This article has been written by Muskan Sharma pursuing a SEBI Grade A Legal Officers’ Test Prep course from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

A bank is a financial institution. It provides various services to individuals, businesses, and the government. These services include accepting deposits, providing investment options, providing loans, facilitating currency exchange, etc. But sometimes banks don’t provide good service to their customers. Customers face issues like issuing cheque books, activating dormant accounts, closing bank accounts, etc. To protect against such situations under the Indian Banking System, the customer should first approach the concerned bank. If that customer is not satisfied with the service rendered by the bank, he can seek help under the Banking Ombudsman Scheme. The scheme covers the business of the banking industries and extends to the whole country. It is a quasi-judicial body. Section 35A of the Banking Regulation Act of 1949 deals with the Banking Ombudsman Scheme. It is a fast-track service without any fees.

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Who is the banking ombudsman

The Ombudsman is an appellate body where customers can file complaints if that bank fails to address the complaint or if customers are not satisfied with the resolution or explanation given by the bank, so they can approach the ombudsman. An ombudsman is a person appointed by the Reserve Bank of India who is a senior official not below the rank of Chief General Manager or General Manager. The RBI will specify the territorial limits or jurisdiction of the Ombudsman. He will be appointed for 3 years, where extension can be granted up to 2 years, subject to the upper age limit of 65 years. The Ombudsman receives and considers the complaint of the aggrieved party for the settlement of the dispute, either by mediation or conciliation. RBI may appoint one or more of its officers as Ombudsman and Deputy Ombudsman to carry out the functions entrusted to them.

Formation of the Banking Ombudsman Scheme

In India, the Banking Ombudsman Scheme was introduced way back in 1995. Through this scheme in 1995, the Banking Ombudsman was first instituted in India. This scheme was implemented through directions issued by the RBI in terms of Section 35A of the Banking Regulation Act, 1949. It was then revised in 2002. The current scheme became operative on January 1, 2006, and then replaced the Banking Ombudsman Scheme of 2002. Presently, the Banking Ombudsman Scheme of 2006, amended up to July 1, 2017, is in operation.

Scope of the Banking Ombudsman Scheme

The scope of the Banking Ombudsman Scheme includes a wide range of banking services, including:

  • Deposits: This includes issues related to opening and maintaining accounts, deposits, withdrawals, and interest payments.
  • Loans and advances: This includes issues related to sanctioning, disbursement, and repayment of loans, as well as interest rates and charges.
  • Other banking services: This includes issues related to credit cards, debit cards, internet banking, and mobile banking.

The Banking Ombudsman Scheme does not cover the following:

  • Disputes related to the terms and conditions of a loan or deposit agreement.
  • Disputes related to investments in mutual funds, shares, or other financial instruments.
  • Disputes related to insurance products.
  • Disputes related to non-banking financial companies (NBFCs).

Who can file the complaint

The customer may file a complaint himself as a complainant or through an authorised representative of the Banking Ombudsman Scheme. 

To file a complaint under the Banking Ombudsman Scheme, the customer must first approach the bank concerned and try to resolve the issue directly. If the customer is not satisfied with the bank’s response, they can then file a complaint with the Banking Ombudsman.

The Banking Ombudsman will investigate the complaint and try to resolve it through conciliation. If conciliation is not possible, the Banking Ombudsman may issue an award in favour of the customer. The award is binding on the bank and must be complied with within 30 days.

How to file a complaint under the Scheme

Complainant in writing with a signature complaint stating the name and address clearly.

There should be the following things mentioned in the complaint:

  • Complete the name and address of the bank branch or office.
  • Facts about the case.
  • Documentary proof, if any.
  • Nature and extent of loss.
  • Relief sought, etc.
  • The complaint to the ombudsman can be lodged online or offline.
    • Online complaint: The complainant can submit a complaint online to the ombudsman by filling out an online form on their website.
    • Offline complaint: Complaints can be filed in physical mode at the Centralised Receipt and Processing Centre (CRPC).

When to approach the ombudsman

In the Banking Ombudsman, one can file a complaint if the reply to a complaint registered with a regulated bank is not received by the request by the concerned bank within 30 days, if the complainant is not satisfied with the reply of the bank, or if the bank rejects the complaint without giving any valid reason for rejecting that complaint. After receiving and considering the complaint relating to a deficiency in banking service, the Ombudsman can pass an award if that complaint is not settled by an agreement within 30 days. The Ombudsman provides a reasonable opportunity for both the bank and the complainant to present their case before passing an award. The complainant can accept the award in full and final settlement or reject it.

What are the grounds on which a complaint can be filed

As per the notification issued by RBI under the Integrated Ombudsman Scheme, 2021, there is no need for a complainant to identify under which scheme he should apply to file a complaint under the Banking Ombudsman Scheme. The RBI made it easy for the complaints of customers to no longer be simply rejected on account of not being covered under the grounds mentioned in the scheme. So, the following are the grounds to file a complaint under the Banking Ombudsman Scheme:

  • Nonpayment or unreasonable delay in payment; issue of checks, drafts, bills, etc.
  • Delay or failure to provide banking facilities that were promised by the bank in writing.
  • Non-acceptance of small-denomination notes or coins tendered without sufficient cause.
  • Refusal to open a deposit account without any valid reason.
  • Delay in proceeding with the respective parties’ accounts; nonpayment of deposit.
  • Nonadherence to RBI instructions related to ATM, debit card, credit card operations, mobile banking, electronic banking services, etc.
  • Delay in disbursement of pensions.
  • Refusal or delay in closing the account.
  • Close the deposited account forcefully without notice or sufficient reason.
  • Delaying or nonpayment of inward remittances.
  • Complaints from non-resident Indians having accounts in India about their remittances from abroad, deposits, and other bank-related matters.
  • No observance of Reserve Bank directives on interest.
  • Nonobservance of any other direction or instruction of the RBI for this purpose.
  • Delay or refusal to issue redemptions of government securities.

What are the powers of the banking ombudsman

Very wide powers are conferred on the ombudsman relating to investigations and inquiries into complaints. He can even act suo moto. He can grant relief because, unlike the power of an ordinary court, his powers are not limited. The Ombudsman is vested with the following powers:

  • Call for certified copies of any document relating to the complaint.
  • To maintain the confidentiality of the case
  • Call for any additional information from the bank concerned with the complaint.
  • The proceeding before the Ombudsman is summary in nature.
  • The administration of general civil law will be under the supervision of the Ombudsman.
  • The key responsibility of the ombudsman is to protect citizens rights and freedom.
  • Hear complaints related to service delivered by the bank, assess those complaints through recommendation, aid in their resolution, and give the award.

Limit on amount of compensation

According to present regulations, ombudsman redressal is allowed for complaints where the compensation amount for any loss suffered by the complainant is limited to 20 lakh rupees. Also, he may award compensation not exceeding 1 lakh rupees to the complainant for mental harassment and agony. The things that the ombudsman considers while passing the compensation are loss of the time of the complainant, expenses incurred by the complainant, harassment, and mental anguish suffered by the complainant.

Achievements of the scheme

The practice from 1995 until now has been expanding the jurisdiction and scope of the ombudsman scheme in the following ways:

Fast redressal of complaints

The grounds to file a complaint are prescribed under the ombudsman scheme. Now the RBI has extended the scope of the scheme to take complaints related to credit cards, inefficiency on the part of bank sales agents to provide promised services without prior notice, imposing service charges on the client, etc. More than 36,000 complaints have been dealt with under this scheme.

The rate of complaint resolution by RBIOs increased to 97.97% in 2021–22, up from 96.59% in 2020–21.

Widened area of coverage of banks

Only commercial banks and scheduled primary cooperative banks have operations under the 1995 scheme. After that, in 2002, the scheme included regional rural banks, the State Bank of India, and subsidiary banks under the definition of the Bank Concerning Banking Regulation Act 1949. Now the scheduled commercial banks come under the latest scheme of 2006.

More recruitment and funding

The RBI decided to increase the funding and recruitment under the scheme. Also, there is an online platform to file an appeal against decisions awarded by the Ombudsman.

No interference by the government

There is no interference by the government in the scheme. Under the supervision of the RBI, it operates directly between the bank and the customer, which prevents unnecessary delays.

Banking Ombudsman Scheme for Non-Banking Financial Companies of 2018

The NBFC ombudsman scheme was introduced by the RBI in 2018 to redress complaints about NBFCs in India. RBI appointed the NBFC ombudsman as a senior official to redress customer complaints against NBFCs for deficiency in certain services covered under clause 8 of the scheme as grounds for complaint. 

Time limit for filing a complaint:

Complaints must be filed within one year from the date of the incident or knowledge of the incident.

Process of complaint resolution:

  • The Banking Ombudsman will acknowledge receipt of the complaint within 15 days.
  • The Banking Ombudsman will investigate the complaint and try to resolve it through conciliation or mediation.
  • If the complaint is not resolved through conciliation or mediation, the Banking Ombudsman will issue an award.
  • The award of the Banking Ombudsman is binding on the NBFC.

Objectives of the Scheme:

  • To provide a quick and inexpensive forum for resolving customer complaints.
  • To ensure fair and equitable treatment of customers.
  • To promote transparency and accountability in the NBFC sector.

Integrated Ombudsman Scheme of 2021

On November 12, 2021, Hon’ble Prime Minister Narendra Modi launched the Integrated Ombudsman Scheme of 2021 by virtue mode. It amalgamates the existing three Ombudsman Schemes of the RBI:

  • Banking Ombudsman Scheme of 2006;
  • Ombudsman Scheme for NBFC of 2013; and 
  • Ombudsman Scheme of Digital Transactions of 2019.

Conclusion

Banks being the institutions of financial importance in every part of the world, the resolution of complaints relating to their conduct is also an essential attribute of consumer satisfaction. Therefore, we have a banking ombudsman. The Banking Ombudsman is appointed by the government and serves consumer complaints regarding various banking regulations in our country. As the filing of a complaint with the banking ombudsman is free of charge, it has helped millions of people since its implementation.

References

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