Ombudsman Services in Banking Industry1

OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
CHAPTER – I
INTRODUCTION
1.1) BANKING AND ITS OVERVIEW

1
Banks are the businesses that deal in money. Bank customers can deposit their
money in bank accounts. Customers can also borrow money from banks. This
borrowed money is called a bank loan. When customers use the services of a bank,
they are doing their banking. Banks provide these services for many different
customers, including children, adults, and business.
Banks use the money that customers deposit in bank accounts to make more
money. They lend some of the money to other customer’s interest for using this
money. Banks pay some of the interest to the customers who made deposits. They
make a profit by keeping the rest.
Banks also invest some of their customer’s money to make more money. They
invest in other businesses, both local and overseas. Banking industry plays a major in
the Indian financial system and provides a wide range of services. It is a financial
institution dealing with deposits, advances and the other related service activities.
According to The Banking Companies Act, 1949 “Banking 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 cheques, drafts, and
pay order or otherwise.”
1.2) FUNCTIONS OF BANK:
1) Receiving deposits:
This is the main function of commercial banks to collect savings of individuals

and firms. They offer different types of deposits for the facility of the customers.
i) Current account or demand deposits:
2
Any sum of money can be withdrawn from this type of account any time
without any prior notice or such. No interest is allowed on this type of account.
ii) Savings account:
This type of account is maintained for the purpose of liquidity instantly by the
individuals. This type of account carries low interest rate.
iii) Fixed deposit:
This type of account is different from the above two types of accounts and is
maintained for a fixed period barring high interest rate which can be withdrawn either
on maturity date or before the date of maturity as per norms of banks.
2) Advancing loans:
This is the important function of the Commercial banks. Credit is given to the
people in different ways.
There are three types of loans:
i) Short term loans:
These loans are advanced for the period of 6 months to 1 year. Higher rate of
interest is charged.
ii) Medium term loans:
Loans advanced for a period of 1 year to 5 years are called medium term loans.
iii) Long term loans:
Loans which are advanced for a period of more than 10 years are called long
term loans.
3) Bank Overdraft:
3
Banks allows their trustful customers to draw more than the deposit they have
in the banks. A higher rate of interest is charged on Overdraft.
4) Cash Credit:
Banks also advances credit against immovable properties and charge interest on
credit advanced.
5) Discounting of bills:
Banks provide short-term finance by discounting bills, i.e. making payment

before the due date of the bills after deducting certain rate of discount. In case any
bill is dishonored on the due date, the bank can recover the amount from the
customer.
1.3) TYPES OF BANKS

There are various types of banks which operate in our country to meet the
financial requirements of different categories of people engaged in agriculture,
business, profession, etc. On the basis of functions, the banking institutions in India
may be divided into the following types:
TYPES OF BANKS
4
CENTRAL BANK DEVELOPMENT BANKS SPECIALIZED BANKS
COMMERCIAL BANKS COOPERATIVE BANKS
PUBLIC SECTOR BANKS PRIMARY CREDIT SOCIETIES
PRIVATE SECTOR BANKS CENTRAL COOPERATIVE BANKS
FOREIGN BANKS STATE COOPERATIVE BANK
1.3.1) Central Bank
A bank which is entrusted with the functions of guiding and regulating the
banking system of a country is known as its Central bank. Such a bank does not deal
with the general public. It acts essentially as Government’s banker; maintain deposit
accounts of all other banks and advances money to other banks, when needed. The
Central Bank provides guidance to other banks whenever they face any problem. It is
therefore known as the banker’s bank. It advises the Government on monetary and
credit policies and decides on the interest rates for bank deposits and bank loans.
Another important function of the Central Bank is the issuance of currency notes,
regulating their circulation in the country by different methods. No other bank than the
Central Bank can issue currency.
1.3.2) Commercial Banks
5
Commercial Banks are banking institutions that accept deposits and grant
short- term loans and advances to their customers. In addition to giving short-term
loans, commercial banks also give medium-term and long-term loan to business
enterprises. Commercial banks are of three types:
i) Public Sector Banks:

These are banks where majority stake is held by the Government of India or
Reserve Bank of India.
Examples of public sector banks are: State Bank of India, Corporation Bank, Bank
of Baroda and Dena Bank, etc.
ii) Private Sectors Banks:

In case of private sector banks majority of share capital of the bank is held by
private individuals. These banks are registered as companies with limited liability.
Examples of Private Sector Banks are: Jammu and Kashmir Bank Ltd., Bank of
Rajasthan Ltd., Development Credit Bank Ltd., Bharat Overseas Bank Ltd., Oriental
Bank of Commerce, Vysya Bank, Axis Bank., etc.
iii) Foreign banks:
These banks are registered and have their headquarters in a foreign country but
operate their branches in our country. Some of the foreign banks operating in our
country are Hong Kong and Shanghai Banking Corporation (HSBC), Citibank,
American Express Bank, Standard & Chartered Bank, Grindlay’s Bank, etc. The
number of foreign banks operating in our country has increased since the financial
sector reforms of 1991.
1.3.3) Development Banks
Business often requires medium and long-term capital for purchase of

machinery and equipment, for using latest technology, or for expansion and
modernization. Such financial assistance is provided by Development Banks. They
also undertake other development measures like Public Sector Banks comprise 19
nationalized banks and State Bank of India and its 7 associate banks. Industrial
6
Finance Corporation of India (IFCI) and State Financial Corporation’s (SFCs) are
examples of development banks in India.
1. 3.4) Cooperative Banks
People who come together to jointly serve their common interest often form a
cooperative society under the Co-operative Societies Act. When a co-operative
society engages itself in banking business it is called a Co-operative Bank. The society
has to obtain a license from the Reserve Bank of India before starting banking
business. Any co-operative bank as a society is to function under the overall
supervision of the Registrar, Co-operative Societies of the State. As regards banking
business, the society must follow the guidelines set and issued by the Reserve Bank of
India. There are three types of co-operative banks operating in our country:
a) Primary Credit Societies
b) Central Cooperative Banks
c) State Cooperative Banks
1. 3.5) Speciqalized Banks
There are some banks, which cater to the requirements and provide overall
support for setting up business in specific areas of activity. EXIM Bank, SIDBI and
NABARD are examples of such banks. They engage themselves in some specific area
or activity and thus, are called specialized banks.
i) Export Import Bank of India (EXIM Bank)
If you want to set up a business for exporting products abroad or importing

products from foreign countries for sale in our country, EXIM bank can provide you
the required support and assistance. The bank grants loans to exporters and importers
and also provides information about the international market.
7
ii) Small Industries Development Bank of India (SIDBI)
If you want to establish a small-scale business unit or industry, loan on easy

terms can be available through SIDBI. It also finances modernization of small-scale
industrial units, use of new technology and market activities. The aim and focus of
SIDBI is to promote, finance and develop small-scale industries.
iii) National Bank for Agriculture and Rural Development (NABARD)
It is a central institution for financing agricultural and rural sectors. If a person

is engaged in agriculture or other activities like handloom weaving, fishing, etc.
NABARD can provide credit, both short-term and long-term, through regional rural
banks. It provides financial assistance, especially, to co-operative credit, in the field of
agriculture, small scale industries, cottages and village industries in rural areas.
1.4) OBJECTIVES OF THE STUDY
1. To ascertain the services of the Banking Ombudsman offered to the

customer(s).
2. To find out Banking Ombudsman Scheme & its functioning mechanism.
3. To show how the Ombudsman machinery helps in resolving customer(s)
complaints.
4. To analyze the changes in Banking Ombudsman Scheme enactments and their
benefits in redressing customer(s) grievances.
5. To explain the duties, functions & powers of the Ombudsman in Banking
Sector.
6. To examine the role of law in the protection of the consumer of financial
services.
1.5) SCOPE OF STUDY
The present study covers the aspect of bankig services in India with special
reference to Ombudsman mechanism. It also deals precicsly the orign of banking in
India. The failure of the Banking Ombudsman can be known after the detailed and
careful examination of the aspects related on the performance as mentioned above.The
policies and procedures of Banking Ombudsman are governed by Reserve Bank of
India. It is regarding the registering of complaints from the prospective customers and
8
providing a solution according to the purview of the board without any favoritism
neither to the bank nor the customer. The performance of the Banking Ombudsman
can be analyzed on the aspects such as:
i) The quantum of complaints handled by them,
ii) The timeliness in handling the issues, and
(iii) Appropriateness of the decisions of the Banking Ombudsman.
1.6) METHODOLOGY OF STUDY
The data is collected from books, magazines and websites concerning to

Banking Services, Banking Ombudsman and its services.
1.7) PERIOD OF STUDY
The period of study taken from 2007 to 2010.
1.8) DURATION OF STUDY
The duration of study is for 2 months.
1.9) IMPORTANCE OF THE STUDY

1. It explains the role of RBI acting as grievance redressal agency in banking
sector.
2. It shows the awareness of customer(s) in getting their problems and difficulties

redressed by the concerned banks.
9
3. It shows upto what extent the policies and procedures of Banking Ombudsman
Scheme are reaching to the outright customer(s).
4. It explains how all the banks in the country are bound to abide by the policies
and procedures framed by RBI.
5. It explains the functioning of all types of banks in accordance to the rules and
regulations of Central Bank Of India.
6. It aids to know whether the services of bank(s) are satisfying the targeted
customer(s) or not.
1.10) LIMITATION OF STUDY
1. The period of study is limited.
2. It requires lot of analysis on the overall subject matter.
3. The data collected cannot be generalized as it is only secondary data.
10
CHAPTER – II
MODERN TRENDS IN
BANKING INDUSTRY
11
2.1) INTRODUCTION
In India, the banks are being segregated in different groups. Each group has its
own benefits and limitations in operating in India and its own dedicated target market.
Only few of them work in the rural and urban sectors. Some of these banks are of
Indian origin and some are foreign players.
With years, banks are also adding services to their customers. The Indian
banking industry is passing through a phase of customers market. The customers have
more choices in choosing their banks. A competition has been established within the
banks operating in India. With stiff competition and advancement of technology, the
services provided by banks have become more easy and convenient. The past days are
witness to an hour wait before withdrawing cash from accounts or a cheque from the
north of the country being cleared in one month in the south.
Today, we are having a fairly well developed banking system with different
classes of banks – public sector banks, foreign banks, private sector banks – both old
and new generation, regional rural banks and co-operative banks with the Reserve
Bank of India as the fountain Head of the system.
In the banking field, there has been an unprecedented growth and

diversification of banking industry has been so stupendous that it has no parallel in the
annals of banking anywhere in the world.
2.2) INFORMATION TECHNOLOGY IN BANKING
India Vision-2020 is the “Vision” envisaged by the former Hon’ble President

of India, Dr A.P.J. Abdul Kalam touching upon very sensitive issues requiring urgent
attention for implementation by banking and finance community, in an effective and
efficient way. Banks have to be proactive to support the innovative products for
enabling wealth generation by young entrepreneurs by setting aside the “conventional
tangible asset syndrome”. The dynamics of banking in relation to national
development vis-à-vis role of banks are briefly discussed hereunder.
Indian banking industry, today is in the midst of an IT revolution. A

combination of regulatory and competitive reasons has led to increasing importance of
total banking automation in the Indian Banking Industry. Information Technology has
basically been used under two different avenues in Banking. The bank which used the
12
right technology to supply timely information will see productivity increase and
thereby gain a competitive edge.
Following are the innovative services offered by the industry in the recent
past:
2.2.1) Electronic Payment Services – E Cheques
Nowadays we are hearing about e-governance, e-mail, e-commerce, e-tail etc.

In the same manner, a new technology is being developed in US for introduction of e-
cheque, which will eventually replace the conventional paper cheque. India, as
harbinger to the introduction of e-cheque, the Negotiable Instruments Act has already
been amended to include; Truncated cheque and E-cheque instruments.
2. 2.2) Real Time Gross Settlement (RTGS)
Real Time Gross Settlement system, introduced in India since March 2004, is a
system through which electronics instructions can be given by banks to transfer funds
from their account to the account of another bank. The RTGS system is maintained
and operated by the RBI and provides a means of efficient and faster funds transfer
among banks facilitating their financial operations. As the name suggests, funds
transfer between banks takes place on a ‘Real Time' basis. Therefore, money can
reach the beneficiary instantaneously and the beneficiary's bank has the responsibility
to credit the beneficiary's account within two hours.
2. 2.3) Electronic Funds Transfer (EFT)
Electronic Funds Transfer (EFT) is a system whereby anyone who wants to

make payment to another person/company etc. can approach his bank and make cash
payment or give instructions/authorization to transfer funds directly from his own
account to the bank account of the receiver/beneficiary. Complete details such as the
receiver's name, bank account number, account type (savings or current account),
bank name, city, branch name etc. should be furnished to the bank at the time of
13
requesting for such transfers so that the amount reaches the beneficiaries' account
correctly and faster. RBI is the service provider of EFT.
2. 2.4) Electronic Clearing Service (ECS)
Electronic Clearing Service is a retail payment system that can be used to

make bulk payments/receipts of a similar nature especially where each individual
payment is of a repetitive nature and of relatively smaller amount. This facility is
meant for companies and government departments to make/receive large volumes of
payments rather than for funds transfers by individuals.
2. 2.5) Automatic Teller Machine (ATM)
Automatic Teller Machine is the most popular devise in India, which enables
the customers to withdraw their money 24 hours a day 7 days a week. It is a devise
that allows customer who has an ATM card to perform routine banking transactions
without interacting with a human teller. In addition to cash withdrawal, ATMs can be
used for payment of utility bills, funds transfer between accounts, deposit of cheques
and cash into accounts, balance enquiry etc.
2. 2.6) Point of Sale Terminal
Point of Sale Terminal is a computer terminal that is linked online to the

computerized customer information files in a bank and magnetically encoded plastic
transaction card that identifies the customer to the computer. During a transaction, the
customer's account is debited and the retailer's account is credited by the computer for
the amount of purchase.
2. 2.7) Tele Banking
14
Tele Banking facilitates the customer to do entire non-cash related banking on

telephone. Under this devise Automatic Voice Recorder is used for simpler queries
and transactions. For complicated queries and transactions, manned phone terminals
are used.
2. 2.8) Electronic Data Interchange (EDI)
Electronic Data Interchange is the electronic exchange of business documents

like purchase order, invoices, shipping notices, receiving advices etc. in a standard,
computer processed, universally accepted format between trading partners. EDI can
also be used to transmit financial information and payments in electronic form.
2.3) IMPLICATION OF INFORMATION TECHNOLOGY IN

BANKING
The banks were quickly responded to the changes in the industry; especially the
new generation banks. The continuance of the trend has re-defined and re-engineered
the banking operations as whole with more customization through leveraging
technology. As technology makes banking convenient, customers can access banking
services and do banking transactions any time and from any ware. The importance of
physical branches is going down.
2.4) CHALLENGES FACED BY BANKS, vis-à-vis, IT

IMPLEMENTATION
15
It is becoming increasingly imperative for banks to assess and ascertain the

benefits of technology implementation. The fruits of technology will certainly taste a
lot sweeter when the returns can be measured in absolute terms but it needs
precautions and the safety nets.
It has not been a smooth sailing for banks keen to jump onto the IT bandwagon.
There have been impediments in the path like the obduracy once shown by trade
unions who felt that IT could turn out to be a threat to secure employment. Further, the
expansion of banks into remote nooks and corners of the country, where logistics
continues to be a handicap, proved to be another stumbling stock. Another challenge
the banks have had to face concerns the inability of banks to retain the trained and
talented personnel, especially those with a good knowledge of IT.
The increasing use of technology in banks has also brought up ‘security'

concerns. To avoid any pitfalls or mishaps on this account, banks ought to have in
place a well-documented security policy including network security and internal
security. The passing of the Information Technology Act has come as a boon to the
banking sector, and banks should now ensure to abide strictly by its covenants. An
effort should also be made to cover e-business in the country's consumer laws.
Some are investing in it to drive the business growth, while others are having
no option but to invest, to stay in business. The choice of right channel, justification of
IT investment on ROI, e-governance, customer relationship management, security
concerns, technological obsolescence, mergers and acquisitions, penetration of IT in
rural areas, and outsourcing of IT operations are the major challenges and issues in the
use of IT in banking operations. The main challenge, however, remains to motivate
the customers to increasingly make use of IT while transacting with banks. For small
banks, heavy investment requirement is the compressing need in addition to their
capital requirements. The coming years will see even more investment in banking
technology, but reaping ROI will call for more strategic thinking.
In the days to come, banks are expected to play a very useful role in the
economic development and the emerging market will provide ample business
opportunities to harness. Human Resources Management is assuming to be of greater
importance. As banking in India will become more and more knowledge supported,
human capital will emerge as the finest assets of the banking system. Ultimately
banking is people and not just figures.
16
Information technology (IT) plays an important role in the banking sector as it

would not only ensure smooth passage of interrelated transactions over the electric
medium but will also facilitate complex financial product innovation and product
development. The application of IT and e-banking is becoming the order of the day
with the banking system heading towards virtual banking.
As an extreme case of e-banking World Wide Banking (WWB) on the pattern

of World Wide Web (WWW) can be visualized. That means all banks would be
interlinked and individual bank identity, as far as the customer is concerned, does not
exist. There is no need to have large number of physical bank branches, extension
counters. There is no need of person-to-person physical interaction or dealings.
Customers would be able to do all their banking operations sitting in their offices or
homes and operating through internet. This would be the case of banking reaching the
customers.
Banking landscape is changing very fast. Many new players with different
muscle powers will enter the market. The Reserve Bank in its bid to move towards the
best international banking practices will further sharpen the prudential norms and
strengthen its supervisor mechanism. There will be more transparency and disclosures.
2.5) FUTURE OUTLOOK OF BANKING SYSTEM IN INDIA
Everyone today is convinced that the technology is going to hold the key to
future of banking. The achievements in the banking today would not have make
possible without IT revolution. Therefore, the key point is while changing to the
17
current environment the banks has to understand properly the trigger for change and
accordingly find out the suitable departure point for the change.
Although, the adoption of technology in banks continues at a rapid pace, the

concentration is perceptibly more in the metros and urban areas. The benefit of
Information Technology is yet to percolate sufficiently to the common man living in
his rural hamlet. More and more programs and software in regional languages could
be introduced to attract more and more people from the rural segments also.
Standards based messaging systems should be increasingly deployed in order to

address cross platform transactions. The surplus manpower generated by the use of IT
should be used for marketing new schemes and banks should form a ‘brains trust'
comprising domain experts and technology specialists.
2.6. CONCLUSION
The banking today is re-defined and re-engineered with the use of Information
Technology and it is sure that the future of banking will offer more sophisticated
services to the customers with the continuous product and process innovations. Thus,
there is a paradigm shift from the seller's market to buyer's market in the industry and
finally it affected at the bankers level to change their approach from "conventional
banking to convenience banking" and "mass banking to class banking". The shift has
also increased the degree of accessibility of a common man to bank for his variety of
needs and requirements.
In any banking system, no bank -- public or private -- can survive unless it

continuously strives to transform its organization into a self-governing, self-correcting
and self-adjusting entity. For banks to grapple with these problems and manage the
future, structural and institutional rigidities need to be eased in two critical areas:
comprehensive legal support for recovery of bad debts and a fundamental change in
the pattern of governance for the PSBs.
18
While public sector banks are in the process of restructuring, private sector
banks are busy consolidating through mergers and acquisitions (the sector has been
recently opened up for foreign investments). PSB’s need to improve in the services
like ATM’s, Credit and Debit cards. They lack behind in providing facilities like loans
and other accounts. These branches are not interlinked with each other and working
hours are less.
In case of Private sector banks customers are not aware of the facts and hidden
costs in view, as there are various products and facilities provided by the banks. The
charges that are been taken are also too high. Challenges and Opportunities exist for
both the public sector as well as the private sector banks, their nature however differs.
19
20
CHAPTER – III
OMBUDSMAN MECHANISM
3.1) INTRODUCTION
Banking Ombudsman is a quasi judicial authority functioning under India’s

Banking Ombudsman Scheme 2006, and the authority was created pursuant to the
decision by the Government of India to enable resolution of complaints of customers
of banks relating to certain services rendered by the banks. The Banking Ombudsman
Scheme was first introduced in India in 1995, and was revised in 2002. The current
scheme became operative from the 1 January 2006, and replaced and superseded the
banking Ombudsman Scheme 2002. From 2002 until 2009, around 69,117 complaints
have been dealt by the Banking Ombudsman.
21
The word ‘Ombudsman’ (‘ahm’ ‘bedz’ ‘man’), in general, means a public official
who is appointed to investigate the citizen’s complaints against the Administration. He
is to intervene for the ordinary citizens in his dealings with the complex machinery of
the establishment.
The Banking Ombudsman Scheme, 1995 was notified by RBI on June 14, 1995
in terms of the powers conferred on the Bank by Section 35A of the Banking
Regulation Act, 1949 to provide for a system of redressal of grievances against banks.
The Scheme sought to establish a system of expeditious and inexpensive resolution of
customer complaints. The Scheme is in operation since 1995 and has been revised
during the years 2002 and 2006. The Scheme is being executed by Banking
Ombudsmen appointed by Reserve Bank at 15 centers covering the entire country. As
mandated by the Banking Ombudsman Scheme, the Banking Ombudsmen submit an
Annual Report on the functioning of their offices every year. Based on such reports,
an Annual Report for the Banking Ombudsman Scheme in a whole is prepared at
Reserve Bank of India, Central Office. As is being the practice, the Annual Report
covers the last five-year period with focus on the current year. Further, as a result of
computerization of the functioning of Banking Ombudsman Offices through the
Complaint Tracking Software, detailed analysis was possible on the information
pertaining to year 2006-07. With the decision to merge the Banking Ombudsman
Offices with that of RBI offices, the accounting period for the Banking Ombudsman
Offices was changed from April 1-March 31 to July 1-June 30 to be in congruent with
that of RBI offices. Accordingly, the information analysed for the year 2006-07
pertains to the period July 1, 2006 to June 30, 2007.
3.2) GENERAL PARTICULARS ON THE SCHEME
The word ‘Ombudsman’ in general means a ‘grievance man’, a public official

who is appointed to investigate complaints against the administration. He is to
intervene for the ordinary citizen in his dealings with the complex machinery of the
establishment. In India, any person whose grievance against a bank is not resolved to
his satisfaction by that bank within a period of one month can approach the Banking
22
Ombudsman if his complaint pertains to any of the matters specified in the Scheme.
Banking Ombudsmen have been authorized to look into complaints concerning
deficiency in banking service , sanction of loans and advances in so far as they relate
to non-observance of the Reserve Bank directives on interest rates, delay in sanction
or non-observance of prescribed time schedule for disposal of loan applications or
nonobservance of any other directions or instructions of the Reserve Bank as may be
specified for this purpose, from time to time, and such other matters as may be
specified by the Reserve Bank. The Scheme envisages expeditious and satisfactory
disposal of customer complaints in a time bound manner.
The Banking Ombudsman on receipt of any complaint endeavors to promote a

settlement of the complaint by agreement between the complainant and the bank
named in the complaint through conciliation or mediation. For the purpose of
promoting a settlement of the complaint, the Banking Ombudsman has been allowed
to follow such procedures as he may consider appropriate and he is not bound by any
legal rule of evidence. If a complaint is not settled by agreement within a period of
one month from the date of receipt of the complaint or such further period as the
Banking Ombudsman may consider necessary, he may pass an Award after affording
the parties reasonable opportunity to present their case. He shall be guided by the
evidence placed before him by the parties, the principles of banking law and practice,
directions, instructions and guidelines issued by the Reserve Bank from time to time
and such other factors, which in his opinion are necessary in the interest of justice.
3.3) SCOPE OF THE SCHEME
The Banking Ombudsman Scheme, 2002 covered all the Regional Rural Banks
in addition to all Commercial Banks and Scheduled Primary Co-operative Banks,
which were already covered by earlier Banking Ombudsman Scheme, 1995. There is
no change in this regard in the Banking Ombudsman Scheme, 2006.
In 2006, the Reserve Bank of India announced the revised Banking

Ombudsman Scheme with enlarged scope that included customer complaints on
certain new areas, such as, credit card complaints, deficiencies in providing the
promised services even by banks' sales agents, levying service charges without prior
23
notice to the customer and non adherence to the fair practices code as adopted by
individual banks. The important new grounds of complaints added include credit card
issues, failure in providing the promised facilities, non-adherence to fair practices
code, levying of excessive charges without prior notice and issues pertaining to
accepting payment towards taxes and issuing/servicing of Government securities. The
grounds of complaints have been enumerated in Clause 8 of the Banking Ombudsman
Scheme, 2006.
3.4) OPERATIONALISATION
Reserve Bank of India operationalised the Banking Ombudsman Scheme by

establishing Banking Ombudsman Offices at 15 centers all over the country. The
names, addresses and area of operation of the Banking Ombudsmen have been given
in to Annexure ‘A’. Reserve Bank frames the guidelines for operationalizing the
Scheme and supervises the running of the Scheme. It also supervises the running of
the Scheme and administrative arrangements, budget and expenditure of the Banking
Ombudsman Offices.
3.5) POLICY FOR THE GRIEVANCES REDRESSAL OF THE

CUSTOMER COMPLAINTS
In the present scenario of competitive banking, excellence in customer service

is the most important tool for sustained business growth. Customer complaints are part
of the business life of any corporate entity. This is more so for banks because banks
are service organizations. As a service organization, customer service and customer
satisfaction should be the prime concern of any bank. The bank believes that
providing prompt and efficient service is essential not only to attract new customers,
but also to retain existing ones. This policy document aims at minimizing instances of
customer complaints and grievances through proper service delivery and review
mechanism and to ensure prompt redressal of customer complaints and grievances.
The review mechanism should help in identifying shortcomings in product features
and service delivery. Customer dissatisfaction would spoil bank’s name and image.
24
The Bank’s policy on grievance redressal follows the under noted principles:
1) Customers are treated fairly at all times.
2) Complaints raised by customers are dealt with courtesy and on time.
3) Customers are fully informed of avenues to escalate their complaints/grievances

within the organization and their rights to alternative remedy, if they are not fully
satisfied with the response of the bank to their complaints.
4) Bank will treat all complaints efficiently and fairly as they can damage the
bank’s reputation and business if handled otherwise. The Bank employees must work
in good faith and without prejudice to the interests of the customer.
In order to make bank’s redressal mechanism more meaningful and effective, a

structured system needs to be built up towards such end. Such system would ensure
that the redressal sought is just and fair and is within the given frame-work of rules
and regulation. The policy document would be made available at all branches. All
employees of the Bank should be made aware about the Complaint handling process.
The customer complaint arises due to:
1) The attitudinal aspects in dealing with customers.
2) Inadequacy of the functions/arrangements made available to the customers or

gaps in standards of services expected and actual services rendered.
The customer is having full right to register his complaint if he is not satisfied
with the services provided by the bank. Customer can give his complaint in writing,
orally or over telephone. If customer’s complaint is not resolved within given time or
if he is not satisfied with the solution provided by the bank, he can approach Banking
Ombudsman with his complaint or other legal avenues available for grievance
redressal.
25
KINDS OF OMBUDSMAN
BANKING OMBUDSMAN
INSURANCE OMBUDSMAN
INCOME TAX OMBUDSMAN
TELECOM OMBUDSMAN
ELECTRICITY OMBUDSMAN
S.E.B.I OMBUDSMAN
26
3.6) KINDS OF OMBUDSMAN
3.6.1) S.E.B.I. Ombudsman
The Securities Exchange Board of India (SEBI) under section 30 read with sub-
section (1) of section 11 of the SEBI Act, 1992, has framed the SEBI (Ombudsman)
Regulations, 2003, which were notified on 21stAugust 2003. The Regulations
provided for the establishment of the office of Ombudsman to redress the Grievance
of investors in securities and connected matters. The listed companies and registered
stock intermediaries have to disclose the name address and other particulars of
ombudsman in their for the benefit of the investors.
3.6.2) Electricity Ombudsman
The Electricity Regulatory Commission, under section 181 read with sub-section
(5) of section 42 of the Electricity Act, 2003, issues guidelines for establishment of
forum and Ombudsman for redressal of grievances of Electricity consumers. The
Delhi Regulatory Commission (DERC) vide its Notification dated 11thMarch, 2006
has issued DERC (Guidelines for establishment of Forum of redressal of grievance of
the consumer and Ombudsman) Regulations, 2003. It may be noted that the
Ombudsman is the Appellate Authority under the Electricity Act 2003, and the DERC
Regulations, 2003 and therefore an electricity consumer has to first approach the
Consumer Grievance Redressal Forum established under the DERC Regulations,
2003.
3.6.3) Tele Communication Ombudsman
The Telecom Regulatory Authority of India Act, 1997, empowers the Telecom
Regulatory Authority of India Act 1997, empowers the Telecom Regulatory Authority
of India (TRAI) to make the recommendations on laying down the standards of
quality of services to be provided by the services providers and conduct the interest of
the periodical surveys of Telecom services so as to protect the interest of the
consumers. The telecoms operators frequently threaten to disconnects the phones and
with draw the numbers given t o subscribers if the deadline for payment is missed by a
day or there is miscalculation of the tiniest amount. The TRAI is, however, neither
empowered to look into the grievances of individual customers nor take action against
27
the operators who do not meet quality of standards As there is no specialized body to
redress the grievance of telecom customers, they have to approach consumer forum
setup under THE Consumer Protection Act, 1986, or civil courts for Resolutions
adjudication of disputes.
3.6.4) Income-Tax Ombudsman
The government is considering creating an office of Income Tax Ombudsman to

protect individual taxpayer’s right. The Ombudsman will identify issues that increase
the compliance burden or create problems for taxpayers and bring those issues to the
attention of the ministry of Finance. The Ombudsman will make appropriate
legislative proposal where necessary and send periodical reports to the Department of
Revenue, suggesting appropriate action. It is proposed to initially setup offices of
Ombudsman at Delhi, Mumbai, Kolkata and Chennai.
3.6.5) Insurance Ombudsman
The Government of India, Minister of Finance, Department of Economics Affairs,
Insurance Division under section 114 (1) of Insurance Act, 1938, has framed the
“Redressal of Public Grievance Rules, 1998”, for appointment of Insurance
Ombudsman, which comes into force with effect from 11thNovember 1998. The
Insurance Ombudsman has started functioning from 1999, to provide for efficient,
cost effective and impartial settlement of claims and grievance of any person against a
Life or General Insurance in Public and private sector. The meaning of expression
‘any other person’ is wider than ‘consumer’ and therefore, even third party having
grievance with respect to an Insurance contract can approach the Ombudsman.
3.6.6) BANKING OMBUDSMAN (BO)
The Reserve Bank of India (RBI) first introduced the Banking Ombudsman
Scheme In1995 in terms of Section 35(A) of Banking Regulation Act 1949 and it was
revised in 2002 and 2006 to provide a system of quick and inexpensive redress of
customer grievances against banks.
28
Now let us discuss in detail about Banking Ombudsman and its mechanism as a
grievances redressal agency in next chapter.
3.7) BANKING OMBUDSMAN SCHEME 2006
This Scheme may be called the Banking Ombudsman Scheme, 2006 and shall
extend to the whole of India to the business in India of a bank as defined under the
Scheme. The Reserve Bank, if it is satisfied that it is expedient so to do, may by order
suspend for such period as may be specified in the order, the operation of all or any of
the provisions of the Scheme, either generally or in relation to any specified bank.
The office of the Banking Ombudsman shall be located at such places as

maybe specified by the Reserve Bank. In order to expedite disposal of complaints, the
Banking Ombudsman may hold sittings at such places within his area of jurisdiction
as may be considered necessary and proper by him in respect of a complaint or
reference before him. The Reserve Bank shall depute such number of its officers or
other staff to the office of the Banking Ombudsman as is considered necessary to
function as the secretariat of the Banking Ombudsman.
3.7.1) SHORT TITLE, COMMENCEMENT, EXTENT AND

APPLICATION
(1) This Scheme may be called the Banking Ombudsman Scheme, 2006.
(2) It shall come into force on such date as the Reserve Bank may specify.
(3) It shall extend to the whole of India.
(4) The Scheme shall apply to the business in India of a bank as defined under
the Scheme.
3.7.2) SUSPENSION OF THE SCHEME

29
(1) The Reserve Bank, if it is satisfied that it is expedient so to do, may by

order suspend for such period as may be specified in the order, the operation of
all or any of the provisions of the Scheme, either generally or in relation to any
specified bank.
(2) The Reserve Bank may, by order, extend from time to time, the period of any
suspension ordered as aforesaid by such period, as it thinks fit
3.7.3) APPOINTMENT AND TENURE OF BO
The Reserve Bank may appoint one or more of its officers in the rank of Chief
General Manager or General Manager to be known as Banking Ombudsman to carry
out the functions entrusted to them by or under the Scheme.
The appointment of Banking Ombudsman under the above Clause may be

made for a period not exceeding three years at a time.
3.7.4) POWERS AND JURISDICTION
(1) The Reserve Bank shall specify the territorial limits to which the authority
of each Banking Ombudsman appointed under Clause 4 of the Scheme shall
extend.
(2) The Banking Ombudsman shall receive and consider complaints relating to
the deficiencies in banking or other services filed on the grounds mentioned in
Clause 8 and facilitate their satisfaction or settlement by agreement or through
conciliation and mediation between the bank concerned and the aggrieved
parties or by passing an Award in accordance with the Scheme.
(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.
30
(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.
3.7.5) DUTIES AND FUNCTIONS OF BO
1) The Ombudsman shall enquire into and investigate in accordance with the
Provisions of the Act, and take action or steps as may be prescribed by the
Act and concerning:
a) Practices and actions by persons, enterprises and other private

institutions where complaints allege that violations of fundamental rights
and freedoms have taken place.
b) All instances or matters of alleged or suspected corruption and the

misappropriation of public moneys or other public property by officials.
2) Without derogating from the provisions, any request or complaint in

respect of instances or matters referred to in that provisions, may include
any instance or matter in respect of which the Ombudsman has reason to
suspect:
a) That the provisions of any law or under the authority of the State or by
any person in its employment, or that any practice is so followed, in a
manner which is not in the public interest.
b) That the powers, duties or functions which vest in the State or, body or
institution, or any person in its employment are exercised or performed
in an irregular manner.
31
3) That moneys forming part of the funds of the State or body or institution, or
received or held by or on behalf of the State or body or institution are being
or have been dealt with an irregular manner.
4) Any person wishing to lay any instance or matter referred to in provisions

before the Ombudsman shall do so in such manner as the Ombudsman may
determine or allow.
5) The Ombudsman shall not be required to investigate any instance or matter

referred to in the provisions which has been laid before him or her under the
provisions when the grounds on account of which the inquiry is desired is in
the opinion of the Ombudsman.
The provisions shall not apply in respect of any decision taken in or in connection
with any civil or criminal case by a court of law.
3.7.6) GROUNDS OF COMPLAINTS LODGED UNDER BO
The type and scope of the complaints which may be considered by a Banking
Ombudsman is very comprehensive, and it has been empowered to receive and
consider complaints pertaining to the following :
1) Non-payment or inordinate delay in the payment or collection of cheques,

drafts, bills, etc.;
2) Non-acceptance, without sufficient cause, of small denomination notes

tendered for any purpose, and for charging of commission for this service;
3) Non-acceptance, without sufficient cause, of coins tendered and for charging of

commission for this service;
4) Non-payment or delay in payment of inward remittances ;
5) Failure to issue or delay in issue, of drafts, pay orders or bankers’ cheques;
6) Non-adherence to prescribed working hours;

32
7) Failure to honor guarantee or letter of credit commitments;
8) 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;
9) Delays, non-credit of proceeds to parties' accounts, non-payment of deposit or

non-observance 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 ;
10)Delays in receipt of export proceeds, handling of export bills, collection of bills

etc., for exporters provided the said complaints pertain to the bank's operations
in India;
11)Refusal to open deposit accounts without any valid reason for refusal;
12)Levying of charges without adequate prior notice to the customer;
13)Non-adherence by the bank or its subsidiaries to the instructions of Reserve

Bank on ATM/debit card operations or credit card operations;
14)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);
15)Refusal to accept or delay in accepting payment towards taxes, as required by

Reserve Bank/Government;
16)Refusal to issue or delay in issuing, or failure to service or delay in servicing or

redemption of Government securities.
17)Forced closure of deposit accounts without due notice or without sufficient

reason;
18)Refusal to close or delay in closing the accounts;
19)Non-adherence to the fair practices code as adopted by the bank; and
20)Any other matter relating to the violation of the directives issued by the
Reserve Bank in relation to banking or other services.
33
Vide their Circular No.CSD.BOS.4638/13.01.01/2006-07 dated May 24, 2007, the

Reserve Bank of India has amended their Banking Ombudsman Scheme, 2006 and the
scheme shall be operative with amended effect.
A customer can also lodge a complaint on the following grounds of deficiency in

service with respect to loans and advances:
1) Non-observance of Reserve Bank Directives on interest rates;
2) Delays in sanction, disbursement or non-observance of prescribed time

schedule for disposal of loan applications;
3) Non-acceptance of application for loans without furnishing valid reasons to the

applicant; and
4) 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, as the case
may be;
5) 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.
6) The Banking Ombudsman may also deal with such other matter as may be
specified by the Reserve Bank from time to time.
3.7.7) COMPLAINTS NOT TO BE CONSIDERED BY BO
One’s complaint will not be considered by Banking Ombudsman if:
a) One has not approached his bank for redressal of his grievance first.
b) One has not made the complaint within one year from the date one has received the
reply of the bank or if no reply is received if it is more than one year and one month
from the date of representation to the bank.
c) The subject matter of the complaint is pending for disposal / has already been deal
with at any other forum like court of law, consumer court etc.
34
d) Frivolous or vexatious.
e) The institution complained against is not covered under the scheme.
f) The subject matter of the complaint is not within the ambit of the Banking
Ombudsman.
g) If the complaint is for the same subject matter that was settled through the office of
the Banking Ombudsman in any previous proceedings.
3.7.8) PROCEDURE FOR FILING A COMPLAINT BEFORE BO:
1) Any person who has a grievance against a bank on any one or more of the
grounds mentioned in Clause 8 of the Scheme may, 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.
2) 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 located and not the place where the bank
concerned or the credit card processing unit is located.
3) 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.
4) The complainant shall file along with the complaint, copies of the documents,
if any, which he proposes to rely upon and also a declaration that the
complaint is maintainable as per clause 9(3) of the Scheme.
5) A complaint can also be made through electronic means.
6) The complainant shall before making a complaint to the Banking Ombudsman,

make a written representation to the bank.
7) 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 if the complainant is not satisfied with
the reply given to him by the bank.
35
8) 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 received, not later than one year and one
month after the date of the representation to the bank.
9) 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 of the parties concerned with the
subject matter.
10) 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.
11) The complaint should not be frivolous or vexatious in nature.
12) The complaint should be made before the expiry of the period of
limitation prescribed under the Indian Limitation Act, 1963 for such claims.
3.7.9) 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 anyother
bank concerned with the complaint to provide any information or furnishcertified
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
36
discharging his duties and shall not disclose such information or document to any
person except with the consent of the person furnishing such information or
document.
Provided that nothing in this clause shall prevent the Banking Ombudsman
from disclosing information or document furnished by a party in a complaint to the
other party or parties to the extent considered by him to be reasonably required to
comply with any legal requirement or the principles of natural justice and fair play in
the proceedings.
3.7.10) SETTLEMENT OF COMPLAINT BY AGREEMENT
(1) As soon as it may be practicable to do, the Banking Ombudsman shall send
a copy of the complaint to the branch or office of the bank named in the complaint,
under advice to the nodal officer referred to in Sub Clause (3) of Clause 15, and
endeavour to promote a settlement of the complaint by agreement between the
complainant and the bank through conciliation or mediation.
(2) For the purpose of promoting a settlement of the complaint, the Banking
Ombudsman may follow such procedure as he may consider just and proper and he
shall not be bound by any rules of evidence.
(3) The proceedings before the Banking Ombudsman shall be summary in

nature.
3.7.11) AWARD BY THE BANKING OMBUDSMAN
37
(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 by wayof 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 lakh 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.
(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 under Sub Clause (1) of clause 14.
(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 (8), comply with the Award and
intimate compliance to the Banking Ombudsman.
38
3.7.12) GROUNDS FOR REJECTION OF COMPLAINT BY BO:
The Banking Ombudsman may reject a complaint at any stage if it appears to him
that a complaint made to him is:
(a) Not on the grounds of complaint referred to in Clause 8 or otherwise not in

accordance with Sub Clause (3) of clause 9; or
(b) Beyond the pecuniary jurisdiction of Banking Ombudsman prescribed

under Clause 12 (5) and 12 (6) 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
(f) In the opinion of the Banking Ombudsman there is no loss or damage or

inconvenience caused to the complainant.
3.7.13) APPEAL BEFORE THE APPELLATE AUTHORITY:
If one is not satisfied with the decision passed by the Banking Ombudsman, one
can approach the appellate authority against the Banking Ombudsman’s decision.
Appellate Authority is vested with a Deputy Governor of the RBI.
One can also explore any other recourse and/or remedies available to him/her as per
the law. The bank also has the option to file an appeal before the appellate authority
under the scheme.
Any person aggrieved by an Award under clause 12 or rejection of a complaint for

the reasons referred to in sub clauses (d) to (f) of clause 13, may within 30 days of the
39
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 clause 12;
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.
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) Send 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 modified award; or
e) Pass any other order as it may deem fit.
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.
40
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.
CHAPTER – IV
DIFFERENCE BETWEEN
BANKING OMBUDSMAN
SCHEME 1995, 2002 & 2006
41
4.1) INTRODUCTION
The Ombudsman’s task is to provide citizens with a means of redress for

maladministration. By performing this role, the Ombudsman helps, first, to relieve the
burdens of litigation by promoting friendly settlement and making recommendations
to avoid the need for proceedings in courts; and second, to promote the effective
implementation of citizen's rights. The Ombudsman is impartial and has a conciliatory
approach.
In India, any person whose grievances against a bank are not resolved to his
satisfaction by that bank within a period of two months then he can approach the
Banking Ombudsman for redressal. This is however subject to the complaint
pertaining to any of the matters specified in the Banking Ombudsman Scheme.
42
Reserve Bank of India (RBI) which assumes the role similar to that of quasi-
legal machinery as it is established by a competent authority to provide for an
additional but optional legal remedy for effective, expeditious and inexpensive
redressal of customer grievances. Towards effective compliance of this optional legal
remedy it introduced the Banking Ombudsmen Scheme in 1995 and got it further
amended in 2002 and in 2006.
The Reserve Bank of India notified the revised Banking Ombudsman Scheme,
2006 which came into effect from January 1, 2006. The new scheme widens its scope
thereby to include customer complaints on certain areas like credit card complaints,
deficiencies in providing the promised services even by banks’ sales agents, levying
service charges without prior notice to the customer and non- adherence to the fair
practices code as adopted by the individual banks. It is made applicable to all
commercial banks, regional rural banks and scheduled primary cooperative banks
whose principal place of business is in India.
The Revised Scheme with well-equipped staff is wholly funded by the Reserve
Bank of India. This new scheme allows the complainants to file a complaint in any
form, including online and the bank customers are entitled to file an appeal with the
Reserve Bank of India. It provides a forum for bank customers for redressal of their
common complaints against banks. On the basis of the new Banking Ombudsman
Scheme, 2006 the customers are also privileged to complain about non-payment or
any inordinate delay in payments or collection of cheques towards bills or remittances
by banks, as also non acceptance of small denomination notes and coins or charging
of commission for acceptance of small denomination notes and coins by banks. The
Banking Ombudsmen currently have their offices in 15 centers covering the entire
country.
4.2) IS THE NEW BANKING OMBUDSMAN SCHEME 2006

DIFFERS FROM ITS PREVIOUS SCHEMES?
43
The vision behind the emergence of Banking Institution is to evolve into a

strong, sound and globally competitive financial system, providing integrated services
to customers from all segments, leveraging on technology and human resources,
adopting the best accounting and ethical practices and fulfilling corporate and social
responsibilities towards all stakeholders. As a part of this vision, the RBI lodged
various Ombudsman schemes till today which forms a part of our discussion.
Yes, the new scheme 2006 differs from its previous schemes. The extent and
scope of the scheme, 2006 is much wider than its earlier schemes of 1995 and 2002.
Because the new scheme introduces for the first time;
1)Includes complaints relating to credit cards, deficiencies in providing the

promised services by banks and its marketing agents, levying of service charges
without prior notice to the customers and non-compliance of fair practice codes by the
banks;
2) Facilitates the submission of complaints through online;
3) Establishes an appellate authority to facilitate appeals against the awards

rendered by the Banking Ombudsmen instead of filing with the Review Authority for
review of such awards.
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.
In exercise of the powers conferred by Section 35A of the Banking Regulation

Act, 1949 and in partial modification of its Notification dated December 26, 2005,
Reserve Bank of India hereby amends the Banking Ombudsman Scheme 2006 to the
extent specified in the Annex hereto. The Reserve Bank hereby directs that all
commercial banks, regional rural banks and scheduled primary co-operative banks
shall comply with the Banking Ombudsman Scheme, 2006 as amended hereby. The
amendments in the Scheme shall come into force from January 1, 2006.
44
4.3) AMENDMENT PASSED BY RBI FOR THE CHANGES IN

BANKING OMBUDSMAN SCHEME, 2006:
Amendment 1:
RBI expands Scope of Banking Ombudsman Scheme; Includes Fair
Banking Practices.
Date: 26 Dec 2005
The Reserve Bank of India today announced the revised Banking Ombudsman
Scheme with enlarged scope to include customer complaints on certain new areas,
such as, credit card complaints, deficiencies in providing the promised services even
by banks' sales agents, levying service charges without prior notice to the customer
and non adherence to the fair practices code as adopted by individual banks.
Applicable to all commercial banks, regional rural banks and scheduled primary
cooperative banks having business in India, the revised scheme will come into effect
from January 1, 2006.
In order to increase its effectiveness, the revised Banking Ombudsman Scheme

will be fully staffed and funded by the Reserve Bank instead of the banks. Under the
revised Banking Ombudsman Scheme, the complainants will be able to file their
complaints in any form, including online. The bank customers would also be able to
appeal to the Reserve Bank against the awards given by the Banking Ombudsmen.
The new scheme provides a forum to bank customers to seek redressal of their
most common complaints against banks, including those relating to credit cards,
service charges, promises given by the sales agents of banks, but not kept by banks, as
also, delays in delivery of bank services. The bank customers would now be able to
complain about non-payment or any inordinate delay in payments or collection of
cheques towards bills or remittances by banks, as also non- acceptance of small
denomination notes and coins or charging of commission for acceptance of small
denomination notes and coins by banks.
45
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 Scheme was revised
in 2002 mainly to cover Regional Rural Banks and to permit review of the Banking
Ombudsmen’s 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
2005-2006 announced by the Governor, Dr Y V Reddy in April 2005.
Amendment 2:
Customers can now appeal against the Banking Ombudsman's
Decision.
Date: 24 May 2007
Bank customers can now appeal against the decision of the Banking
Ombudsman where he has rejected the customer's complaint relating to matters falling
within the grounds of complaints specified under the scheme. The Reserve Bank of
India has amended the Banking Ombudsman Scheme, 2006 to enable the customers to
appeal against the Banking Ombudsman's decision. The amendments are available on
the RBI website. Before the scheme was amended, the bank customers could appeal
only against the awards given by the Banking Ombudsman. The appellate authority
for the Banking Ombudsman Scheme is the Deputy Governor of Reserve Bank of
India.
It may be recalled that in the Annual Policy for 2007-2008, the Reserve Bank
had announced that based on customer feedback, it would amend the Banking
46
Ombudsman Scheme, 2006 to extend the appeal option also to the decisions of the
Banking Ombudsman.
Originally introduced in 1995, the Banking Ombudsman Scheme enables

speedy and cost effective resolution of complaints of bank customers relating to
deficiency in bank services. The Scheme now covers all Scheduled Commercial
Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks. The
customers can also now complain to the Banking Ombudsman against deficiency in
almost any banking services, including credit cards, after exhausting the channel
available with the bank concerned for resolving their complaints. The Reserve Bank
has appointed 15 Banking Ombudsmen who are located mostly in State Capitals under
the Scheme. The Banking Ombudsman tries to resolve the complaint through
conciliation or mediation and even passes an award if it is not resolved through such
settlement.
Amendment 3:
RBI amends Banking Ombudsman Scheme: includes complaints
relating to Internet Banking and Non-adherence to BCSBI Code.
Date: 05 Feb 2009
The Reserve Bank of India has widened the scope of its Banking Ombudsman
Scheme 2006, to include deficiencies arising out of internet banking. Under the
amended Scheme, a customer would also be able to lodge a complaint against the
bank for its non-adherence to the provisions of the fair practices code for lenders or
the Code of Bank's Commitment to Customers issued by the Banking Codes and
Standards Board of India (BCSBI). The BCSBI is an independent and autonomous
watchdog set up by the Reserve Bank to monitor and ensure that the codes and
standards adopted by the banks for rendering banking services are adhered to in true
spirit.
As per the amended Scheme, the Banking Ombudsman can award

compensation not exceeding Rupees one lakh to the complainant in the case of
47
complaints arising out of credit card operations, taking into account the loss of the
complainant's time, expenses incurred by him as also, harassment and mental anguish
suffered. Further, non-observance of the Reserve Bank's guidelines on engagement of
recovery agents by banks has also been brought specifically under the purview of the
Scheme.
Any customer who has a grievance against a bank can complain to the Banking
Ombudsman in whose jurisdiction the branch of the bank complained against is
located. Some banks have centralized certain transactions, like housing loans, credit
cards, etc. If there are complaints regarding such transactions, complaints would have
to be made to the Banking Ombudsman in the State in which the bank customer
receives the bill.
In addition, the Reserve Bank has simplified the format for lodging complaint
to the Banking Ombudsman. Though the complainant need not lodge his complaint in
a specific format, the Scheme now provides for an easy-to-fill format for lodging
complaints, in case complainants prefer to use it. The jurisdictions of the Banking
Ombudsman at Kanpur, New Delhi, Chandigarh, Chennai and Thiruvananthapuram
have been rationalized to include/exclude certain areas taking into account the
geographical proximity of those areas to the Office of the Banking Ombudsman.
The amended Scheme however, does not include certain banking transactions,
such as, failure to honor bank guarantee or letter of credit, etc. Complaints on these
areas of banking services are insignificant in number.
48
CHAPTER – V
CONSUMER GRIEVANCES
DURING 2007 – 2010
49
5.1) NUMBER OF COMPLAINTS RECEIVED
The Banking Ombudsman Offices receive complaints pertaining to deficiency

in service provided by banks. The number of complaints received has increased
substantially over the years and this trend is maintained during the year 2009-10 also
by recording an increase of 15% over the previous year.
Table 1 - Number of complaints received by the BO Offices

Period No. of BO offices No. of complaints Rate of increase (%
received during the over previous year)
year
2005-06 15 31,732 20
2006-07 15 38,638 22
2007-08 15 47,887 24
2008-09 15 69,117 44
2009-10 15 79,266 15
The number of complaints received has recorded substantial increase since

2006 as new grounds of complaints such as credit card issues, failure in providing the
promised facilities, non-adherence to fair practices code and levying of excessive
charges without prior notice, etc were included in the Scheme. Further, internet
banking related complaints were added as a new ground for complaint as per the
February 3, 2009 amendment of the Scheme. Increased awareness among the public
50
about the BOS and online accessibility to BO office through internet also contributed
to the increase in receipt of complaints.
Chart 1 - Number of complaints received
5.2) BO OFFICE WISE RECEIPT OF COMPLAINTS

The 15 Offices of the Banking Ombudsman receive and consider complaints from
customers relating to the deficiencies in banking services in respect to their territorial jurisdiction.
The current territorial jurisdiction is given in Annex1.
Table 2- BO Office-wise Receipt of Complaints

BO No. of complaints received during % % to
Office increase total
in 2009- complain
10 over ts
2007 2008- 2009-10 2008-
-08 09 09
Ahmeda 2855 3732 4149 11 5.2
bad
Bangalor 2975 3255 3854 18 4.9
e
Bhopal 3402 3375 3873 15 4.9
Bhubane 998 1159 1219 5 1.5
swar
Chandig 2331 2634 3234 23 4.1
arh
Chennai 4545 10381 12727 23 16.10
Guwahat 282 455 528 16 0.6
i
51
Hyderab 2843 3961 5622 42 7.1

ad
Jaipur 3369 3688 4560 24 5.8
Kanpur 5340 7776 7832 1 9.9
Kolkata 2815 3671 5326 45 6.7
Mumbai 6070 9631 10058 5 12.7
New 6742 10473 12045 15 15.20
Delhi
Patna 1480 2110 1707 - 2.2
Thiruvan 1840 2816 2532 - 3.2
an-
thapura
m
Total 47887 69117 79266 15% 100%
Four BO offices at Chennai, New Delhi, Mumbai and Kanpur accounted for
54% of all the complaints in that order, with Chennai at 16.10%, followed by New
Delhi 15.20%, Mumbai 12.7% and Kanpur at 9.9%. Among other BO offices,
Hyderabad accounted for 7.1% of the complaints followed by Kolkata 6.7%.
Percentage wise, Kolkata office witnessed the highest increase in the number of
complaints 45% during the year, followed by Hyderabad 42%.
Chart 2 - BO Office wise Receipt of Complaints
5.3) AVEARAGE NUMBER OF COMPLAINTS RECEIVED
52
Average number of complaints received per BO office is also on the increase

due to enlargement of the scope of the Scheme coupled with the awareness
programmes undertaken by the BO offices on a regular basis.
Table 3 - Average Number of Complaints received per BO Office
Period No. of BO offices No. of Average No. of

complaints complaints
received during received per BO
the year office
2005-06 15 31732 2115

2006-07 15 38638 2576
2007-08 15 47887 3192
2008-09 15 69117 4608
2009-10 15 79266 5284
On an average, each BO office handled 5284 complaints during the current

year as compared to just 2115 complaints during the year 2005-06, indicating the
popularity of the Scheme.
Chart 3 – Average number of Complaints received per BO Office
53
5.4) REGION – WISE RECEIPT OF COMPLAINTS
The offices of the Banking Ombudsman received maximum number of

complaints from rural and metropolitan areas during the year 2009-10. This is a
testimony to the success of the awareness efforts undertaken by the Offices of the
Banking Ombudsman as well as the RBI Regional Offices through personal/village
visits, media campaign etc. During the year, the RBI had celebrated its platinum
jubilee and all offices including Central Office Departments had conducted outreach
programmes. Further, Top Executives of the Bank had visited very remote and
moffusil areas of the country as a part of outreach activity of Platinum Jubilee year
celebrations. The detailed region wise position of complaints is given below:
Table 4- Region-wise receipt of Complaints at the BO Offices
Region No of No of No of % increase
complaints complaints complaints
received received received
during during during
2007-08 2008-09 2009-10
Rural 8418 13915 25,055 (32%) 80%
Semi Urban 6641 9817 10,741(14%) 9%
Urban 10,978 15,723 16,423 (20%) 5%
Metropolita 21,850 29,662 27,047(34%) (-) 9%
54
n
Total 47,887 69,117 79,266 15%
(100%)
While the number of complaints from rural areas increased by 80 % during the
year 2009-10, complaints from the semi-urban areas increased by 9 % only. On the
other hand, complaints from the metros had decreased by 9%. These figures can be
well compared against the total increase in the number of complaints by 15 %.
Chart 4 – Region wise receipt of Complaints
5.5) MODEWISE RECEIPT OF COMPLAINTS

Complainants can log on to the RBI web site at “www.rbi.org.in” and complain
about deficiency in bank’s services by using the online complaint form. The email ids
of the Banking Ombudsmen are also available in the public domain and complainants
can send emails to them. For those who have no access to internet, complaints can be
sent by post. During the year 2007-08, 2008-09 and 2009-10 the complaints received
by different modes are as under:
Table 5 - Mode wise Receipt of Complaints at the BO Offices

55
Mode No. of Complaints No. of Complaints No. of Complaints

received during received during received during
2007-08 2008-09 2009-10
No. % No. % No. %
Email 7183 15% 15,927 23% 9221 12%
On line 7662 16% 9352 14% 11,400 14%
Letter, 33,042 69% 43,838 63% 58,645 74%
post-
card,
Fax,
etc.
Total 47,887 100 69,117 100 79,266 100
Since 46% of the complaints are received from the rural (32%) and semi urban
(14%) areas, the receipt of complaints through the postal mode has increased from
63% to 74% during the current year, indicating the less access to internet facilities in
the rural/semi urban areas as compared to the urban and metro. Email complaints have
decreased from 23 % to 12 % of the total complaints during the year.
Chart 5 – Mode wise Receipt of Complaints
The Complaint Tracking Software in place in the Banking Ombudsman Office

gives acknowledgement automatically and complaint number is given as soon as it is
56
taken into the book of the Banking Ombudsman. The Complaint Tracking Software is
updated from time to time to meet the changing requirements related to complaints.
5.6) NATURE OF COMPALINTS HANDLED

The grounds of complaints have been enumerated in Clause 8 of the Banking
Ombudsman Scheme 2006. The following Table gives the broad category wise
complaints received during the last three years:-
Table 6 - Category-wise receipt of complaints
Nature of Complaints Received during % to aggregate complaints

complaints
200 2008-09 2009-10 2008- 2009-
7-08 09 10
Deposit 5,612 6,706 3,681 9.7 4.7
accounts
Remittances 5,213 5,335 5,708 7.7 7.2
Credit cards 10,129 17,648 18,810 25.5 23.7
Loans and 6,054 8,174 6,612 11.8 8.3
advances -
Charges 3,740 4,794 4,764 6.9 6.0
without
notice
Pension 1,582 2,916 4,831 4.2 6.1
Failure to 6,388 11,824 11,569 17.2 14.6

meet
commitments
DSAs and 3,128 3,018 1,609 4.4 2.0
recovery
agents
Notes and 141 11 158 0.2 0.2
coins 3
Others 5,900 8,589 18,840 12.4 23.8
Out of - - 2,684 - 3.4
Subject
57
Total 47,887 69,117 79,266 100.00 100.00
Complaints relating to credit cards (comprising 24 % of the total complaints in

2009-10 as compared to 25.5% previous year) show a declining trend this year. These
complaints include complaints related to debit cards and ATM cards also. The types of
card-related complaints consists of items like issuance of unsolicited credit cards and
unsolicited insurance policies and recovery of premium charges, charging of annual
fee in spite of being offered as ‘free’ card and issuance of loans over phone, disputes
over wrong billing, settlement offers conveyed telephonically, non-settlement of
insurance claims after the demise of the card holder, abusive calls, excessive charges,
wrong debits to account, non dispensation of money from ATM, etc . A general
source of these complaints continues to be the difficulty in accessing the credit card
issuers and the poor response from the call centers. Simply put, this is the issue of
non-transparency and mis-selling.
Complaints under the head ‘Others’ constituted 24 % of the total complaints as
against 12.4% during the previous year. These include mainly non-adherence to
prescribed working hours, refusal to accept or delay in accepting payments towards
taxes as required by RBI/ Government of India, refusal to accept/delay in issuing or
failure to service or delay in servicing or redemption of Government securities, refusal
to close or delay in closing of accounts, etc. These complaints are of very Primary in
nature and need not had to be escalated to the offices of BOs and should have been
redressed at individual banks’ level.
Complaints relating to failure on commitments made (non-adherence to fair
practices code as adopted by the bank, failure to provide or delay in providing banking
facilities other than loans and advances etc.) ranked the third major item of complaint
this year at 15 % of the total complaints as compared to 18% during the previous year
and showing a declining trend. This points to the lack of sensitivity, transparency and
need for improved MITC at the point of sales. As these complaints mostly relate to
basic banking facilities, banks need to address these issues on priority basis without
any demur.
Chart 6 – Nature of Complaints Handled
58
5.7) DISPOSAL OF COMPLAINTS

A brief profile of the complaints disposed of by BO offices during the year is
given below:
59
Table 7 - Disposal of Complaints by BO Offices
Particulars 2005-06 2006-07 2007- 2008-09 2009-10

08
Complaints 33,363 44,766 54,992 75,009 88,699

received during the
year including
complaints brought
forward from
previous year
Comp No. 27,193 37,661 49,10 65,576 83,336

laints 0
dispos
ed of
durin
g the % 82 84 8 87 94
year 9
Comp No. 6,170 7,105 5,892 9,433 5,363

laints
carrie
d
forwa
% 18 16 1 13 6
rd to
1
next
year
Chart 7 – Disposal of Complaints
60
Banking Ombudsman Offices disposed of 94% (83,336) of the 88,699

complaints received during the year 2009-10, as against disposal of 87% of the
complaints received during previous year, indicating promptness in disposal of cases
at all the BO offices.
5.8) CONCILIATION OF MEETINGS
Conciliation meetings which enable two parties to meet “face to face” have
played an important role in the process of resolution of complaints. Although,
Banking Ombudsman does not force parties to come to settlement, such meetings
facilitate them to come to their own solution rather than have a solution imposed on
them by way of an award. During the year, as many as 31278 complaints were settled
by the BO offices after holding conciliation meetings and other persuasive efforts.
Thus, the objective of the BO Scheme (expeditious and inexpensive resolution of
customer complaints without having to examine elaborate documentary evidences)
could be satisfactorily achieved to a large extent by promoting settlement by mutual
consent.
5.9) REJECTED COMPLAINTS
61
Table 8 - Reasons for Rejection

Reasons Complaints rejected during
2007-08 % 2008-09 2009- %
% 10
First 7,950 40 18,18 42 16,163 31

resort 7
complaint
s
Time 260 1 510 1 642 1
barred
complaint
s
Complain 333 2 804 2 1,357 3
ts dealt
earlier
Complain 476 2 707 2 948 2
ts
pending
in other
forum
Frivolous 137 1 194 1 132 -
complaint
s
Incomplet 434 2 3,019 7 6,337 12

e address
etc
Complain 3,249 16 4,764 11 6,301 12
ts without
sufficient
cause
Not 706 4 806 2 626 1
pursued
by the
complain
ants
Complica 478 2 512 1 2,514 5
ted,
requiring
elaborate
evidence
No loss to 547 3 143 0 511 1
the
complain
ants
Complain 3,673 19 10771 25 12,006 23
ts outside
the
scheme
62
Bank 1,492 8 2,698 6 4,310 9

branches
outside
BO
jurisdictio
n-
Total 19735 100 43115 100 51,847 100
Although as much as 51847 complaints were shown as rejected during the year,
it may be mentioned that, as stated in paragraph 5.2, in most of these cases, the
Scheme could provide relief to the complainant to a large extent by way of reversal of
bank charges, overdue interest, over limit charges, partial settlement/ write off of
overdue, etc during the process of resolution.
5.10) FIRST RESORT COMPLAINTS (19.4% of total complaints
handled)
First resort complaints accounted for the highest percentage of complaints

rejected (31 % in 2009-10 as against 42 % in 2008- 09 and 40 % in 2007-08). High
percentage of first resort complaints indicates greater faith of the complainants in the
institution of the BO Scheme rather than in their banks or the inept handling of
customer’s complaints by front line staff in the banks. While this highlights the
marked increase in the customer awareness about the BO Scheme, it also points to the
requirement of educating the public to lodge their complaints first with the bank
concerned, and to approach the BO later, if they are not satisfied with the response
from the bank. While rejecting such complaints, one copy of the complaint is
endorsed to the bank concerned. The banks were generally prompt in redressing such
complaints forwarded to them. Thus, although no data is available as to the exact
number of such complaints redressed, it is our experience that very few first resort
complaints rejected by BOs were received back. It could be that the reference to BO
has helped the complainants to get their grievances redressed from the banks
concerned.
5.11) COMPLAINTS OUTSIDE THE BO SCHEME (14.4% of total

complaints handled)
The second-highest cause of rejection is due to ‘complaints outside the

Scheme’ (23 % of rejected complaints in 2009-10 as against 25 % in 2008-09 and 19
% in 2007- 08), indicates that the customer awareness campaigns need to be more
fine-tuned and focused. These complaints were also rejected after initial scrutiny.
63
However, copies of these complaints, as in the case of first resort complaints, were
endorsed to the banks concerned. Banks were generally prompt in redressing the cases
forwarded to them. In several cases, banks have kept BO informed of the redressal
measures taken on these complaints. Some of these complaints were sent to other RBI
departments like Department of Banking Supervision, Department of Banking
Operations and Development, Department of Non Banking Supervision, Rural
Planning and Credit Department, etc or other organizations like Securities and
Exchange Board of India, Insurance Regulatory and Development Authority for
redressal.
5.12) COMPLAINTS MADE WOTHOUT SUFFICIENT CAUSE

(7.7% of total complaints handled)
Complaints made without sufficient cause constituting 12% of the rejected

complaints represent those complaints where the banks concerned may have acted as
per the covenants of the products and service contracts. Here also the complaints will
be processed as usual and a decision taken to reject the complaint as it was made
without sufficient cause.
5.13) REJECTION DUE TO OTHER REASONS (20.5% of the total

complaints)
Such complaints constituting 44% of the rejected complaints were rejected due
to reasons like Complicated complaints requiring elaborate evidence, bank branches
outside the BO jurisdiction, Not pursued by the complainants, No loss to the
complainants, incomplete address, complaints dealt with earlier, Frivolous complaints,
Complaints pending in other forum etc as shown in Table 13. Rejection of such
complaints will be done only after giving proper opportunities to both the parties and
due examination of bank’s submissions.
Chart 8- Reasons for Rejection of complaints

64
Pending Position of Complaints at BO Offices

Table 9- Details of complaints pending at the end of the year
Period of No. of cases pending
pending 2007-08 % to total 2008-09 % to total 2009-10 % to total
pending pending pending
Up to 1 2712 46 5041 54 2787 52
month
1-2 1394 24 2751 29 1526 28
months
2-3 861 14 956 10 808 15
months
More than 925 16 685 7 242 5
3 months
Total 5892 100 9433 100 5363 100
As regards pendency, only 6% of the complaints received during the current

year were carried forward to the next year as against carry forward position of 13%
during the previous year. Only 15% of the pending complaints were outstanding for
more than 2 months and 5% for more than 3 months as compared to 10 % and 7 %
respectively during the previous year. This indicates substantial improvement in
prompt disposal of complaints due to the close follow-up, both by the BOs and Top
Management. The complaints not accompanied by documentary evidence, unusually
long time given to the concerned banks to respond to queries, etc mostly contributed
to the delay in disposing of the complaints.
Chart 9 – Complaints pending for more than three months
65
Table No. 10 - BO Office Staff-wise complaints received

Office 2007-08 2008-09 2009-10
No. of No. of No. of No. of No. of No. of No. of No. of No. of
com- officers com- com- officers com- com- officers com-
plaint plaint plaint plaint plaint plaints
s s per s re- s per s re- per
receiv officer ceived officer ceived officer
ed
Ahmed 2855 9 317 3732 14 267 4149 15 277
abad
Bangal 2975 10 297 3255 9 362 3854 10 385
ore
Bhopal 3402 7 486 3375 7 482 3873 9 430
Bhuba 998 3 333 1159 4 290 1219 5 244
neswar
Chandi 2331 9 259 2634 11 240 3234 12 270
garh
Chenn 4545 20 227 10381 16 649 12727 19 670
ai
Guwah 282 6 47 455 5 91 528 5 106
ati
Hydera 2843 9 316 3961 13 305 5622 14 402
bad
Jaipur 3369 9 374 3688 10 369 4560 11 415
Kanpu 5340 19 281 7776 17 457 7832 17 461
r
Kolkat 2815 6 469 3671 13 282 5326 15 355
a
Mumb 6070 9 674 9631 13 741 10058 13 774
ai
New 6742 13 519 10473 17 616 12045 17 709
Delhi
Patna 1480 9 164 2110 6 352 1707 6 285
Thiruv 1840 7 262 2816 6 469 2532 6 422
anan-
thapur
am
All 47887 145 330 69117 161 429 79266 174 456
66
India
Thus the BO office “Staff-wise complaints received “position is the highest in

Mumbai (774 complaints per staff per year), followed by New Delhi (709), Chennai
(670) and Kanpur (461) as against the BO average of 456 complaints per staff per
year, indicating the urgency in augmenting the staff position in these four offices on a
priority basis so as to keep the quality of the decisions.
Chart 10 – BO office Staff-wise complaints received
67
CHAPTER – VI
FINDINGS AND CONCLUSIONS
6.1) FINDINGS
1) During 2009-10, the Banking Ombudsmen (BO) received 79, 266 complaints,
recording an increase of 15 per cent from 69,117 complaints received in 2008-
09. The rate of increase, however, dropped significantly – from 44 per cent in
2008-2009 to 15 per cent in 2009-2010. The number of complaints increased
mainly due to awareness campaigns carried out by the Banking Ombudsmen
(BOs) and various proactive measures taken by the Reserve Bank.
2) BO offices at Chennai accounted for maximum receipt of complaints (16.10
per cent), followed by New Delhi at 15.20 per cent, Mumbai at 13.7 per cent
and Kanpur 9.9 per cent.
68
3) The average number of complaints received per BO office increased to 5,284

during 2009-2010 as against 4,608 complaints received during 2008-09.
Chennai BO office alone received as many as 12,727 complaints, followed by
BO, New Delhi (12,045), Mumbai (10,058) and Kanpur (7,832).
4) The number of complaints from rural and metropolitan areas increased during
the year 2009-10. Complaints received from metropolitan areas constituted 34
per cent of total complaints, followed by rural areas at 32 per cent, urban areas
at 20 per cent and semi urban areas at 14 per cent. This was mainly due to the
awareness efforts undertaken by the Banking Ombudsmen as well as the
Reserve Bank through personal/ village visits, media campaign, etc.
5) Credit cards related complaints at 24 per cent of the total complaints formed a
significant proportion followed by complaints relating to 'Failure to meet
commitments made' (non adherence to fair practices code as adopted by banks)
at 15 per cent. Complaints related to loans and advances at 8 per cent,
remittance related complaints (7 per cent), deposits related complaints (5 per
cent), pension related complaints (6 per cent).
6) During 2009-10, Banking Ombudsmen disposed off 94 per cent of the total
complaints received (87 per cent in the previous year). Out of 5363 complaints
pending as on June 30, 2010, only five per cent (242) complaints were pending
for more than three months as against seven per cent in the previous year.
7) While the cost of running the Scheme through 15 offices of BO in the country
at Rs.19.74 crore recorded an increase of 29 per cent over the previous year,
the average cost per complaint remained at Rs. 2368 - the same level as that of
the last year. This was due to increase in the number of complaints
received/dealt with.
Using the feedback received from BOs, the Reserve Bank took many proactive
customer-centric initiatives. Some illustrations:
1) Agency banks were directed to pay compensation at Bank rate + 2 per cent
penalty for delay in payment of pension dues.
2) Banks were advised to pay compensation of Rs. 100 per day to the
complainants for delay in resolving complaints in respect of failed ATM
transactions.
3) Banks were advised to display their contact details, such as, telephone numbers
of help desk/contact person for lodging of ATM related complaints at all ATM
locations.
4) Effective April 1, 2010, payment of interest on savings bank deposits was made
to be paid on a daily product basis.
5) Banks were advised to issue no-due certificates in all cases resolved through
Banking Ombudsmen's intervention within a week of reaching such settlement
and also suitably modify records of Credit Information Bureau of India Limited
(CIBIL).
6) Banks were advised to issue loan statements to borrowers every year.
69
7) The Reserve Bank issued a comprehensive master circular on customer service

on July 1, 2010.
8) Booklets on FAQs on Housing Loan and Cheque Collection Policy were
published.
9) Banks were advised to review their customer service / customer care aspects
and submit a detailed memorandum to their Board of Directors, once every six
months and initiate prompt corrective action wherever service quality / skill
gaps were noticed.
The Reserve Bank introduced the Banking Ombudsman Scheme (BOS) in

India on June 14, 1995 to provide an expeditious and inexpensive forum to bank
customers for resolution of their complaints relating to deficiency in banking services
provided by commercial banks, regional rural banks and scheduled primary co-
operative banks. There are 15 offices of Banking Ombudsman (OBOs), spread across
the country. The feedback gathered in the course of administering the BOS has been
used by RBI to modify the Scheme in 2002, 2006, 2007 and 2009, to include, among
other things, customer complaints on new areas such as credit card complaints,
internet banking, deficiencies in providing the promised services by both bank and its
sales agents (DSAs), levying service charges without prior notice to the customers,
non- adherence to the Fair Practices Code adopted by individual banks, etc. From a
total of 11, when the BO Scheme was started in 1995, today, the BO Scheme provides
for 27 grounds of complaints / deficiencies in bank services. RBI operates the BOS,
free of cost, so as to make it accessible to all. In order to increase its effectiveness and
utility, BOS is today fully staffed and funded by RBI.
6.2) CONCLUSIONS
Though the Banking Ombudsman Scheme was introduced, in the year 1995,
with a view to do away wit the banking customer complaints, the scheme was
amended in subsequent years 2002 and 2006. But the banks do not seem to have
adopted the norms of their efficient functioning, that is the reason behind the
increasing consumer cases against banks which are governed under the scheme.
In the system of Banking Ombudsman, the results are delivered very soon, the
procedures are fair together with cost, and proportionate to the nature of the issues
involved. The system deals with cases at reasonable speed, is understandable to those
who use it, is responsive to the needs of those who use it, and provides as much
certainty as the nature of particular cases allows. This is true because over the past
70
five years nearly 36000 complaints are being resolved by the Banking Ombudsman
under this Banking Ombudsman Scheme. Though the Banking Ombudsman is eligible
enough to deliver the bank customer complaints at the earliest 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. The reason is they are well popular
among the common public which is lacking with the banking ombudsman and its
working. Definitely the Scheme needs popularity in the society for its more
appropriateness and effectiveness so that the aggrieved bank customer with the
services of the bank prefers to knock the door of the banking ombudsman for
redressal. The scheme should provide more powers and levy more duties on the
banking ombudsman so that they can easily be approachable by the aggrieved bank
customer.
71
REVIEW OF LITERATURE
(BIBLIOGRAPHY AND
WIBLIOGRAPHY)
BIBLIOGRAPHY
72
• RBI Journals
• Annual Report by Reserve Bank Of India 2009 – 2010.
• Booklet of Banking Ombudsman Scheme 2006.
• The Ombudsman Handbook, Designing and Managing An Effective Problem
Solving – James T.Ziegenfuss, Jr. patrica Orourke.
• Modern Banking technology – Dr.Friods T.Shroff.
• Modern Banking Theory And Practice – Muralidharan.
• Banking Theory Law And practice – Rajesh.
WIBLIOGRAPHY
73
• www.rbi.org.in
• www.bankingupdate.com
• www.indbank.com/ombudsman.htm
• www.ucobank.com/ombudsman.htm
• http://www.nos.org/Secbuscour/25.pdf
74
ANNEXURES
ANNEXURE - I
ADDRESS AND AREA OF OPERATION OF BANKING

OMBUDSMAN
75
Sl. Centre Contact details of the Area of

No. Office of Operation
Banking Ombudsman
1 Ahmedabad Shri. K. Chandrachoodan,C/o Gujarat, Union
Reserve Bank of India La Territories of Dadra
Gajjar Chambers, Ashram and Nagar Haveli,
Road, Daman and Diu
Ahmedabad-380009.
Tel.No.079- 26582357,
079-26586718/2657 5807
Fax No.079-26583325
Click here to send email

2 Bangalore Shri. K.R.Ananda, C/o Reserve Karnataka
Bank of India, 10/3/8,
Nrupathunga Road,Bangalore-
560 001. Tel.No.080-
22210771,
080-22275629
Fax No.080-22244047

3 Bhopal Shri T. Karunakaran,C/o Madhya Pradesh and
Reserve Bank of India, Chattisgarh
Hoshangabad Road,
Post Box No.32, Bhopal-462
011
Tel.No.0755-2573772,
0755-2573776
Fax No.0755-2573779

4 Bhubaneswar Shri K C Mahapatra,C/o Orissa
Reserve Bank of India, Pt.
Jawaharlal Nehru Marg,
Bhubaneswar-751001.
76
Tel.No.0674-2396207, 0674-
2396008
Fax No.0674-2393906

5 Chandigarh Shri Lalit Srivastava, C/o Himachal Pradesh,
Reserve Bank of India,4th Punjab and Union
Floor, Sector 17, Central Territory of Chandigarh
Vista,Chandigarh – 160 017
Tel.No.0172-
2721011/2784261
Fax.No.0172-2721880
6 Chennai Shri S. Ganesh,C/o Reserve Tamil Nadu, Union
Bank of India,Fort Glacis, Territories of
Chennai 600 001 Pondicherry and
Tel No. (044) 2539 9170 / Andaman and Nicobar
25395964 / 2539 9159. Islands
Fax No.044-25395488

7 Guwahati Shri B.B.Sangma,C/o Reserve Assam, Arunachal
Bank of India Station Pradesh, Manipur,
Road,Pan Bazar Meghalaya, Mizoram,
Guwahati-781 001. Nagaland and Tripura
Tel.No.0361-2542556, 0361-
2540445
Fax No.0361-2540445

8 Hyderabad Shri M. Sebastian ,C/o Reserve Andhra Pradesh
Bank of India 6-1-56,
Secretariat Road Saifabad,
Hyderabad-500 004,
Tel.No.040-23210013,
77
040-23243970
Fax No.040-23210014

9 Jaipur Shri P Vijaya kumar Rajasthan
C/o Reserve Bank of India,4th
floor, Rambagh Circle, Tonk
Road, Jaipur-302 052,
Tel.No.
(0141)5107973/5101331, Fax
No.0141-2562220

10 Kanpur Shri B.K.Bhoi, C/o Reserve Uttar Pradesh
Bank of India M.G. Road, Post (excluding District of
Box No.82 Ghaziabad) and
Kanpur-208 001. Uttaranchal
Tel.No.0512-2361191/0512-
2310593
Fax No.0512-2362553

11 Kolkata Shri C.V.GeorgeC/o Reserve West Bengal and
Bank of India15, Nethaji Sikkim
Subhas Road
Kolkata-700 001.
Tel.No.033-22306222/033-
22305580
Fax No.033-22305899
78
12 Mumbai Shri O.P. AggarwalC/o Maharashtra and Goa

Reserve Bank of India
Garment House,
Ground Floor,Dr. Annie
Besant Road,Worli, Mumbai-
400 018
Tel.No.022-
24924607/24960893/2493
3358
Fax No.022-24960912

13 New Delhi Shri M Rajeshwara Delhi, Haryana, Jammu
RaoBanking and Kashmir and
OmbudsmanReserve Bank of Ghaziabad district of
India Building2nd Floor, 6, Uttar Pradesh
Sansad marg
New Delhi – 110001
TelNo.
(011)23730632/23730633/
23736270/23736271/23725445
/ 23710882
Fax No. 011-23725218

14 Patna Shri A F Naqvi C/o Reserve Bihar and Jharkhand
Bank of India, South Gandhi
Maidan, Patna-800001
Tel.No.0612 2322569/2323734
Fax No.0612-2320407

15 Thiruvananthapu Shri F R Joseph C/o Reserve Kerala and Union
ram Bank of India Bakery Junction Territory of
Thiruvananthapuram-695 033. Lakshadweep
Tel.No.0471-2326852 /
79
2332723/2323959
Fax.No.0471-2321625
80
ANNEXURE - II
FORM OF COMPLAINT (TO BE LODGED) WITH THE
BANKING OMBUDSMAN
(TO BE FILLED UP BY THE COMPLAINANT)
To:
The Banking Ombudsman
Place of BO’s office…………………………..
Dear Sir,
Sub: Complaint against …………………….(Name of the bank’s branch) of

………………………………………………………………………………… (Name
of the Bank)
Details of the complaint are as under:
1. Name of the Complainant …………………..
2. Full Address of the Complainant ……………………

……………………
……………………
Pin Code ………………..
Phone No/ Fax No....……………………
Email …………………….
3. Complaint against
(Name and full address of the branch/bank) ………………………….
………………………….
Pin Code …………………….
Phone No. / Fax No. …………………….
4. Particulars of Bank or Credit card Account (If any)

81
…………………………………………………………………………
5. (a) Date of representation already made by the complainant to the bank
(Please enclose a copy of the representation)

…………………………………………………………………………………………..
(b) Whether any reminder was sent by the complainant? YES/NO
(Please enclose a copy of the reminder)

………………………………………………………………………………………
6. Subject matter of the complaint (Please refer to Clause 8 of the Scheme)
…………………………………………………………………………………………
…………………………………………………………………………………………
7. Details of the complaint:
(If space is not sufficient, please enclose separate sheet)

…………………………………………………………………………………………
…………………………………………………………………………………………
……………………………………………………………………
8. Whether any reply (Within a period of one month after the bank concerned
received the representation) has been received from the bank? Yes/ No
(If yes, please enclose a copy of the reply)
9. Nature of Relief sought from the Banking Ombudsman

…………………………………………………………………………………………..
(Please enclose a copy of documentary proof, if any, in support of your claim)
10. Nature and extent of monetary loss, if any, claimed by the complainant by way of
compensation (please refer to clauses 12 (5) & 12 (6) of the Scheme) Rs……………..
11. List of documents enclosed:
(Please enclose a copy of all the documents)
12. Declaration:
(i) I/ We, the complainant/s herein declare that:

a) The information furnished herein above is true and correct; and
b) I/We have not concealed or misrepresented any fact stated in the above columns
and in the documents submitted herewith.
82
(ii) The complaint is filed before expiry of period of one year reckoned in accordance
with the provisions of Clause 9(3) (a) and (b) of the Scheme.
(iii) The subject matter of the present complaint has never been brought before the
Office of the Banking Ombudsman by me/ us or by any of the parties concerned with
the subject matter to the best of my/ our knowledge.
(iv) The subject matter of the present complaint has not been decided by/pending with
any forum/court/arbitrator.
(v) I/We authorize the bank to disclose any such information/ documents furnished by
us to the Banking Ombudsman and disclosure whereof in the opinion of the Banking
Ombudsman is necessary and is required for redressal of our complaint.
(vi) I/We have noted the contents of the Banking Ombudsman Scheme, 2006.
Yours faithfully,
(Signature of Complainant)
NOMINATION – (If the complainant wants to nominate his representative to appear

and make submissions on his behalf before the Banking Ombudsman or to the Office
of the Banking Ombudsman, the following declaration should be submitted.)
I/We the above named complainant/s hereby nominate

Shri/Smt………………………………………….. who is not an Advocate and whose
address is………………………………………………………………………………...
as my/our REPRESENTATIVE in all proceedings of this complaint and confirm that
any statement, acceptance or rejection made by him/her shall be binding on me/us.
He/She has signed below in my presence.
ACCEPTED
(Signature of Representative)
(Signature of Complainant)
Note: If submitted online, the complaint need not be signed.
Substituted by Notification Ref CSD.BOS.No. 4736/13.01.01/2008-09 dated February

3, 2009.
83
84

Ombudsman Services in Banking Industry1

Загружено:

Сведения о документе

Исходное описание:

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Ombudsman Services in Banking Industry1

Загружено:

Авторское право:

Доступные форматы

OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW

1.1) BANKING AND ITS OVERVIEW

According to The Banking Companies Act, 1949 “Banking means the

1.2) FUNCTIONS OF BANK:

This is the main function of commercial banks to collect savings of individuals

i) Current account or demand deposits:

ii) Savings account:

iii) Fixed deposit:

There are three types of loans:

i) Short term loans:

ii) Medium term loans:

iii) Long term loans:

Banks provide short-term finance by discounting bills, i.e. making payment

1.3) TYPES OF BANKS

CENTRAL BANK DEVELOPMENT BANKS SPECIALIZED BANKS

COMMERCIAL BANKS COOPERATIVE BANKS

PUBLIC SECTOR BANKS PRIMARY CREDIT SOCIETIES

PRIVATE SECTOR BANKS CENTRAL COOPERATIVE BANKS

FOREIGN BANKS STATE COOPERATIVE BANK

1.3.1) Central Bank

1.3.2) Commercial Banks

i) Public Sector Banks:

ii) Private Sectors Banks:

iii) Foreign banks:

1.3.3) Development Banks

Business often requires medium and long-term capital for purchase of

1. 3.4) Cooperative Banks

a) Primary Credit Societies

b) Central Cooperative Banks

c) State Cooperative Banks

1. 3.5) Speciqalized Banks

i) Export Import Bank of India (EXIM Bank)

If you want to set up a business for exporting products abroad or importing

ii) Small Industries Development Bank of India (SIDBI)

If you want to establish a small-scale business unit or industry, loan on easy

iii) National Bank for Agriculture and Rural Development (NABARD)

It is a central institution for financing agricultural and rural sectors. If a person

1.4) OBJECTIVES OF THE STUDY

1. To ascertain the services of the Banking Ombudsman offered to the

1.5) SCOPE OF STUDY

i) The quantum of complaints handled by them,

ii) The timeliness in handling the issues, and

(iii) Appropriateness of the decisions of the Banking Ombudsman.

1.6) METHODOLOGY OF STUDY

The data is collected from books, magazines and websites concerning to

1.7) PERIOD OF STUDY

The period of study taken from 2007 to 2010.

1.8) DURATION OF STUDY

The duration of study is for 2 months.

1.9) IMPORTANCE OF THE STUDY

2. It shows the awareness of customer(s) in getting their problems and difficulties

1.10) LIMITATION OF STUDY

1. The period of study is limited.

2. It requires lot of analysis on the overall subject matter.

3. The data collected cannot be generalized as it is only secondary data.

In the banking field, there has been an unprecedented growth and

2.2) INFORMATION TECHNOLOGY IN BANKING

India Vision-2020 is the “Vision” envisaged by the former Hon’ble President

Indian banking industry, today is in the midst of an IT revolution. A

2.2.1) Electronic Payment Services – E Cheques

Nowadays we are hearing about e-governance, e-mail, e-commerce, e-tail etc.

2. 2.2) Real Time Gross Settlement (RTGS)

2. 2.3) Electronic Funds Transfer (EFT)