Banking is important institution in any economy which ensures smooth facilitation of transactions in every economy. This important institution is often characterised by disputes which hamper its normal functioning and can bring dissatisfaction to consumers availing the banking facility. ‘The bank is liable for deficiency in service for inordinate delays in providing banking services and the customer of the bank is entitled to claim compensation for the loss and the injury suffered.’[i] . In order to address the deficiency in banking services and eradicate the grievances arising out of dispute between banks and its customers, Banking Ombudsman Scheme 2006 has been initiated.
The Scheme
Banking Ombudsman Scheme, 2006 is a scheme to resolve the grievances of the customers availing banking facility in country. It can be called a quasi-judicial authority which aims at resolving complaints of customers. The Banking Ombudsman Scheme is an expeditious and inexpensive forum for bank customers for resolution of complaints relating to certain services rendered by banks. [ii]It was incorporated in the system to earmark and redress the deficiency of services. The Scheme shall apply to the business in India of a bank as defined under the Scheme.[iii]
In India, The Scheme has an elaborate history in India starting from 1995. The current provisions are based on ‘Banking Ombudsman Scheme, 2006’ which is in operation after certain amendments. It is speedy and efficacious mechanism to obtain redressal of grievances.
Banking ombudsman
A senior official appointed to provide redressal to the grievances of the customers. He is someone officially appointed by the RBI. Banking ombudsman is ‘any person appointed under Clause 4 of the Scheme’[iv]. Clause 4 says that Reserve Bank may appoint one or more of its officers who hold the rank of General Manager to carry out the functions of banking ombudsman. [v] The period of appointment is not more than 3 years. The ombudsman is provided with the area of jurisdiction which he has to control and RBI provides him a Secretariat[vi] (office of Banking Ombudsman) which is a well-developed institution managed by various individuals.
Salient Features
- The Scheme is framed and holds authority under Section 35A of the Banking Regulation Act, 1949.
- RBI is the sole authority governing the scheme on the discretion of whom the act depends on. The Scheme clearly describes that the date of commencement and its suspension would be determined by the RBI.[vii]
- The scheme includes all Scheduled Commercial Banks, Regional Rural Banks and Primary Co- operative banks. Non-scheduled banks which are not listed in the Second Schedule of the Reserve Bank of India Act, 1934do not comply with the provisions of the RBI Act and hence, cannot be covered the ambit of the Banking Ombudsman Scheme.[viii]
- The scheme was first introduced in 1995 and has been revised several times until 2006 when it actually came into force. The recent amendment dates back to 2017.
- Banks covered under the scheme are obligated to display the relevant details related to the scheme in all the offices and branches. Moreover a copy of the scheme has to be made available with the designated officer and should be placed on the website of the bank.[ix]
Grounds of Complaint under the Scheme[x]
- Non-payment or delay– The bank is liable in case it does not pay or inordinately delays payment of any of the following-Cheques; drafts; bills; inward remittances.
- Non acceptance or charges commission – The consumer can file complaint if the bank charges commission or refuses- to accept notes of small denomination; or if it refuses to accept coins tendered.
- Delay or failure – The bank can be held responsible in the case if delays issue of or even fails to deliver drafts; pay orders; bankers cheques; some banking facility(other than loans) which is promised in writing. The bank is also answerable to customers if it delays non credits of proceeds; non-payment of deposits
- Non- adherence- The customers can file complaint if the bank does not adhere to any of the following, that is- working hours of banks which are prescribed; guidelines given by RBI in relation to the use of ATM, Debit, Prepaid card or credit card; guidelines provided by RBI in regards to electronic or mobile banking
- Refusal or delay–The bank is liable if it refuses to accept or delay accepting payment related to taxes; or refuses to issue Government Securities; it refuses or delays to close account
- Non observance- the customers can seek redressal if the banks do not observe RBI guidelines related to recovery agents; or its directives related to interest rates; the bank does not observe the time schedule for disposal of loan application.
Rejection of complaint
The Banking Ombudsman has the authority to reject any complain if any of the grounds is satisfied[xi]:
- If it not in accordance with any of the grounds given in any of the clause of the Scheme.
- If the jurisdiction under clause 12 is not appropriate especially the pecuniary.
- If the complaint has no cause or complainant then it is not diligent about the same.
- If in the opinion of Ombudsman, no loss or inconvenience has been suffered by complainant.
Procedure to File a Complaint
The scheme has very well articulated the procedure to register and pursue a complaint. It is required by every individual to follow these steps which are as follows[xii]:
Satisfaction of grounds – The person having grievance which is related to any of the Grounds mentioned in Clause 8, he can register a complaint with Ombudsman within whose jurisdiction bank lies.
Complainant – The Scheme provides that the complainant can file a complaint through himself or his representative.
Registration of complaint– The complaint can be filed electronically or could also be submitted with the ombudsman. The complainant has to sign the complaint which has to compulsorily mention certain details as stated in the Scheme like nature and extent of loss or relief sought etc. The declaration of the complaint is also important.
Conditions to be necessarily fulfilled– The scheme requires fulfilment certain guidelines which can ensure successful registration of the complaint. These include:
- A written representation to the concerned bank stating the distress it acquired because of the actions of bank and the bank rejected the complaint or did not reply within a month. Even if the reply is received, it is not satisfactory.
- The complaint is made within one year of receiving reply or in case of no reply, it is one year and one month.
- No complain lies if there is same cause of action which has been earlier dealt by the Ombudsman.
- The complaint abides by the Limitation Act, 1963.
Relief to the Complainant
The scheme which has been formulated with the sole objective of providing relief to the complainant has defined provisions for allaying the grievances of Consumers:
- Directions to summon for information– The act under Clause 10 states that the Ombudsman has the authority to ask the concerned Bank to furnish relevant information through certified copies or other documents. The confidentiality of documents has to be maintained by the Ombudsman except the fact that the information can be provided to the complainant.
- Settlement through Agreement– The issue can be solved by mutual agreement between the parties through conciliation or mediation. The proceedings of settlement can be arbitrary determined by the Banking Ombudsman.
- Compensation– the Scheme provides Ombudsman the authority to compensate the victim up to Rs 20 lakh. The cases on mental harassment include compensation not exceeding 1 lakh.
- Award- There may arise a situation that dispute cannot be solved by the settlement and the Ombudsman has to hear case from both the sides andthen pass the Award most suitable or reject the complaint if does not satisfy the grounds.
- Appeal– If any of the parties is not satisfied by the decision of Ombudsman, they can appeal before the appellate authority within 30 days of the communication of award.
Success of the scheme
- The scheme is free of cost and ensures speedy dealing without cumbersome aspects in procedure. It is a judicial mechanism which does not take a lot of time as there is no involvement of actual courts.
- The scheme is directly functional between customers and banks which is supervised by Reserve Bank and does not have any say of Governmental authorities.
- There has been rise in speed of disposal of complaints. It has been reported that around 36,000 complaints have been dealt by the Scheme. There are various offices in India to ensure speedy disposal of disputes. Thus, an alternative dispute resolution formed by the RBI has been a huge success for the Banking Industry.[xiii]
- The scope has been widened by the Reserve Bank of India to include deficiencies arising out of sale of various things like insurance, mutual funds etc.
Criticism of the Scheme
- It is not much useful in providing a quick solution to complex problems which customer can face.
- The Scheme gives a lot of power to the Ombudsman who can act arbitrarily without any accountability.
- Complainant has no control over the investigation and it may happen that Ombudsman refuse to deal with a specific matter.
- There is not much awareness about the scheme and hence people are devoid of attaining redressal.
- The Award is not binding and if the bank does not comply with it then the person has to approach civil court which leads to hassle filled justice approach.
Conclusion
Banking ombudsman scheme is an effective and constructive tool for the customers of the banking facilities when they face inadequacy in the facilities that they are availing. The Scheme has been a majoradvantage to the customers giving them power to check for the services that banks are providing. The scheme has been useful in dealing with complaints separately despite having Consumer Disputes Redressal Forums. Hence the Scheme has been remarkable in solving disputes between consumers. But there is lot more to achieve.
Frequently Asked Questions
Who is a Banking Ombudsman?
A senior official usually appointed by the RBI to redress the grievances of customer and provide remedy against complaints arising in certain banking services.
Where can a person register the complaint?
The complaint is lodged at the office of the Banking Ombudsman who has the jurisdiction of the bank branch.
Is there any cost involved in filing complaints with Banking Ombudsman?
No, there is no cost involved. The Scheme does not mention any charge or any fee for resolving customers’ complaints.
What is further recourse if one does not accept the Banking Ombudsman’s decision?
One can approach the appellate authority and file an appeal if not satisfied against the Banking Ombudsmen’s decision.
Edited by Shikhar Shrivastava
Approved & Published – Sakshi Raje
Reference
[i]P.N.Prasad Vs. Union Bank of India [1991],(1) CPR 198 (SCDRC- AP, Hyderabad)
[ii]https://m.rbi.org.in/Scripts/FAQView.aspx?Id=24
[iii] Clause 1 of the Banking Ombudsman Scheme 2006
[iv] Clause 3(4) of the Banking Ombudsman Scheme 2006
[v] Clause 4of the Banking Ombudsman Scheme 2006
[vi] Clause 6 of the Banking Ombudsman Scheme 2006
[vii] Clause 1,2 of the Banking Ombudsman Scheme 2006
[viii]TitikshaSeth ,Banking Ombudsman – Things You Should Know https://cyberblogindia.in/banking-ombudsman/
[ix] Clause 15 of the Banking Ombudsman Scheme 2006
[x]Clause 8 of the Banking Ombudsman Scheme 2006
[xi] Clause 13 of the Banking Ombudsman Scheme 2006
[xii] Clause 9of the Banking Ombudsman Scheme 2006
[xiii]Krishnendra Joshi, ‘All you Need to Know about Banking Ombudsman in India’ available at https://blog.ipleaders.in/recover-loss-banking-ombudsman/(last accessed on 04-02-2020)
