In this article, Utkarsh Nigam, currently enrolled in the Certificate Course in Investment & Banking Due Diligence at LawSikho discusses the Banking Ombudsman Scheme

Introduction

The Banking Ombudsman Scheme is like a fast track and inexpensive forum for the customers of the bank for resolution of their complaints regarding the services rendered by the banks in India. The Banking Ombudsman creates an onus through Section 35A of the Banking Regulation Act, 1949 to appoint a banking ombudsman, who is a senior official not below the rank of Chief General Manager or General Manager appointed by the Reserve Bank of India. The scheme came into effect from the year 1995 and presently the current operational scheme is Banking Ombudsman Scheme (amended up to July 1, 2017). The main aim of the scheme is to have a resolution scheme related to the services rendered by the banks in case the customer is not satisfied with the same and in cases where there is no solution provided by the banks for settlement of such complaints and disputes. The Banking Ombudsman Scheme extends to the whole country and covers the business of banking industry in the country that means all scheduled commercial banks, rural banks, cooperative banks will come under the purview of the scheme.

The Reserve Bank of India shall specify the jurisdiction or the territorial limits of the selected ombudsman. The ombudsman shall be responsible for receiving and considering the complaints filed by the aggrieved parties irrespective of the amount of money involved in the complaint. He will be responsible for the settlement of the dispute between the bank and the aggrieved party either by the process of mediation or conciliation or if necessary by giving an award to the concerned party if the circumstances require so. The appointed ombudsman has to submit a report to the governor of the Reserve Bank on 30th June of every financial year regarding the activities conducted through his office during the preceding financial year and also any other details as asked by the Reserve Bank.

The Banking Ombudsman Scheme allows an aggrieved customer to file a complaint of any nature regardless of any amount involved, in the complaint with the ombudsman.

Grounds on which complaints can be filed

Some of the grounds on which these complaints can be filed by the aggrieved customers are-

1. Delay or non-payment of cheques, drafts, bills etc.,
2. Non-acceptance of any notes or coins of the Indian currency without giving any sufficient cause,
3. Charging some amount of commission for any service mentioned in the above point which the bank does not have the authority of,
4. Non-payment or delay in payment of the inward remittances,
5. Non-adherence in regards to the working hours of the banks,
6. Delay or failure to provide a banking facility, earlier promised by the officials or the agents of the bank,
7. Refusing to open deposit accounts without any valid reason,
8. Delay or non-remittance of money or any other bank related matters regarding the non-resident Indians,
9. Levying of any other additional charge without any previous intimation to the customers,
10. Non-adherence to the instructions and guidelines given by the Reserve Bank in relation to use of ATM or Debit cards, like – Account debited but cash not dispensed by ATMs, Less cash dispensed by the ATM machine, Stolen cards, Account debited twice for one transaction done on the abovementioned factors,
11. Non-adherence to the guidelines given by the Reserve Bank in relation to the Credit Card facilities provided by the banks, like – Wrong billings on the card, Charging of excess annual fees against the pre-stated fee, Unsolicited calls for add-on cards etc.
12. Inappropriate approach by the recovery agents on behalf of the banks or not following the guidelines are given by the Reserve Bank in regards to the functioning of the recovery agents.
13. Any other guidelines stated by the Reserve Bank.
14. Non-adherence to the guidelines given by the Reserve Bank in regards to the Mobile or Internet Banking facility provided by the banks, like – delay or failure to effect online payment / Fund Transfer, unauthorized electronic payment / Fund Transfer
15. Delay or refusal to accept payments towards taxes and other charges as directed by the Reserve Bank or the government,
16. Delay in issuance or refusal to issue redemption of government securities,
17. Forced closure of deposit accounts without prior notice or without any specific reasons for the delay in closure of any type of accounts held by the customer,
18. Complaints on the grounds regarding non-observance of Reserve Bank guidelines on interest rates, refusing to accept applications for loans without a valid reasons or not disposing of the loan applications within the prescribed time or non-adherence to the provisions of the fair practices code for lenders as adopted by the bank or Code of Bank’s Commitment to Customers,
19. Non-adherence to any other guidelines or any other instructions given by the Reserve Bank from time to time to the banks or their subsidiaries involved in the banking business in the country.

Procedure to register a complaint

Filing of the complaint

The procedure to register a complaint regarding any of the banks by the customers starts from the process of identifying the sort of deficiency of service from the list above mentioned.

Who can file the complaint?

The complainant may, himself or through an authorised representative make a complaint to the Banking Ombudsman within whose jurisdiction the bank is located. It should be noted that in cases of credit card complaints the complaint will be filed with the Banking Ombudsman within whose territorial jurisdiction the billing address of the complainant or the customer is located.

Details to be provided in the complaint

The complaint shall be made in writing or in electronic mode (in this case the print out of such complaint shall be taken as a record by the ombudsman) and shall be duly signed by the complainant or his representative in a specified form which shall state the name and address of the complainant, name and address of the branch or office of the bank against which the complaint has to be filed, the facts of the complaint including the quantum of loss caused to the complainant and the relief which is sought from the ombudsman through the complaint. The complainant is required to file copies of the documents if there are any, to support his claim of the complaint and for the complaint to be maintainable under subclause (3) of the abovementioned clause.

Onus on the complainant to go to the Bank first

The complainant has the onus to go to the bank first for the redressal of his complaint, therefore, no complaint to the ombudsman shall lie unless the complainant has approached the bank with his complaint in a written representation and the bank has rejected his complaint or the complainant hasn’t received any reply from the side of the bank within one month after the complaint has been received by the bank or the customer is not satisfied with the redressal provided to him. Also, the complaint with the ombudsman has to be filed within one year from the received reply from the bank or where no reply has been received by the bank then not later than one year and one month from the date of representation.  The complaint will not lie to the ombudsman in case if the same cause of action which was settled on merits by the Ombudsman in any previous case has been brought to him.

Directions issued by the Ombudsman

After the complaint has been filed to the ombudsman, he has the power to direct the bank, against which the complaint has been filed to furnish any information or certified copies of any documents relating to the complaint. The ombudsman has the responsibility to maintain the confidentiality of the information provided but is not barred due to the above clause from disclosing any information or document considered by him to be reasonably required to comply with any legal requirements or the principles of natural justice and fair play in the proceedings

Settlement of the complaint through mediation/conciliation

As soon as possible the banking ombudsman shall send the copy of the complaint to the branch office of the bank mentioned in the complaint by the complainant and initiate to promote a settlement of the complaint by agreement between the parties through mediation or conciliation.

If the complaint is not settled

In case if the complaint is not settled by agreement within a period of one month from the date of receipt of the complaint or from the period which is allowed by the ombudsman, the ombudsman after hearing the parties involved in the case, may pass an award or reject the complaint.

Duties of the Banking Ombudsman while dealing with a complaint

• The Banking Ombudsman has to take into account the prevalent laws and directions, guidelines and instructions given by the Reserve Bank from time to time.  
• The award given should accompany the reasons on which the award was given and also should contain the directions, if any, to the bank for any specific performance of the obligations in addition to the amount, if any, to be paid by the bank to the complainant as a compensation for the loss suffered by him due to the deficiency in service by the bank.  
• Banking Ombudsman shall not have the power to pass an Award directing payment of an amount towards compensation 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 two million rupees whichever is lower.
  
• The Banking Ombudsman may also award compensation in addition to the above but not exceeding rupees 0.1 million to the complainant, taking into account the loss of the complainant’s time, expenses incurred by the complainant, harassment and mental agony suffered by the complainant.

Appeal

The party to the complaint aggrieved by the award given by the ombudsman or by the rejection of the complaint may within thirty days of the date of receipt of communication of the award, may appeal before the appellate authority.

Conclusion

The banking ombudsman scheme is a tool in the hands of the customers of the banking industry that can be used by them whenever there is a deficiency in service on the part of the bank or when the customers are not satisfied with the services provided by the banking industry. The scheme has been a major benefit to the customers as it has given them the power to keep the banks in a check for the services they are providing.