CHAPTER 1

BANKING

1.1 INTRODUCTION
Banking has become a part and parcel of our day-to-day life. Today, banks offer an easy
access to a common man. They carry out variety of functions apart from their main functions of
accepting deposits and lending. Banking is a service industry. Banks provide financial services to
the people, business and industries. Merchant banking, money transfer, credit cards, ATM's are
some of theimportant financial services provided by the modern banks.
Indian banking system, over the years has gone through various phrases after
establishment of RBI in 1935 according to RBI Act,1934 , during British rule, to function as
Central Bank of the country. Earlier Central Bank's functions were being looked after by the
Imperial Bank of India.
The development of 'Banking is evolutionary in nature. There is no single answer to the
question of what is Banking. Because a bank performs a multitude of functions and services
which cannot be comprehended into a single definition. For a common man, a bank is a storehouse
of money, for a businessman it is an institution of finance and for a worker it may be a depository
for his saving.

It may be explained in brief as "Banking is what a bank does". But it is not clear enough to
understand the subject in full The Oxford dictionary defines a bank as "an establishment for the
custody of money which it pays out on a customer's order'. But this definition is also not enough,
because it considers the deposit lending andrepayment functions only. The meaning of a bank can
be understood only by its functions just as a tree is known by its fruits, As any othersubjects, it has its
own origin, growth and development.

Development of Banking in India:Banking in India is indeed as old as Himalayas, but the banking functions became an

effective force only after the first decades of 20th century. To understand of the history of modem
banking in India. One has to refer to the English "Agency Houses" established by the East India
Company, These Agency Houses, were basically trading firms and carrying on banking business
as part of their main business. Because of this dual functions and lack of their own capital they
failed and vanished from the scene during the third decade of 18th century.

Meaning and Definition of banks:A bank is an institution which deals in money and credit.Thus, bank is an intermediary
which handles other people's money both for their advantage and to its own profit. But banks are
not merely a trader in money but also an important manufacturer of money. In other words, a
bank is a factory of credit.
According to 5(b) defines banking as "accepting for the purpose of lending or
investment of deposits of money from the public, repayable on demand or otherwise and
withdrawals by cheque, draft and order or otherwise". Section 5 (1) (c) defines banking company
as "Any company which transacts the business of banking in India".
The Oxford Dictionary defines a bank as "an establishment for the custody of money,
which it pays out on a customer's order".
Section 5(c) of Banking Regulation Act,1949 has been defined banking as, "One which
transacts the business of banking which means the accepting for the purpose of lending or

investment of deposits of money from the public, repayable on demand or otherwise and
withdrawable by cheque, draft, order or otherwise.
Banking activities:
A bank usually provides the following services:

Checking account

Cheque books

Savings account

Money market account

Certificate of deposit (CD)

Individual retirement account (IRA)

Credit card

Debit card

Mortgage

Mutual fund

Personal loan

Time deposit

Automated teller machine

2.2:- HISTORY OF BANK

It is interesting to trace the origin of the word Bank in the modern sense to the German
word "Banck" which means, heap or mound or joint stock fund. From this, the Italian word
"Banco" meaning heap of money was coined.
Some people have the opinion that the words "bank is derived from the French words,
"bancus" or "banque" which means a "bench". Initially the bankers, the Jews in Lombardy,
transacted their business on benches in the market place and bench resembled the banking
counter.

Elementary financial records are known from the beginning of history, Baked clay records were
done before the invention of writing.
In the 17th century, merchants started storing their gold with goldsmiths in London.
The goldsmiths had their own vaults, and charged a fee for storing the merchant's gold. The

goldsmiths eventually started loaning money using the gold left to them, and also paid interest on
the gold.
The Bank of England began issuing banknotes in 1695. The oldest bank still in existence
is Monte dei Paschi di Siena in Siena, Italy, which started in 1472.

CHAPTER 2
OMBUDSMAN BANKING

INTRODUCTION

An ombudsman or public advocate is usually appointed by the government or by parliament, but

with a significant degree of independence, who is charged with representing the interests of
the public by investigating and addressing complaints of maladministration or a violation of
rights. In some countries an Inspector General, Citizen Advocate or other official may have
duties similar to those of a national ombudsman, and may also be appointed by a legislature.
Below the national level an ombudsman may be appointed by a state, local or municipal
government. Unofficial ombudsmen may be appointed by, or even work for, a corporation such
as a utility supplier, newspaper, NGO, or professional regulatory body.
The typical duties of an ombudsman are to investigate complaints and attempt to resolve them,
usually through recommendations (binding or not) or mediation. Ombudsmen sometimes also
aim to identify systematic issues leading to poor service or breaches of people's rights. At the
national level, most ombudsmen have a wide mandate to deal with the entire public sector, and
sometimes also elements of the private sector (for example, contracted service providers). In
some cases, there is a more restricted mandate, for example with particular sectors of society.
More recent developments have included the creation of specialized Children's Ombudsman and
Information Commissioner agencies.
In some jurisdictions an ombudsman charged with handling concerns about national government
is more formally referred to as the "Parliamentary Commissioner" (e.g. the United Kingdom
Parliamentary Commissioner for Administration, and the Western Australian state Ombudsman).
In many countries where the ombudsman's responsibility includes protecting human rights, the
ombudsman is recognized as the national human rights institution. The post of ombudsman had
by the end of the 20th century been instituted by most governments and by some
intergovernmental organizations such as the European Union.

2.2 ORIGINS AND ETYMOLOGY

A prototype of ombudsmen may have flourished in China during the Qin Dynasty (221 BC), and
in Korea during the Joseon Dynasty.The position of secret royal inspector, or Amhaeng-eosa was
unique to the Joseon Dynasty, where an undercover official directly appointed by the king was
sent to local provinces to monitor government officials and look after the populace while
travelling incognito. The Roman Tribune had some similar roles, with power to veto acts that
7

infringed upon the Plebeians. Another precursor to the ombudsman was the Turkish Diwan-alMazalim which appears to go back to the second caliph, Umar (634644) and the concept
of Qadi al-Qudat. They were also attested in Siam, India, the Liao dynasty (Khitan Empire),
Japan, and China.
An indigenous Swedish, Norwegian, and Danish term, ombudsman is etymologically rooted in
the Old

Norse word umboosmaor,

essentially

meaning

"representative"

(with

the

word umbud/ombud meaning proxy, attorney, that is someone who is authorized to act for
someone else, a meaning it still has in the Scandinavian languages). The first preserved use is
in Sweden. In the Danish Law of Jutland from 1241, the term is umbozman and means a royal
civil servant in a hundred. From 1552, it is also used in the other Scandinavian languages such as
the both Icelandic and Faroese umboosmaour,
the Norwegian ombudsman and the Danish ombudsman. The Swedish speaking minority in
Finland uses the Swedish terminology.
Use of the term began in Sweden, with the Swedish Parliamentary Ombudsman instituted by
the Instrument of Government of 1809, to safeguard the rights of citizens by establishing a
supervisory agency independent of the executive branch. The predecessor of the Swedish
Parliamentary Ombudsman was the Office of Supreme Ombudsman ("Hgste Ombudsmannen"),
which was established by the Swedish King, Charles XII, in 1713. Charles XII was in exile
in Turkey and needed a representative in Sweden to ensure that judges and civil servants acted in
accordance with the laws and with their duties. If they did not do so, the Supreme Ombudsman
had the right to prosecute them for negligence. In 1719 the Swedish Office of Supreme
Ombudsman

became

the Chancellor

of

Justice.[4] The Parliamentary

Ombudsman was

established in 1809 by the SwedishRiksdag, as a parallel institution to the stillpresent Chancellor of Justice, reflecting the concept of separation of powers as developed
by Montesquieu.
The Parliamentary Ombudsman is the institution that the Scandinavian countries subsequently
developed into its contemporary form, and which subsequently has been adopted in many other
parts of the world. The word ombudsman and its specific meaning have since been adopted in
8

various

languages,

including

Spanish

Dutch

and

Czech.

The

German

language

uses Ombudsmann, Ombudsfrau and Ombudsleute. Notable exceptions are French and Finnish,
which use translations instead. Modern variations of this term include "ombud," "ombuds,"
"ombudsperson," or "ombudswoman," and the conventional English plural is ombudsmen. In
Nigeria, the ombudsman is known as the Public Complaints Commission or the ombudsman

2.2.1 IN POLITICS
In general, an ombudsman is a state official appointed to provide a check on government activity
in the interests of the citizen, and to oversee the investigation of complaints of improper
government activity against the citizen. If the ombudsman finds a complaint to be substantiated,
the problem may get rectified, or an ombudsman report is published making recommendations
for change. Further redress depends on the laws of the country concerned, but this typically
involves financial compensation. Ombudsmen in most countries do not have the power to initiate
legal proceedings or prosecution on the grounds of a complaint. This role is sometimes referred
to as a "tribunician" role, and has been traditionally fulfilled by elected representatives the term
refers to the ancient Roman "tribunes of the plebeians" (tribuni plebis), whose role was to
intercede in the political process on behalf of common citizens.
The major advantage of an ombudsman is that he or she examines complaints from outside the
offending state institution, thus avoiding the conflicts of interest inherent in self-policing.
However, the ombudsman system relies heavily on the selection of an appropriate individual for
the office, and on the cooperation of at least some effective official from within the apparatus of
the state.

2.1.2 IN ORGANISATIONS

Many private companies, universities, non-profit organisations and government agencies also
have an ombudsman (or an ombuds office) to serve internal employees, and managers and/or
other constituencies. These ombudsman roles are structured to function independently, by
reporting to the CEO or board of directors, and according to International Ombudsman
Association (IOA) Standards of Practice they do not have any other role in the organisation.
Organisational ombudsmen often receive more complaints than alternative procedures such as
anonymous hot-lines.
Since the 1960s, the profession has grown in the United States, and Canada, particularly in
corporations, universities and government agencies. The organizational ombudsman works as a
designated neutral party, one who is high-ranking in an organization, but who is not part of
executive management. Using an alternative dispute resolution (ADR) orappropriate dispute
resolution approach, an organisational ombudsman can provide options to whistleblowers or
employees and managers with ethical concerns; provide coaching, shuttle diplomacy, generic
solutions (meaning a solution which protects the identity of one individual by applying to a class
of people, rather than just for the one individual) and mediation for conflicts; track problem
areas; and make recommendations for changes to policies or procedures in support of orderly
systems change.

10

2.3 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 Cooperative Banks are covered under the Scheme.

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.

11

2.4 MAKING THE BANKING OMBUDSMAN MORE RESPONSIVE TO

CUSTOMERS
Though the banking ombudsman functions well as a grievance redressal mechanism, the large of
number of rejection of complaints call for a need to revamp the scheme to make it more proactive, transparent, helpful and responsive to meet customer needs
The annual report on the performance of the banking ombudsman scheme for the year 2010-11
released by Reserve Bank of India (RBI) last month gives a mixed picture of customer service in
banks. The total complaints received by all the ombudsmen in the country have come down by
10% compared to the previous year, which may give rise to a feeling that customer service in
banks appear to have improved though marginally . Because of this, the general feeling is that
the ombudsman scheme started by RBI in 1995 has been one of the better managed grievance
redressal mechanisms presently operating in our country. But if you analyze the report carefully,
you are in for a major surprise. Out of 71,274 complaints received by the ombudsmen during the
year 2010-11, 50,474 complaints (i.e. 71%) were rejected by the ombudsmen for various reasons.
Out of these, 36,522 complaints i.e.72% of the rejected complaints were non-maintainable,
meaning thereby that they were outright rejected without even accepting them for consideration.
This large number of rejections for whatever reasons indicate that either the banks customers are
not aware of the rules of ombudsman scheme or the office of the ombudsman is not rising up to
the aspirations of the bank customers.
The report further states that the number of complaints rejected on various grounds is showing a
rising trend. While 62% of the total complaints disposed off in 2009-10 were on account of
rejection, the same accounted for 71% of the complaints disposed during 2010-11. This gives rise
to a feeling that the office of the ombudsmen must be spending more time in rejecting rather than
in accepting the complaints. This is because the percentage of rejection far outstrips the number
of accepted complaints for the last three years. The following analysis of the rejected complaints
clearly brings out the need to completely overhaul the scheme to suit the changing profile of
bank customers, as more and more people from the rural background join the mainstream of
banking due to financial inclusion programmers pursued by the government.

12

2.5 FIVE REASON FOR REJECTION

1. First reason for rejection: First resort complaints: During last year 16,755 complaints
constituting 33% of the complaints rejected falls into the category of first resort complaints. The
complaints referred to the ombudsman without first approaching the bank concerned are termed
as first resort complaints. This happens because full details of the ombudsman scheme are neither
available at the banks branches, nor are they properly communicated to the customers. It is
practically difficult for every customer to look for the details of the scheme on the website of
ombudsman and then prepare the complaint on the lines of the scheme. This is because a very
limited people have access to and/or knowledge about Internet in our country, though it is
growing fast. Besides the website itself is very formal and needs to be made more user-friendly
so that ordinary citizens could easily understand the scheme. When the RBI has permitted the
customer to submit a complaint even on a plain paper, a workable solution should be found out,
rather than outright reject the complaint received without first referring to the bank concerned.
The report further states that the high percentage of first resort complaints indicates greater faith
of the complainants in the banking ombudsman rather than their banks concerned in getting their
problems solved. If that be the case, there is all the more reason to ensure that a practical solution
should be found to totally eliminate such rejections. The best course in such cases is for the
ombudsman to accept the complaint and handle it in the normal course, advising the complainant
at the same time the correct procedure to be followed for his future guidance. But no complaint
should be rejected for this reason, as full details of the scheme are hardly publicized and no
branch of a bank is able to provide even a two-page leaflet containing important aspect of the
scheme to its customers. It is, therefore, necessary to revisit the ombudsman scheme and
drastically modify the terms of the scheme to allow the customers to submit complaints even
before writing to the main office of the bank concerned.
2. Second reason for rejection: Complaints outside the scheme: Complaints received but are
outside the scheme constitute the second highest percentage of rejections. 8,583 complaints (17%
of the total rejection) were rejected because the complaints relate to areas which do not come
under the purview of the scheme. This again is due to lack of communication of the details of the
13

scheme to bank customers. But this also raises the question as to whether there is any scope to
expand the areas to be covered by the ombudsman. It is worthwhile for the RBI to review the
areas not covered by the scheme and explore the possibility of adding on more and more areas to
meet customer expectations with out in any way intruding into the operational freedom of
banking institutions.
3. Third reason for rejection: Complaints without sufficient cause: These constitute 11% of the
total complaints rejected and appear large enough to go deep into the complaints to find out what
makes the customer write to the ombudsman, if there is no sufficient cause to complain. As many
as 5,447 complaints fall into this category and it is possible that the complainant may not have
been able to put across his grievance in a manner understood by the ombudsmans office. The
best course in such cases is, before rejecting the complaint outright, the ombudsmans office can
contact the complainant at least on the telephone and have a chat with him or her to understand
the reasons better and assess whether there is any merit in the complaint. This will not only
create a lot of goodwill for the ombudsman, but will also help in eliminating such complaints by
educating the customers.

4. Fourth reason for rejection: Complicated complaints requiring elaborate evidence: 4,441
complaints constituting 9% of the complaints rejected fall into this category. It is rather strange
that the ombudsman who is there to solve the problems faced by the customer should reject a
complaint for the reason that it is too complicated requiring elaborate evidence. The ombudsman
scheme provides for arbitration and there is no reason why these complicated complaints cannot
be solved through arbitration if acceptable to the parties. If the ombudsman requires any
assistance of specialists to solve these complicated cases, the RBI could think of appointing an
advisory panel for every ombudsman, consisting of two persons, one an expert in banking and
another a chartered account who has had experience in bank audits and these advisors could be
consulted by the ombudsman wherever necessary, so that complicated complaints too get
resolved to the satisfaction of the banks customers.

14

5. Fifth reason for rejection: Bank branches outside the jurisdiction of the ombudsman: 2,838
complaints (constituting 5% of the rejected complaints) were rejected simply because they fell
outside the jurisdiction of the ombudsman, who received the complaint. Yes, the customer would
have made the mistake of addressing the complaint to the wrong office of the ombudsman for
want of information about the correct jurisdiction. This might have happened because the RBI is
yet to arrange for an ombudsman in every state, and several states are clubbed together, which
might have caused this mistake. But instead of rejecting them, these complaints could have been
easily forwarded to the correct ombudsman, under whose jurisdiction they fall, under advice to
the complainant, so that these complaints too get attended to by the right ombudsman.
Apart from the above changes suggested, there is a need to make the ombudsman more helpful,
pro-active, transparent and responsive to meet the expectations of the customers and bring down
the rejections considerably. Every ombudsmans office should have a toll-free number to enable
the customers to seek any clarification, if necessary, before submitting their complaint. This tollfree number must be prominently displayed in every branch of a bank and also in ATM booths
located in their jurisdiction. The complaint forms, too, must be made available through the
branches of banks and this should be closely monitored through the internal inspection of every
bank.
It may appear strange for us in India, but in United Kingdom there is a provision to evaluate even
the level of service rendered to the complainants by the financial ombudsman, which speaks
volumes about their transparency. Some of the most useful ways in which the UK ombudsman
helps the banking public can be observed from the following information culled out from their
very informative and illustrative website www.financial-ombudsman.org.uk .
We answer over a million enquiries a year and deal with more than 200,000 disputes. We will
be happy to phone you back, if youre worried about the cost of calling us
If you ask us to look into your complaint, we will explain any particular rules and restrictions
that may apply in your own individual caseand we will always give you the chance to query
anything you dont understand. If youre not sure if your complaint is one we can help with, just
ask us.
We can provide information about our service in different formats and languages. And we can
adapt the way we communicate with youdepending on your needs. For example, we can use

15

Braille, large print or audiotape and we can make and receive calls using Text Relay. Please let
us know what your particular needs are, and we will do our best to help.
If you are not happy with the way we have dealt with your caseor with the level of service we
have providedplease let us know. We have a special procedure to handle complaints about our
servicefor example, if you think we have:

treated you rudely or unfairly;

failed to explain things properly; or

caused unnecessary delays (but please bear in mind our usual time-frame for resolving
disputes, as explained above).
This procedure involves the independent assessor, who can carry out a final review of the way
we have handled a complaint. The independent assessor is appointed by our board and has
official terms of reference.
The sky is the limit for anybody to improve their services, and UK ombudsman is a classic
example of showing its desire to serve the public with great concern and total commitment,
which could be achieved with a little more imagination and foresight. By raising the bar for the
ombudsman to excel in customer service, banks too will get a clear message that there cannot be
any compromise in so far as quality of customer service is concerned.
Can our ombudsmen, too, reach that level of perfection and provide that level of comfort to the
public at large, and be a torch bearer of the customers rights to the extent of becoming a model
for others to emulate? If people sitting in the RBI make up their mind, it is certainly possible to
excel in this field also, as they have proved their mettle many times in the past in the matter of
managing the banks of our country so admirably during the recent international turmoil in the
financial world.

16

Chapter 3

3.1 PROCEDURE FOR FILING COMPLAINT

Any person who has a grievance against a bank on any one or more of the grounds
mentioned t above, 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.

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
ted 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 e proposes to rely upon and also a declaration that the complaint is

maintainable as per clause 9(3) of the Scheme.

A complaint can also be made through electronic means,
The complainant shall before making a complaint to the Banking ombudsman, make a ten
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 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

17

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 f 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 not be frivolous or vexatious in nature.
complaint should be made before the expiry of the period of limitation prescribed under
The Indian Limitation Act, 1963 for such claims.

PROCEDURE FOR FILING THE COMPLAINT BEFORE THE

BANKING

OMBUDSMAN
One can file a complaint with the Banking ombudsman simply by writing on a plain
paper, One can also file it online One may lodge his/ her complaint at the office of the Banking
Ombudsman under whose jurisdiction, the bank branch complained against is situated. For
complaints relating to credit cards and types of services with centralized operations, complaints
may be filed before the Banking ombudsman within whose territorial jurisdiction the billing
address of the customer is located.

SALIENT FEATURES OF THE BANKING OMBUDSMAN SCHEME,2006

Baking Ombudsman Scheme 2006 ha been introduced by RBI 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. The salient features of the Scheme are as follows.

CHAPTER 4
18

GROUNDS ON WHICH COMPLAINT CAN BE MADE TO BANKING

OMBUDSMAN
The Banking Ombudsman can receive and consider complaints relating to the following
deficiency in banking or other services.

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 for charging 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 ;
failure to provide or delay in providing a banking facility (other than loans and advances)
promised in writing by a bank or its direct selling agents;

delays, non-credit of proceeds to parties accounts, non-payment of deposit or nonobservance of the Reserve Bank directives, if any, applicable to rate of interest on
deposits in any savings, current or other account maintained with a bank ;

complaints from Non-Resident Indians having accounts in India in relation to their

remittances from abroad, deposits and other bank-related matters;
refusal to open deposit accounts without any valid reason for refusal; levying of charges
without adequate prior notice to the customer;

19

 non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on

ATM/Debit card operations or credit card operations;

non-disbursement or delay in disbursement of pension (to the extent the grievance can be
attributed to the action on the part of the bank concerned, but not with regard to its
employees);

refusal to accept or delay in accepting payment towards taxes, as required by Reserve

Bank/Government;

refusal to issue or delay in issuing, or failure to service or delay in servicing or

redemption of Government securities;

forced closure of deposit accounts without due notice or without sufficient reason;
refusal to close or delay in closing the accounts;
non-adherence to the fair practices code as adopted by the bank or non-adherence to the
provisions of the Code of Bank s Commitments to Customers issued by Banking Codes
and Standards Board of India and as adopted by the bank ;

non-observance of Reserve Bank guidelines on engagement of recovery agents by banks;

and

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

The Banking Ombudsman can receive and consider complaints relating to the following
deficiency in banking or other services.

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;

20

non-acceptance of application for loans without furnishing valid reasons to the applicant;
and

non-adherence to the provisions of the fair practices code for lenders as adopted by the
bank or Code of Banks Commitment to Customers, as the case may be;

non-observance of any other direction or instruction of the Reserve Bank as may be

specified by the Reserve Bank for this purpose from time to time.

The Banking Ombudsman may also deal with such other matter as may be specified by
the Reserve Bank from time to time.

4.2 SETTLEMENT OF COMPLAINT AND PASSING OF AWARD BY THE

BANKING OMBUDSMAN

As per the scheme the Banking Ombudsman shall Endeavour to promote settlement of
the complaint by Agreement between the complainant and Bank.

If the complaint is not settled by agreement within a period of one month from the date
of receipt of the complaint or such further period as the Banking ombudsman may allow
the parties, the Banking Ombudsman may, after a the parties a reasonable opportunity to
present their case, pass an Award or reject the complaint.

Banking Ombudsman shall not have the power to pass an award directing payment of an
amount which is more than the actual loss suffered by the complainant as a direct
consequence of the act of omission or commission of the bank, or ten lakh rupees
whichever is lower.

21

CHAPTER 5
WHAT IS BANKING OMBUDSMAN
The Banking Ombudsman is a senior official, appointed by the Reserve Bank of India to address
grievances and complaints from customers, regarding deficiencies in banking services. It covers
all kinds of banks PSU Banks, Private banks, Rural banks and co-operative banks. Even
though, it was originally setup in 1995, there were major revisions in 2006 covering transactions
related to complaints of ATM cards, debit cards and credit cards, deduction of service charges by
banks without prior intimation, unfair practices of banks and non-compliance by direct sales
agents (DSA) of banks for services promised while opening an account etc. It was last amended
in Feb, 2009 to cover deficiencies arising out of internet banking too.
Today, the Banking Ombudsman covers almost all kind of complaints for banking services. To
give you a brief idea about their effectiveness, Banking Ombudsmen received 79,266 complaints
in the year 2009-2010 out of which around 94% were handled and just 5-6% of the complaints
remained pending for more than three months as on June 30, 2010. There are a total of 15
Banking Ombudsman in our country. You complain to the one which comes under the
22

jurisdiction of the Bank location, i.e., if your bank is in Bangalore, you can complain to the BO
from Bangalore region. Incase you or the bank is not satisfied by the decision given by the
Banking ombudsman, in that case within 30 days of BO decision, the complaint can be taken
forward to Appellate Authority, which is a Deputy Governor of the RBI . Its just like going to
supreme court if you are not satisfied by High court decision

5.2 COMPLAINTS ARE TAKEN CARE BY BANKING OMBUDSMAN

So, the first question that comes to mind naturally is Will it be helpful for me? You
wont believe it, but the most basic problems, a common man faces (See an example of what I
faced) , like rude behaviour of bank officials, delays in disbursing loans, forcing customers to
buy insurance policies for processing loans etc., are all addressed by Banking Ombudsman (BO),
and the process of complaining is as simple as filling up a form online or sending in a filled form
to a postal address.

23

The best part is that if you are harassed because of any issue or have undergone through mental
agony, you can ask for a compensation upto Rs 1 lac. Also some readers of the blog has
acknowledged that banking ombudsman were useful for them (see this , this and this comment) .
So let me list down some of the possible scenarios where you can file a complaint with Banking
ombudsman.

Levying of charges without any notice or Information.

Charging higher rate of interest linked to BPLR on Housing Loan

Any Loss suffered because of lack of co-ordination from Bank side

Unreasonable credit card charges

Fraudulent transfer of funds by using net banking

Fraudulent transactions against lost credit card

Cheque lost in transit by the bank

Non-updation of CIBIL records

Loss of cheque from Cheque drop box

Closure of any account with providing any information or reason

When bank demands unreasonable proofs for openening of account

Change in terms and conditions without notice or valid reason

Delay in providing any service

Mis-selling of Insurance products

24

Forcing customers to take insurnace policies for processing Loans

Rejection of Loans

Harrasment to customer or misbehaviour for any reason

Casual approach from Bank on performing its duties

I ran a poll with title Have you even been frustrated with your Bank and wanted to complain?
on this blog, on which 100 people participated. Surprisingly , around 65% people said that they
were frustrated on some issue with their bank and wanted to complain. Only 35% said that the
never had any issue with their bank which went to a level that they have to complain about it .

25

5.3 REAL LIFE CASES SOLVED BY BANKING OMBUDSMAN

As per the Banking Ombudsman Annual Report 2009-2010 , ombudsmen have resolved
thousands of cases and helped common man get justice. I would say, this is a great way to raise
your voice and show banks that they cant take you for granted, just because they are bigger than
you in size. A customer has to be treated as per the guidelines, and customer service is the critical
part of any service provider. Just to give you some idea, the Banking Ombudsman annual report
showcases around 57 different real life cases of how it has helped customers get justice (Page 5773) . I am highlighting four of those live cases below
1. How a person got compensation of Rs 16,200 because he got less money from ATM
The complainant maintained an account with AB Bank. He withdrew an amount of Rs 500 from
the ATM of DH bank on July 28, 2009. The cash dispensed by the machine was only Rs 400.
However, his account was debited by Rs 500. The amount of Rs 100 was credited back to his
account only on January 27, 2010 (Around 162 days late) & despite lodging the complaint
immediately, no penalty was paid to him as per the instructions issued by DPSS, vide its circular
dated July 17, 2009. Since the bank had delayed in affording the credit to the complainants
account by more than five months, the BO directed the bank to pay the penalty amount of Rs
16,200 for the delayed period (Rs 100 for each 162 days) .
2. How a credit card holder got Rs 10,000 in compensation for non-updation of CIBIL
records
One credit card holder complained about the banks claim against his settled credit card account
dues, and non-updation of his status with CIBIL. The bank accepted that although the credit card
account was settled three years ago, the status of the account could not be updated in the records
of the bank with CIBIL (See a related example) , which was rectified subsequently. Clear
26

negligence was observed on the part of the bank for not updating their records for more than
three years, resulting in undue harassment to the complainant. The bank was directed to pay an
amount of Rs 10,000 to the complainant as a token compensation for the violation of BCSBI
Codes.
The Branch Manager assured him to provide the loan without delay. However after three months
the branch returned all the papers stating that the Loan Disbursement Officer was ill because of
which they were unable to provide the loan..

27

5.4 PROOF THAT IT WORKS

How Trivikram got his wrongly wrongly credited money to different amount .

I got my money back after complaining the issue in Banking ombudsman.

Last year May I transferred money through internet banking to wrong account. After realizing I
called my bank officials and requested not to transfer. But its already transferred they need to
contact with payee bank. The other bank people not given any information as I am not a account
holder. I tried through my friend they told that its transferred back to my account. Almost three
months I tried hard back and forth in both the banks but no use.
This month (5/04/2011) I got to know about Banking ombudsman through one of my colleague
and I raised the issue with all my details. Today I got my money back:-).
Ankur on comments section mentions how he got his interest back by
Hey

Manish,

some good news i finally got my intrest back for arnd 20 days. though the amount was meagre
but yet it was fruitful. i had known 3 persons who applied for this scheme and we 4 guys got
6000/- back in total.
now i believe that BO(directly got a call from the branch manager to come and collect the
cheque)do works and finally thx to you guys for guidance.cheers
How Atul got his IT refund with help of Banking Ombudsman
28

Hi Manish,
I had approached IT ombudsman for IT refund. After chasing IT officials for 2.5 years the
experience with Ombudsman was inspiring. Not only I got the money back but with interest.
The only catch is that one needs to be patience and keep all proofs ready. Best way is to keep
copy of letters send by post, copy of emails etc..
Banking sector has become the core of almost all the monetary transaction that took place in the
country. All the Financial transaction within the country and with the Foreign Country are done
through Banks. Functions of the banking sectors now-a-days ranges from accepting deposit from
Public giving loan, depository of stock exchanges, etc to insurance service provider which is
popularly called "Bancassurance. Many a times disputes arise between customers and banks on
matters relating to banking operations such as wrong debit accounts, excess recovery of
interest/charges wrong dishonor of cheques, inadequacy in services, etc. In order to provide
quick, inexpensive and expedite settlement of customers complaints, the Reserve Bank
introduced Banking Ombudsman Scheme since June 1995 under the provisions of Section 35 of
Banking Regulation Act, 1949. The Banking ombudsman scheme enables an expeditious and
inexpensive forum to bank customers for resolution of complaints relating to certain services
rendered by banks.

29

JURISDICTION, POWERS AND DUTIES OF BANKING OMBUDSMAN

(1) The Reserve Bank shall specify the territorial limits to which the authority of each Banking
Ombudsman appointed under Clause 4 of the Scheme shall extend.
(2) The Banking Ombudsman shall receive and consider complaints relating to the deficiencies
in banking or other services filed on the grounds mentioned in clause 8 and facilitate their
satisfaction or settlement by agreement or through conciliation and mediation between the bank
concerned and the aggrieved parties or by passing an Award in accordance with the Scheme.
(3) The Banking Ombudsman shall exercise general powers of superintendence and control over
his Office and shall be responsible for the conduct of business thereat.
(4) The Office of the Banking Ombudsman shall draw up an annual budget for itself in
consultation with Reserve Bank and shall exercise the powers of expenditure within the
approved budget on the lines of Reserve Bank of India Expenditure Rules, 2005.
(5) The Banking Ombudsman shall send to the Governor, Reserve Bank, a report, as on 30th
June every year, containing a general review of the activities of his Office during the preceding
financial year and shall furnish such other information as the Reserve Bank may direct and the
Reserve Bank may, if it considers necessary in the public interest so to do, publish the report and
the information received from the Banking Ombudsman in such consolidated form or otherwise
as it deems fit.

30

CHAPTER 6

6.1 POWER TO CALL FOR INFORMATION

1) For the purpose of carrying out his duties under this Scheme, a Banking Ombudsman may
require the bank against whom the complaint is made or 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.
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.

31

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.

6.2 AWARD BY THE BANKING OMBUDSMAN

1) If a complaint is not settled by agreement within a period of one month from the date of
receipt of the complaint or such further period as the Banking Ombudsman may allow the
parties, he may, after affording the parties a reasonable opportunity to present their case, pass an
Award or reject the complaint.
2) The Banking Ombudsman shall take into account the evidence placed before him by the
parties, the principles of banking law and practice, directions, instructions and guidelines issued
by the Reserve Bank from time to time and such other factors which in his opinion are relevant
to the complaint.
3) The award shall state briefly the reasons for passing the award.
4) The Award passed under sub-clause (1) shall contain the direction/s, if any, to the bank for
specific performance of its obligations and in addition to or otherwise, the amount, if any, to be
paid by the bank to the complainant byway of compensation for any loss suffered by the
complainant, arising directly out of the act or omission of the bank.
5) Notwithstanding anything contained in sub-clause (4), the Banking Ombudsman shall not
have the power to pass an award directing payment of an amount which is more than the actual
loss suffered by the complainant as a direct consequence of the act of omission or commission of
the bank, or ten lakhs rupees whichever is lower.
6) In the case of complaints, arising out of credit card operations, the Banking Ombudsman may
also award compensation not exceeding Rs 1 lakh to the complainant, taking into account the
loss of the complainant's time, expenses incurred by the complainant, harassment and mental
anguish suffered by the complainant.
7) A copy of the Award shall be sent to the complainant and the bank.
32

8) An award shall lapse and be of no effect unless the complainant furnishes to the bank
concerned within a period of 30 days from the date of receipt of copy of the Award, a letter of
acceptance of the Award in full and final settlement of his claim. Provided that no such
acceptance may be furnished by the complainant if he has filed an appeal
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 , comply with the Award and intimate compliance to the Banking Ombudsman.

33

6.3 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 under the provisions of the scheme; or

b) Beyond the pecuniary jurisdiction of Banking Ombudsman prescribed under the provision of
scheme; or

c) Requiring consideration of elaborate documentary and oral evidence and the proceedings
before the Banking Ombudsman are not appropriate for adjudication of such complaint; or

d) Without any sufficient cause; or

e) That it is not pursued by the complainant with reasonable diligence; or

34

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

35

6.4 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,maywithin 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;
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.
2) The Appellate Authority shall, after giving the parties a reasonable opportunity of being
heard
a) Dismiss the appeal; or
b) Allow the appeal and set aside the Award; or
c) Remand the matter to the Banking Ombudsman for fresh disposal in accordance
with such directions as the Appellate Authority may consider necessary or proper; or
d) Modify the Award and pass such directions as may be necessary to give effect to the
Award so modified; or
e) Pass any other order as it may deem fit.

36

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.

CHAPTER 7
BANKS TO DISPLAY SALIENT FEATURES OF THE SCHEME FOR
COMMON KNOWLEDGE OF PUBLIC

37

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 bank 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

COST

INVOLVED

IN

FILING

COMPLAINTS

WITH

BANKING

OMBUDSMAN:
No. The Banking Ombudsman does not charge any fee for filing and resolving
customers complaints

38

LIMIT ON THE AMOUNT OF COMPENSATION AS SPECIFIED IN AN

AWAED:
The amount, if any, to be paid by the bank to the complainant by way of compensation
for any loss suffered by the complainant is limited to the amount arising directly out of
the act or omission of the bank or Rs 10 lakhs, whichever is lower.

COMPENSATION

MAY BE

CLAIMED

FOR

MENTAL AGONY AND

HARASSMENT:
The Banking Ombudsman may award compensation not exceeding Rs 1 lakh to the
complainant only in the case of complaints relating to credit card operations for mental
agony and harassment. The Banking Ombudsman will take into account the loss of the
complainant s time, expenses incurred by the complainant, harassment and mental
anguish suffered by the complainant while passing such award.

HOW TO FILE A COMPAINT BEFORE THE BANKING OMBUDSMAN:

One can file a complaint with the Banking Ombudsman simply by writing on a plain
paper. One can also file it online (at click here to go to Banking Ombudsman scheme or
by sending an email to the Banking Ombudsman. There is a form along with details of
the scheme in our website. However, it is not necessary to use this format.

7.3 BACKDROP

Growing Public Policy concern

Customer dissatisfaction a topic of discussion in various for a including the floor of

parliament.
39

Growing customer expectations with increasing Awareness of rights.

The satisfaction levels of customer is the touch stone on which the quality of service is
toned.

Market discipline issues and need for policy intervention.

7.4 CUSTOMER SERVICE POLICY EVOLUTION

40

Formulated the Banking Ombudsman Scheme 1995 and revised in 2002 to enhance the
scope of complaint redressal.

Set up the Committee on Procedures and Performance Audit of Public Services in 2003 to
look into the issues relating to banking services rendered to the common man.

Banks were advised in December 2003 to constitute an Adhoc Committee to undertake

Procedures and Performance Audit on public services rendered by them.

Banks were advised in August 2004 to constitute Customers' Service Committee of the
Board to bring about ongoing improvement in the quality of customer service rendered.

Banks were asked in April 2005 to convert the Adhoc Committees into Standing
Committee on Customer Service to serve as a focal point for customer service in banks
with powers to evaluate the functioning in various departments of the banks.

RBI facilitated the formulation of Fair Practices Code for Lenders and Codes of Conduct
in respect of credit card operations, direct sales agencies and calculation of dues and
repossession of security.

RBI prescribed proper disclosures by banks relating to aspects such as maintenance of

minimum balances in accounts, issue of cheque books, entry in pass books, statement of
accounts, formulation of transparent cheque collection policy by banks, etc.

RBI introduced in June 2005 simplified procedures to facilitate expeditious and hassle
free settlement of claims of deceased depositors.
41

RBI issued in November 2005, comprehensive guidelines on credit card operations to

protect the interest of credit card holders.

A clean note policy was formulated and implemented to improve quality of currency in
circulation and ensure sufficient availability of fresh currency and coins.

Banks were also advised to formulate a transparent and comprehensive deposit policy
setting out the rights of the depositors in general and small depositors in particular.

RBI has facilitated the setting up of the Banking Code and Standards Board of India.

For the first time, RBI in its report on Trend and Progress of Banking in India 2004-05
listed the complaints received against Scheduled Commercial Banks under the caption
"Customer Services in Commercial Banks" to highlight the issue of customer service in
banks.

RBI advised banks, in April 2005 to place all the awards passed by the Banking
Ombudsman before the Customer Service Committee to enable them to address issues of
systemic deficiencies existing in banks, if any, brought out by the awards.

RBI also advised banks to place all the awards remaining unimplemented for more than
three months with the reasons therefore before the Customer Service Committee to
enable the Committee to report to the Board such delays in implementation without valid
reasons and for initiating necessary remedial action

RBI advised banks, in April 2005 to place all the awards passed by the Banking
Ombudsman before the Customer Service Committee to enable them to address issues of
systemic deficiencies existing in banks, if any, brought out by the awards.

RBI also advised banks to place all the awards remaining unimplemented for more than
three months with the reasons therefore before the Customer Service Committee to
enable the Committee to report to the Board such delays in implementation without valid
reasons and for initiating necessary remedial action

42

CHAPTER 8
BANKING OMBUDSMAN SCHEME

Institutions covered

Stages of Redressal

Staffing

1995

2002

2006

Commercial banks

Commercial banks

Commercial banks

Scheduled primary

Scheduled primary Scheduled primary cooperative

cooperative banks

cooperative banks

banks

RRBs

RRBs

Settlement

Agreement

Agreement

Recommendation

Award

Award

Award

Review

Appeal

BO -By a Selection BO -By a Selection Serving

Chief

General

Committee-Retired

Committee-Retired

Manager/General Manager

personnel

personnel

Secretary- RBI

Secretary- RBI

Secretary- RBI

Deputy Secretary & Staff- RBI

Deputy Secretary & Deputy Secretary &

Staff- SLBC Bank

Staff- SLBC Bank

1995

2002

43

2006

Funding

Participating banks

RbI

Procedure Complaints Prescribed

Prescribed

Online/email/by post Prescribed

Receipt

application in

application in

application not insisted

Writing

writing

www.bankingombudsman.rbi.org

Not specified

Specifically

Specifically prescribed clause 8

Nature of complaints

Participating banks

Cases

of

prescribed clause 12
fraud Cases of fraud can Focus on resolution of

cannot be handled

be handked

VISION

44

grievances

OExvDepyrfficofthBankigmbuds

To provide an inexpensive, transparent and credible mechanism ensuring fair treatment of the
common person utilizing banking services.

8.2 ORGANIZATIONAL CHART

Office of the Banking Ombudsman

8.3 GOALS

45

To ensure redressal of grievances of users of banking services in an inexpensive,

expeditious and fair manner that will provide impetus to improved customer services in
the banking sector on a continuous basis.

To provide feedback/suggestions to Reserve Bank of India towards framing appropriate

and timely guidelines to banks to improve the level of customer service and to strengthen
their internal grievance redressal systems.

To enhance the awareness of the Banking Ombudsman Scheme.

To facilitate quick and fair (non-discriminatory) redressal of grievances through use of IT

systems, comprehensive and easily accessible database and enhanced capabilities of staff
through training.

8.1.1 ENHANCEMENTS PROVIDED BY THE 2006 SCHEME

Wider Scope

Simpler procedures

Better focus

Greater involvement of RBI

46

8.1.2 PROCEDURE FOR LODGING COMPLAINTS

Essential- grievance to be taken up with bank first;

Aggrieved persons not satisfied by a banks service and its resolution of complaint can
apply to the Banking Ombudsman within one year;

Complaints in prescribed format or in any other but incorporating all the required
information.

Complaints can be submitted online/ email/ in hard copy

Complaints from individuals/ their representatives (except advocates)/GOU/RBI..

8.1.3 Maintainability of Complain

Prescribed time rejection of complaint/non receipt of reply within one month of his
representation / non satisfaction of reply

not later than one year after the cause of action

not time barred as per the Indian Limitation Act 1963

Not a subject matter on which BO decision has already been taken

Not a subject matter which is before court/ tribunal/ arbitrator/ other forum

47

CHAPTER 9
GROUNDS OF COMPLAINT . . . . BANKING SERVICES
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 for charging 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
failure to provide or delay in providing a banking facility (other than loans and advances)

promised in writing by a bank or its direct selling agents

delays, non-credit of proceeds to parties accounts, non-payment of deposit or nonobservance of the Reserve Bank directives, if any, applicable to rate of interest on

deposits in any savings, current or other account maintained with a bank

complaints from Non-Resident Indians having accounts in India in relation to their

remittances from abroad, deposits and other bank-related matters;

refusal to open deposit accounts without any valid reason for refusal
levying of charges without adequate prior notice to the customer
non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on
ATM/Debit card operations or credit card operations

48

non-disbursement or delay in disbursement of pension (to the extent the grievance can be
attributed to the action on the part of the bank concerned, but not with regard to its

employees)
refusal to accept or delay in accepting payment towards taxes, as required by Reserve

Bank/Government
refusal to issue or delay in issuing, or failure to service or delay in servicing or

redemption of Government securities

forced closure of deposit accounts without due notice or without sufficient reason
refusal to close or delay in closing the accounts
non-adherence to the fair practices code as adopted by the bank or non-adherence to the
provisions of the Code of Banks Commitments to Customers issued by Banking Codes

and Standards Board of India and as adopted by the bank

non-observance of Reserve Bank guidelines on engagement of recovery agents by banks

and
any other matter relating to the violation of the directives issued by the Reserve Bank in

relation to banking or other services.

A customer can also lodge a complaint on the following grounds of deficiency in service

with respect to loans and advance

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
non-adherence to the provisions of the fair practices code for lenders as adopted by the

bank or Code of Banks Commitment to Customers, as the case may be

non-observance of any other direction or instruction of the Reserve Bank as may be

specified by the Reserve Bank for this purpose from time to time.
The Banking Ombudsman may also deal with such other matter as may be specified by
the Reserve Bank from time to time.

49

9.1.1 Complaints - Loans and Advances

non-observance of RBI 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

non-observance of any other directions or instructions of the RBI from time to time.
Excluded

Complaints arising out of frauds and forgery and subjudice cases (Supreme Courts
observation that it would not be appropriate for BOs to give a finding on forgery or to
form an opinion on cases already referred to courts)

50

9.2 AVERAGE COST PER COMPLAINT

YEARS

AMOUNT (Rs)

2007-08
2008-09
2009-10
2010-11

7413
6315
3045
2538

2011-12
2611
9.2.1 Features of the Monitoring Mechanism

It is common to all Banking Ombudsmen offices.

Each Banking Ombudsmen office will feed in the complaint details on the
application.

The application generates a unique complaint id, which can be used by Banking
Ombudsmen, RBI and Finance ministry to monitor/track the status of a particular
complaint.

Automatic acknowledgement generated on tracking of complaints

RBI and Finance Ministry can monitor the overall status of complaints at all the
Banking Ombudsmen offices.

9.2.2 Banking Ombudsmen Complaint Monitoring Application on RBIs Secured Internet

Website

51

Finance Ministry instructions vide letter dated August 11, 2005 for computerization and
online complaint monitoring system for Banking Ombudsman Scheme by September 30,
2005.

Complaint Monitoring Application was successfully tested and hosted on the RBIs
Secured Internet Website. It is in operation since September 30, 2005 .

9.2.3 Right to Information Act and Banking Ombudsman Scheme

The following are in the public domain:

The BO Scheme

FAQs

Complaint Application form

BO addresses & email ids

Annual Review of the Scheme

The Complainant can get the status of his complaint till disposal

At disposal the Award gives reasons for decision taken

Each decision of the Appellate Authority is a speaking order

52

9.3 BENEFITS OF THE BO SCHEME

Prompt and impartial resolution of complaints
No cost to the customer
Assessment based on overall fairness, good business practices, accepted banking law and
practice
9.3.1 ROAD AHEAD

Focus on customer education and financial literacy

Customer Awareness and Empowerment

Understanding rights and responsibilities

Percolation of the spirit of the Banking Code and Standards as adopted by the bank down
the rank and file to the level of the service delivery interface

53

9.4 Complaints pile up at Mumbai insurance ombudsman office

At least 2,500 complaints are lying with the Insurance Ombudsmans office here for a decision.
And, it will take more than a year to clear these. Reason: There is no ombudsman. The post has
been vacant since October 2012. Given the backlog, it could take up to a year to clear just the
pending cases, before the new ones could be perused.

The institution was created through a November 11, 1998 notification to quickly dispose
grievances of insurance customers. According to this notification, the ombudsman shall pass an
award within three months from receipt of a complaint. The awards are binding upon insurance
companies. If the policy holder is not satisfied with the award, he can approach other venues
such as consumer forums and courts of law.
The 90-day time frame to dispose cases was fixed in 1998, when there were only
five insurance companies. Although this number has gone up, the number of ombudsmen across
the country still remains 12. With 50-plus insurance companies in the country for the life and
54

non-life insurance sector, on an average, the time taken to resolve a complaint ranges from six
months to nine months.
J Hari Narayan, chairman of the Insurance Regulatory and Development Authority (Irda), said
since 100-plus applications have come for the post of the ombudsman, it was taking a longer
time to decide. A new ombudsman will be appointed by next month, he said.
Sector experts said there was a proposal to have five more ombudsmen. However, Irda officials
said this proposal was still being examined and no decision had been taken.
Sources in the ombudsmans office said till last year, 62 per cent of complaints were from the
non-life sector and 38 per cent from the life segment. However, there has been a gradual shift
with 52-54 per cent coming from non-life and 46-48 per cent from life. Among life, unit-linked
plans (Ulips) accounted for the highest number of complaints, with issues related to high net
asset value (NAV) products topping the list.
Insurance sector players said although the Ulip guidelines were introduced in September 2010,
the repercussions were still to be seen. Many insurers and their agents have promised high
returns on certain Ulip products. However, due to adverse market conditions, these returns may
not be achieved by consumer. So, there is a tendency of customers to complain, said the CEO of
a private life insurance firm. He, however, added, these complaints were not tenable, since
companies do not guarantee these returns in the policy document.
Irda has taken steps to curb insurers from selling high NAV-based Ulips. Hari Narayan said such
products were bad for customers and, hence, all approvals for these products had been stopped.
He said Irda was in the process of bringing out regulations for curbing sale of high NAV products
and these would soon be gazetted.
On the non-life front, health insurance complaints topped the list, with most of these relating to
late filing of documents.
When such complaints reached the Ombudsmans office, they were decided in favour of the
customer. So, the Ombudsman told insurance companies that henceforth, claims should not be
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repudiated merely citing late submission of claims. This has led to a fall in such claims, said an
official in the ombudsmans office here.

9.4.1 LEGAL OMBUDSMAN

The Legal Ombudsman is an ombudsman service that opened in October 2010.[1] It is a free
service that investigates complaints about lawyers in England and Wales. The Legal Ombudsman
was set up as a result of the Legal Services Act 2007[2] and took over from the Legal Complaints
Service and other legal complaint-handling bodies. The current Chief Executive is Nick Hawkins
and the current Chief Ombudsman is Kathryn Stone.[3] The Legal Ombudsman is a member of
the Ombudsman Association.

CHAPTER 10
GOVERNANCE AND JURISDICTION
Sections 114 and 115 of the Legal Services Act 2007 established the Office for Legal
Complaints and stipulated that it must operate an ombudsman scheme. The OLC appointed the
first chief ombudsman and acts as the Legal Ombudsmans board. The OLC is responsible to
both the Legal Services Board and the Ministry of Justice. The current chair of the OLC is Steve
Green.
The Legal Ombudsman can investigate complaints made by members of the public (and small
businesses, clubs and charities) about the service they receive from lawyers working in England
and Wales. The following types of lawyers fall within the Legal Ombudsman's jurisdiction:

The Legal Ombudsmans role is restricted to investigating issues around quality of service.
Because the Legal Ombudsman is a lay organization (section 112 (2) of the Legal Services Act
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does not allow a lawyer to be the Chief Ombudsman), [generally, it cannot say whether legal
advice is correct or not. The exception is if it appears that the advice is so unreasonable that no
other lawyer in the same circumstances would have given it: this is the reasonable or common
sense approach.

Similarly, the Legal Ombudsman cannot make decisions on matters of negligence because
negligence is a legal concept that must be proved in a court of law. However, it is possible that
poor service, which the Legal Ombudsman can investigate, might overlap with evidence that a
complainant might wish to use to argue that their lawyer has been negligent. Where there is an
overlap, only the courts have the authority to decide what amounts to negligence. The Legal
Ombudsmans rules allow it to decline to investigate cases that relate to legal advice or
negligence if it thinks that they would be better dealt with by the courts or some other schemes.

Any issues relating to the general conduct of a lawyer will be referred to the appropriate
regulating body. For instance, where there is evidence to suggest a solicitor may have been guilty
of misconduct, the Legal Ombudsman will refer the matter to the Solicitors Regulation
Authority.

Complainants normally have to complain to the lawyer first. Failing this there are two relevant
time limits regarding taking a complaint to the Legal Ombudsman: It will accept complaints up
to six years from the date of act/omission, or three years from when the complainant should have
known about the complaint if later. However, this new limit will be introduced gradually so at
the moment the problem must have happened on or after 6 October 2010.

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10.2 FINANCIAL OMBUDSMAN SERVICES

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The Financial Ombudsman Service is an ombudsman in the United Kingdom. It was established
in 2000, and given statutory powers in 2001 by the Financial Services and Markets Act 2000, to
help settle disputes between consumers and UK-based businesses providing financial services,
such as banks, building societies, insurance companies, investment firms, financial advisers and
finance companies.
The Financial Ombudsman Service can deal with complaints from consumers about most
financial matters including, for example: banking, insurance, mortgages, pensions, savings and
investments, credit cards and store cards, loans and credit, hire purchase and pawnbroking,
financial advice, stocks, shares, unit trusts and bonds.
From November 2009 money-transfer operators also came under the ombudsman's remit.
Before the ombudsman can step in, the consumer must first give the business they are unhappy
with the opportunity to look into the complaint itself - before the ombudsman service can make a
decision on the dispute. The business has a maximum of 8 weeks to resolve the complaint. If
they do not resolve it within 8 weeks or the consumer is not happy with the response then they
can refer the complaint to the ombudsman service.

10.2.1 PROCESSES
The ombudsman makes decisions on the basis of what it believes is fair and reasonable in the
particular circumstances of each case. In making decisions on individual complaints, the law
[7]

[6]

requires the ombudsman to take into account: relevant law and regulations; regulator's rules,

guidance and standards; codes of practice; and (where appropriate) what he/she considers to have
been good industry practice at the relevant time.

10.2.2 FUNDING
The Financial Ombudsman Service is funded by the UK's financial services sector through a
combination of statutory levies and case fees. These are paid by financial businesses that are
regulated by the Financial Conduct Authority (FCA) or licensed by the Office of Fair Trading
(OFT) and are automatically covered by law by the ombudsman service. The payment of these
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statutory levies and fees are not optional and are payable whether or not a complaint is upheld by
the Financial Ombudsman Service. The service is free to consumers. Between 2006 and 2009 the
ombudsman service made use of case-handling services provided by Deloitte LLP, to handle the
growing volumes of work generated by payment protection insurance complaints.

10.2.3 IMPARTIALITY
The Financial Ombudsman Service publishes the proportion of complaints it upholds in favour
of consumers. Across all complaints in 2013/2014 the ombudsman found 58% in favour of
consumers.
The ombudsman was set up by parliament to be an impartial and independent body, though its
decisions can be criticized by the side that loses.
Independent commentators acknowledge that the ombudsman service is a valuable free service
for consumers - although those who feel they have "lost" a complaint might understandably feel
let down and want to question the ombudsman's impartiality. Some consumers have questioned
the amount of redress awarded by the ombudsman while many businesses expect the
ombudsman to apply the compensation cap rigidly and lobbied against the increase (in January
2012) from 100,000 to 150,000 in the maximum compensation the ombudsman can tell a
business to pay.
Various websites have been set up to complain about the Financial Ombudsman's partiality usually by people who disagree with particular ombudsman decisions.

10.2.4 COMPLAINTS-HANDLING PERFORMANCE OF INDIVIDUAL

FINANCIAL COMPANIES
Since September 2009 the Financial Ombudsman Service has been publishing complaints data
on its website every six months about named individual businesses. The data provided relates to
businesses which have 30 or more new cases, or 30 or more resolved cases, in each six-month
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period. The data shows the number of new complaints, and the proportion of complaints upheld
in favour of consumers.
The complaints data shows that:
just under 200 businesses (out of more than 100,000 covered by the ombudsman service)
together generate around 90% of the complaints workload,
the number of complaints relating to each individual business ranges from 30 to over 45,000,
the proportion of cases upheld in favour of the consumer varies substantially from business to
business between 3% and 100%.

10.3 BUDGET AND STAFFING LEVELS

The entire ombudsman staff in 2007 (including substantial number of ancillary staff)
was 960. They managed to handle 627,814 initial enquiries and close 111,673 cases which had
been sent to for adjudication. The BBC reported in September 2007 that the ombudsman planned
to reduce staff numbers to 600, reflecting the decline in mortgage endowment complaints. By
December 2009 ombudsman staff had increased to over 1,000 - reflecting a substantially
increased workload of 200,000 cases. Currently there are 4,500 people working at the
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ombudsman reflecting a substantially increased workload of over half a million cases last year
(2014/2015).
Staffing levels at the Financial Ombudsman Service fluctuate - as does the budget year-on-year to match the volume of disputes it is dealing with. The number of staff required - and forecasts
for complaints volumes and workload - are consulted on publicly each year in the ombudsman's
corporate plan and budget.
10.3.1 STATUS OF OMBUDSMAN DECISIONS
Around 90% of the disputes that the Financial Ombudsman Service resolves are settled at earlier
informal stages, without the intervention of an ombudsman. An ombudsman's decision is the
final stage of the Financial Ombudsman Service's process.If the consumer with the
complaint accepts a final decision, it is binding on both parties and enforceable in court.
But if the consumer chooses not to accept an ombudsman's decision, their legal rights remain
unaffected and they can take the matter to court instead subject to any requirements set by the
courts. However, independent commentators generally recommend that consumers should use
the ombudsman service rather than the courts as the outcome of court cases can be unexpected,
disappointing and costly.
However, there have been judicial reviews against the ombudsman, brought by financial services
companies who have to accept the ombudsman's decisions which are binding in law. For
example, in January 2011 the British Bankers Association on behalf of a number of high-street
banks brought a judicial review against the ombudsman and the FSA on the approach to PPI
complaints handling. The High Court rejected the banks' challenge and endorsed the approach
taken by the ombudsman and the FSA. The difficulty in winning a judicial review is that the
Financial Services and Markets Act 2000 which led to the establishment of the Financial
Ombudsman Service requires the ombudsman to make decisions "by reference to what is, in the
opinion of the ombudsman, fair and reasonable in all the circumstances of the case".
In a judicial review of an ombudsman's decision brought by an independent financial
adviser (IFA), the judge further clarified that the ombudsman is "free to make an award different
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from that which a court applying the law would make". This means that a litigant has to
surmount the very high hurdle of proving that the entirety of the ombudsman's decision was so
unfair that no right minded person would have made a similar decision. This is referred to as
the Wednesbury unreasonableness principle which applies to any application for judicial review
under made due to the irrationality of the decision.

10.3.4 ACOUNTABILITY
The board of the Financial Ombudsman Service is appointed by the Financial Conduct
Authority and the appointment of the chairman is approved by HM Treasury. The board's role
includes guarding the independence of the ombudsman - from undue influence by the financial
services industry and trade bodies, regulators, consumer groups and government. Board members
are non-executive - they have no involvement in individual complaints.
The ombudsman can be asked to appear before the Parliamentary Treasury Select Committee
who can be contacted by the consumer's MP.
In November 2011 the Financial Ombudsman Service became covered by the Freedom of
Information Act. The ombudsman's website has a page of information on this subject
Consumer satisfaction surveys - and surveys of businesses covered by the ombudsman - are
conducted by the Financial Ombudsman Service on an ongoing basis. The results are published
annually in the ombudsman's annual review.
Customers of the Financial Ombudsman Service - both consumers and businesses - can seek
redress from the Independent Assessor if they are unhappy with the level of service they have
received.
The Independent Assessor is appointed by the board of the Financial Ombudsman Service. The
current holder of the post is Amerdeep Somal, who has held several similar posts.
The Independent Assessor reports formally to the board of the Financial Ombudsman Service which publishes a report in full each year as part of the Financial Ombudsman Service's annual
review.
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10.4 Latest Development

64

10.4.1 RBI expands Scope of Banking Ombudsman Scheme; Includes Fair Banking
Practices
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 RBI
expands Scope of Banking Ombudsman Scheme; Includes Fair Banking Practice surd
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 bills or remittances by banks, as also nonacceptance 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 89 Scheme was revised in 2002 mainly to cover Regional
65

Rural Banks and to permit review of the Banking Ombudsmens awards against banks by the
Reserve Bank. The Banking Ombudsmen currently have their offices in 15 centers.
The Reserve Bank is also in an advanced stage of setting up an independent Banking Codes and
Standards Board of India to ensure that comprehensive code of conduct for fair treatment to
customers are formulated by banks and adhered to.
The Reserve Bank of India had announced setting up of the Board in its Annual Policy for 20052006 announced by the Governor, Dr Y V Reddy in April 2005.
10.4.2 RBI launches online system to track applications
Mumbai: The Reserve Bank on Thursday launched an online system to track applications to help
the public. Applications made to the various departments of the Reserve Bank of India (RBI)
can now be tracked online through the application tracking system (ATS). The Reserve Bank
launched the ATS on its Website for convenience of the public, RBI said in a release.

The tracking system, however, RBI said, cannot be used for tracking complaints made under the
Banking Ombudsman Scheme or any other complaints.
Through this facility, the applicant can then submit an online application, attach related
documents, view it and track its movement, it added. For tracking the applications made, the
applicants will have to register on the RBI Website and the system will generate a first time login
and password and send it to the applicant through email. 90
10.4.3 RBI set up Working Group to review Banking Ombudsman Scheme
The Reserve Bank of India in the month of January 2013 had set up a working group to evaluate
and make improvements in the grievance redressal mechanism for bank customers. The working
group constituted in the Reserve Bank of India is going to review, update, and revise the Banking
Ombudsman Scheme, 2006. As per the RBI annual report of the Banking Ombudsman Scheme

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2011-12, In Financial Year 2011-12, the banking ombudsmans office of the RBI received around
72889 complaints.
It disposed off 94 per cent of the customer complaints, about one-fourth of the total customer
complaints were about banks failure to meet commitments and non-observance of fair practices
code.
Also, it was seen that the Banking Ombudsman received 14492 card-related complaints in the
reporting year. Unsolicited cards and charging of annual fee in spite of being offered free card
formed the basis of some of the complaints against the banks.
Presently, we have 15 Banking Ombudsmen with unambiguous jurisdiction covering the 29
States and seven Union Territories in India.
The Reserve Bank introduced the Banking Ombudsman Scheme in 1995 to provide an
expeditious and inexpensive forum to bank customers for resolution of their complaints relating
to banking services.
The Scheme covered banking services rendered by scheduled commercial banks and scheduled
primary cooperative banks.
The objective of the Banking Ombudsman Scheme is to be a visible and reliable system of
dispute resolution mechanism for bank customers. The Ombudsmen generally resort to
conciliation or mediation for settlement of complaints.
The Banking Ombudsman Scheme was revised in 2002 to cover Regional Rural Banks and 91 to
permit a review of the Banking Ombudsmans Awards against the banks by the Reserve Bank.
The Scheme was further revised in 2006 giving it a much wider scope by including several new
areas of customer complaints.
The Banking Ombudsmen currently have their offices in 15 Centers spread across the country
and are fully funded by the Reserve Bank. The Banking Ombudsmen are serving Officers of
Reserve Bank in the rank of Chief General Managers and General Managers. Two major
challenges in effective implementation of Banking Ombudsman Scheme are creating widespread
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awareness about the Scheme and providing easy access to grievance redressal under the Scheme.
Banking Ombudsmen have been touring across the country to popularize the Scheme.
There is a steady increase in the number of complaints under the scheme indicating the growing
awareness among the people. It is observed that more and more complaints are being received
reflecting the increased awareness and empowerment of customers.
The use of internet by complainants is steadily picking up with the Banking Ombudsmen
receiving as much as 30% of all complaints in electronic mode (e-mail/online).
The Annual Report 2007-08 covers the activities of the 15 Banking Ombudsman Offices, with
specific reference to the number and nature of complaints received, the banks complained against
and the manner of disposal of complaints.
The Report also highlights certain exemplary decisions given by Banking ombudsman. During
the year 2007-08, the Banking Ombudsmen received 47887 complaints as against 38638
received in the previous year (an increase of 24%) and disposed of 89% of the total complaints
(84% in the previous year), with only 11% carried forward to the next year. Of the 11% of
complaints carried forward to the next year, only 6 % were more than 2 months old. The Banking
Ombudsmen have been generally effective in redressal of complaints. One of the challenges that
bank customers continue to face is ensuring fair treatment from banks. The cases handled by the
Banking Ombudsmen reveal that bankers need to deal with customers in a more transparent
manner, particularly in making them aware of the terms and conditions of sanction and the
specific connotation associated with them right at the beginning. Reasonableness in pricing of
products by banks and their dealing with default situations are other areas which require added
focus, as 92 complaints on these fronts continue to come to the Banking Ombudsman.
The Office of the Banking Ombudsman has evolved over the years in ensuring better customer
service in the banking industry. The Office would continue to play lead role in customer
empowerment and in creating a customer-centric environment in banks.
The study clearly pointed out that the awareness of Banking Ombudsman Scheme provided by
RBI is much low and the need is to create awareness of the scheme. Most specific observation
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the study rendered it shall be appropriate if the individual Urban co-operative banks have their
own Ombudsman for speedy settlement of the customers' grievances.
The study could achieve its objective and validate the Hypothesis. Banks being the institutions of
financial importance in every part of the world, the resolution of the complaints relating to their
conduct is also an essential attribute of consumer satisfaction.
Therefore the ombudsman or the officer for dealing with consumer complaints regarding the
banks has been appointed by an authority in various nations. In India the banking ombudsman
scheme was introduced in the year 1995, with a view to do away with the banking customer
complaints. It was amended in subsequent years of 2002 and 2006.
Banking Ombudsman Scheme may be widened The Reserve Bank of India (RBI) has constituted
an internal working group to review, update and revise the Banking Ombudsman Scheme, which
was last reviewed comprehensively in 2006. While the scheme in its current form covers all
aspects of banking, from the point-of-view of customer service, there are some areas, which
experts hope would be addressed as part of the review.
In 2011-12, the Banking Ombudsman Scheme was able to dispose off 94 per cent of the 77,507
complaints it received. This has been the disposal rate for three years in a row, RBI said in its
annual report on the Banking Ombudsman Scheme, 2011-12. Most complaints were related to
the failure to meet commitments, or not observing banking code or fair practices code (25 per 93
cent), followed by credit/debit card (21 per cent) and deposit accounts (12 per cent) issues. RBI's
review of the scheme would look at the nature of complaints received and see if any of these
need to be reduced or enhanced.
For instance, the impending review might seek to introduce a time frame for the scheme to
resolve complaints. At present, if a customer has a complaint, he files it with the bank. If the
bank does not resolve it in 30 days, then the complaint would go to the Ombudsman, who might
take another 30-40 days, as it could ask the bank and/or the customer for clarifications. There are
cases when it has taken two to three months for a complaint to be resolved, says V N Kulkarni,
former bank official and Debt counselor with Bank of India's Abhay Credit Counseling Centre.
If there is no response from the bank, the Ombudsman should take ex parte decision.
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Since representations have been made to the RBI, it is possible that this might be addressed in
the revised scheme, he says.
Another likely revision, which has also been proposed by the Damodaran Committee on
customer service, is to ask banks to strengthen their internal Ombudsman schemes so that the
RBI's Banking Ombudsman can function as the Appellate Authority, says an official of the
Indian Banks' Association. Currently, the Deputy Governor of RBI is the Appellate Authority.
In the recent past, the role of the scheme has been widened to include internet banking, ATM
operations and other electronic services.
It is being considered if there is a need to include complaints regarding harassment or rude
behavior by counter staff at bank branches in the ambit of the Ombudsman scheme. Similarly,
increasing the geographic coverage of the scheme from the current 17 offices is also being
considered, says a senior banking official.
In cases where monetary compensation is claimed by customers, the amount prescribed is the
actual loss plus some nominal amount. But, in cases where the customer claims compensation
for, say, mental harassment, it is being considered how much monetary compensation the
Ombudsman can prescribe, the official adds.
94 Customers who are not satisfied with their bank's service can approach the Banking
Ombudsman with their grievances. While, until now, the scope was restricted to products and
services, going ahead it might be possible to pull up bank staff for poor conduct. While this may
seem intangible, it would make bank staff more receptive to customers' requirements. Similarly,
if it is possible to resolve a complaint without approaching the Ombudsman, the bank should do
it proactively and not wait for customers to lodge a complaint. Hence, a time frame would also
help customers.

CONCULSION

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Though the Banking Ombudsman Schemewas introduced in the year 1995, with aview to do
away with the banking customer complaints, the scheme was amendedin subsequent years of
2002 and 2006. But the banks do not seem to have adoptedthe norms for their efficient
functioning, that is the reason behind the increasingconsumer cases against the banks, which are
governed under the scheme.In the system of Banking Ombudsman, the results are delivered very
soon, theprocedures are fair together with cost, and proportionate to the nature of the
issuesinvolved. The system deals with cases at reasonable speed, is understandable tothose 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 overthe past five years nearly 36000 complaints
are being resolved by the BankingOmbudsman under this Banking Ombudsman Scheme.
Though the BankingOmbudsman is eligible enough to deliver the bank customer complaints at
theearliest 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. Thereason is they are well
popular among the common public which is lacking withthe banking ombudsman and its
working. Definitely the Schemeneeds popularityin the society for its more appropriateness and
effectiveness so that the aggrievedbank customer with the services of the bank prefers to knock
the door of thebanking ombudsman for redressal. The scheme should provide more powers
andlevy more duties on the banking ombudsman so that they can easily beapproachable by the
aggrieved bank customer

12 WEBLOGRAPHY
Www.ombudsman.saving,org
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www.financial-ombudsman.org.uk
bc ombudsman website
www.balkanweb.com
www.ararteko.com
www.the furniture ombudsman.org

BIBLOGRAPHY
Article
Siladitya Chatterjee, The banking ombudsman scheme
Books
M.L. Tannan, Banking Law and Practice in India, 23rd Edition
Taxmann, Corporate Laws, 26th Edition

Questionnaire
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1. What does the Banking Ombudsman Scheme, 2006 offer?

The Banking Ombudsman Scheme, 2006 enables resolution of complaints of bank customers relating to
certain services rendered by banks.
2. Has the Banking Ombudsman Scheme come into effect?
The Scheme has come into force from January 1, 2006.
3. Who is a Banking Ombudsman?
The Banking Ombudsman is person appointed by the Reserve Bank of India to redress customer
complaints against certain deficiency in banking services.
4. Does the Banking Ombudsman have any legal power?
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.
5. How many Banking Ombudsmen have been appointed and where are they located?
As on date, 15 Banking Ombudsmen have been appointed with their offices located mostly in the State
Capitals. The addresses of the Banking Ombudsman offices have been provided in the RBI website.
6. Which banks are covered under the Banking Ombudsman Scheme, 2006?
All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are
covered under the Scheme.
7. How is the new Banking Ombudsman Scheme, 2006 different from the Old Banking
Ombudsman Scheme, 2002?
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.

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