal against the Banking Ombudsman's Decision.] Ombudsmens awards against banks by the Reserve Bank. The Banking Ombudsmen currently have their offices in 15

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Date:24 May 2007Bank 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 appeal only against The the awards given the RBI website. by for the the Banking Banking Before the scheme was amended, the bank customers could Ombudsman. 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. Originally introduced in 1995, the Banking Ombudsman Scheme enables speedy and cost effective resolution of complaints of bank customers relating to deficiency in bank services. The Scheme now covers all Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks. The customers can also now complain to the Banking Ombudsman against deficiency in almost any banking services, including credit cards, after exhausting the channel available with the bank appellate authority

Ombudsman Scheme is the Deputy Governor of Reserve Bank of

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concerned for resolving their complaints. The Reserve Bank has appointed 15 Banking Ombudsmen who are located mostly in State Capitals under the Scheme. The Banking Ombudsman tries to resolve the complaint through conciliation or mediation and even passes an award if it is not resolved through such settlement.

Amendment 3: RBI amends Banking relating Ombudsman to Internet Scheme: Banking includes and Noncomplaints

adherence to BCSBI Code. Date:05 Feb 2009 The Reserve Bank of India has widened the scope of its Banking Ombudsman Scheme 2006, to include deficiencies arising out of internet banking. Under the amended Scheme, a customer would also be able to lodge a complaint against the bank for its nonadherence to the provisions of the fair practices code for lenders or the Code of Bank's Commitment to Customers issued by the Banking Codes and Standards Board of India (BCSBI). The BCSBI is an independent and autonomous watchdog set up by the Reserve Bank to monitor and ensure that the codes

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and standards adopted by the banks for rendering banking services are adhered to in true spirit. As per the amended Scheme, the Banking Ombudsman can award compensation not exceeding Rupees one lakh to the complainant in the case of 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 mentalanguish 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

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and Thiruvananthapuram certain have been rationalized into account to the

include/exclude Ombudsman.

areas

taking

geographical proximity of those areas to the Office of the Banking

The amended Scheme however, does not include certain banking transactions, such as, failure to honour bank guarantee or letter of credit, etc. Complaints on the areas of banking services are insignificant in number.

Chp:-7 Policy for grievances redressal in IDBI bank 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

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concern of any bank. The bank believes that providing prompt and efficient service is essential not only to attract new customers, but also to retain existing ones. This policy document aims at minimizing instances of customer complaints and grievances through proper service delivery and review mechanism and to ensure prompt redressal of customer complaints and grievances. The review mechanism should help in identifying shortcomings in product features and service delivery. Customer dissatisfaction would spoil banks name and image. The Banks policy on grievance redressal follows the under noted principles. Customers be treated fairly at all times Complaints raised by customers are dealt with courtesy and on time Customers are fully informed of avenues to escalate their complaints/grievances within the organization and their rights to alternative remedy, if they are not fully satisfied with the response of the bank to their complaints. Bank will treat all complaints efficiently and fairly as they can damage the banks reputation and business if handled otherwise. The Bank employees must work in good faith and without prejudice to the interests of the customer. In order to make banks redressal mechanism more meaningful and effective, a structured system needs to be built up towards such end. Such

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system would ensure that the redressal sought is just and fair and is within the given frame-work of rules and regulation. The policy document would be made available at all branches. All employees of the Bank should be made aware about the Complaint handling process. The customer 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 customers 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. INTERNAL MACHINERY TO HANDLE

CUSTOMERCOMPLAINTS/ GRIEVANCES Customer Service Committee of the Board This sub-committee of the Board would be responsible for formulation of a Comprehensive Deposit Policy incorporating the issues such as the treatment of death of a depositor for operations of his account, the product approval process and the annual survey of depositor satisfaction and the tri-enniel audit of such services. The Committee would also examine any other issues having a bearing on the quality of customer service rendered. This Committee would also review the functioning of Standing Committee on Customer Service. The Customer Service Committee of the Board is responsible for the rendering of customer service to the individual, both as a depositor and also as

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a borrower. The Committee is, therefore, responsible for

examining loan policies and service issues for the individual as a borrower also. Standing Committee on Customer Service The Standing Committee on Customer Service will be chaired by the Managing Director/ Executive Director of the Bank. Besides two to three senior executives of the bank, the committee would also have two to three eminent non-executives drawn from the public as members. The committee would have the following functions. Evaluate feed-back on quality of customer service received from various quarters. The committee would also review comments/feed-back on customer service and implementation of commitments in the Code of Banks Commitments to Customers received from BCSBI. The Committee would be responsible to ensure that all regulatory instructions regarding customer service are followed by the bank. Towards this, the committee would obtain necessary feed-back from zonal/regional managers/ functional heads. The committee also would consider unresolved complaints/grievances referred to it by functional heads responsible for redressal and offer their advice.

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The committee would submit report on its performance to the customer service committee of the board at quarterly intervals.

Nodal Officer and other designated officials to handle complaints and grievances 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. To enable the customers to voice their grievances or offer suggestions for improvement in customer service, Customer Day is observed at all the offices of the Bank across the organization covering branches, Regional / Zonal Offices and Head Office, on 15th of every month ( next day, if 15th is a holiday or half day).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

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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 banks Nodal Officer at Head Office designated to deal with customers complaints / grievance giving full details of the case. RESOLUTION OF GRIEVANCES Branch Manager is responsible for the resolution of

complaints/grievances in respect of customers service by the branch. He would be responsible for ensuring closure of all complaints received at the branches. It is his foremost duty to see that the complaint should be resolved completely to the customers satisfaction and if the customer is not satisfied, then he should be provided with alternate avenues to escalate the issue. If the branch manager feels that it is not possible at his level to solve the problem he can refer the case to Regional or Zonal Office for guidance. Similarly, if Regional or Zonal office finds that they are not able to solve the problem such cases may be referred to the Nodal Officer. 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.

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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. Communication of Banks stand on any issue to the customer is a vital requirement. Complaints received, which would require some time for examination of issues involved, should invariably be acknowledged promptly

INTERACTION WITH CUSTOMERS The Bank recognizes that customers

expectation/requirement/grievances can be better appreciated

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through personal interaction with customers by Banks staff. Structured customer meets, say once in a month will give a message to the customers that the bank cares for them and values their feedback/suggestions for improvement in customer service. Many of the complaints arise on account of lack of awareness among customers about bank services and such interactions will help the customers appreciate banking services better. As for the bank the feedback from customers would be valuable input for revising its product and services to meet customer requirements. SENSITIZING OPERATING STAFF ON

HANDLINGCOMPLAINTS Staff should be properly trained for handling complaints. We are dealing with people and hence difference of opinion and areas of friction can arise. With an open mind and a smile on the face we should be able to win the customers confidence. It would be the responsibility of the Nodal Officer to ensure that internal machinery for handling complaints/grievances operates smoothly and efficiently at all levels. He should give feedback on training needs of staff at various levels to the HR Dept.

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Chp:-8 COMPENDIUM OF CASE HANDLED BY THE BANKING OMBUDSMAN OFFICE SUBJECT: Refusal to Close the Account The complainant, Mr.XYZ was holding a current account with ABC Bank. On11.09.1990, following a raid conducted on his premises by the Income Tax Dept., jewellery, FDRs, cheque books, 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 wasRs.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 cheque book 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 cheque book 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 Mr.XYZ operations the conducted in the premises of account No.929 in the on 11.09.1990, showing a

department had seized a cheque book in respect of current name ofMr.XYZ credit balance of Rs.44,647.10 as on the date of seizure adding that the cheque book and passbook were not readily traceable and the

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department had no objection in allowing operations in the

account by the complainant. DECISION When the complainant had approached the bank on12.09.2003 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 incurrent 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

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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 ason11.09.1990 when the passbook and cheque book 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 department investigations his the current a income account raid tax in when his the income tax his conducted premises. While the

department

confiscated

passbook, cheque book, FDRs 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

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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. XYZs 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. Therefore the customer approached the Banking Ombudsman to complaint the ignorance of the bank and to get his account closed. As soon as the complaint was lodged to the Banking Ombudsman he founded that the evidence provided by the complainant was true. So the Banking Ombudsman directed the bank to refund the complainant the amount of Rs. 44,467/that was lying to his credit since 11.09.1990 as per the passbook.

CONCLUSION Though the Banking Ombudsman Scheme was introduced in the year 1995, with a view to do away with the banking customer complaints, the scheme was amended in subsequent years of 2002 and 2006. But the banks do not seem to have adopted the norms for their efficient functioning, that is the reason behind the

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increasing consumer cases against the banks, which are governed under the scheme. 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 at Ombudsman the earliest Scheme. yet the Though the Banking Redressal Ombudsman is eligible enough to deliver the bank customer complaints Consumer 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

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BIBILOGRAPHY Annual Report by the Reserve Bank of India

B a n k i n g O m b u d s m a n Scheme 2007-2008. Booklet of The Banking Ombudsman Scheme 2006. RBI Journals.

WEBLIOGRAPHY http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=159 http://www.rbi.org.in/Scripts/PublicationsView.aspx? id=11113#2 http://www.nos.org/Secbuscour/25.pdf http://www.indbank.com/ombudsman.htm http://www.ucobank.com/ombudsman.htm

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