What is Banking Ombudsman Scheme? Institutions covered & Procedure for Complaining

Banking Ombudsman Scheme

The Banking Ombudsman Scheme was implemented by the RBI to redress the complaints of customers on particular sorts of banking services given by banks and to encourage the settlement of those complaints.

The scheme was presented under the Banking Regulation Act of 1949 by RBI with impact from 1995. Later it was legally clarified and modified by introducing the regulations under Banking Ombudsman Scheme, 2006. The most recent revision was made in 2017.

Who is the Banking Ombudsman?

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against any type of confusion in the specified banking services covered by the Banking Ombudsman Scheme, 2006.

By the end of April 2018, twenty Banking Ombudsmen have been appointed with their offices located mostly in the capitals of states.

(Also Read: Cheque Truncation System)

Institutions covered under the Banking Ombudsman Scheme

• All Scheduled Commercial Banks, Regional Rural Banks (RRBs), and Scheduled Primary Co-operative Banks (UCBs) are covered under the Scheme.

• Regions of customer redressal accessible with the Ombudsman mechanism

The RBI has recorded around 25 regions where the customers can raise complaints with the Banking Ombudsman. Some of them are:

• Non-payment/inordinate delay in the payment or collection of checks, drafts, bills, and so on;

• Non-payment/delay in payment of inward remittances;

• Failure/delay to issue drafts, pay orders, or bankers' checks;

• Non-adherence to prescribed working hours;

• Refusal to open deposit accounts with no valid reason for refusal;

• Imposing any type of charges without adequate prior notice to the customer;

• Refusal/delay in shutting the accounts;

• Not observing RBI guidelines on engagement of recovery agents by banks;

Method for submitting question/complaint with Banking Ombudsman

A bank customer can file a complaint with the Banking Ombudsman basically by composing on plain paper or online. The customer can file a complaint with the Banking Ombudsman on the accompanying grounds:

• the bank fails to answer the customer's complaint in one month

• the bank dismisses the complaint,

• the complainant isn't satisfied with the reply given by the bank.

Limit on the amount of compensation

According to the present regulations, the ombudsman redressal is considered a complaint where the compensation amount for any loss endured by the complainant has limited to Rs 20 lakh. Additionally, the Banking Ombudsman may grant compensation not surpassing Rs 1 lakh to the complainant for mental agony and harassment.

The Banking Ombudsman will consider the loss of the complainant's time, expenses incurred by the complainant, harassment, and mental anguish endured by the complainant while passing the compensation.

Ombudsman Scheme for Non-Banking Financial Companies, 2018

The RBI acquainted an NBFC Ombudsman scheme with redress complaints as to NBFCs in 2018.

The NBFC Ombudsman is a senior official selected by the RBI to redress customers' complaints against NBFCs for deficiency in specific services covered under the section of complaint specified under Clause 8 of the Scheme. Four NBFC Ombudsmen have been named with their offices located at Chennai, Kolkata, New Delhi, and Mumbai.

Cases Concerning the Banking Services

Following are the cases, through which it tends to be learned that what the complaints have been taken care of by the Banking Ombudsman Scheme:

1. Failure to issue a bank guarantee. The bank was affirmed to have neglected to issue a bank guarantee despite sufficient security and the complainant endured financial loss. It was stated that the non-issuance of bank guarantee despite providing security deposit with the bank would be considered as a deficiency in service and the complainant was held entitled to interest on that security amount.

2. Failure to confirm remittance. In one of the cases, the complainant's child transmitted an amount from abroad to be credited to his NRI account with an appellant bank. The remittance was not confirmed for quite a while. Appellant bank argued that non-confirmation was because of the failure of computers. The issue is whether this delay with respect to the bank amounted to a deficiency in service.

The Commission in appeal saw that bank officials could have checked vouchers and checks got by post or confirmation and could include given correct answer inside a reasonable time. It was considered as a failure of the bank to confirm remittance got from an outside country within a reasonable period amounts to deficiency in service.

3. Deficiency in services. In the greater part of the cases against the banks, the customers have affirmed the deficiency in services gave by the banks.

(a) Issues of cash credit office. The appellant had the cash credit office from 1994 with a respondent bank and furthermore, he had issued two checks of which one was en-cashed, and the difference was shamed. The respondent bank asserted that the appellant had overdrawn account. It was held that when there was credit for the complainant, the shame of the check issued by the complainant could not be supposed to be bonafide. The respondent bank was held blameworthy of deficiency of service and the appellant was held entitled for compensation.

(b) Issues of discounting agreement. Further on account of Corporation Bank and Anr v. Navin J. Shah, the Respondent was an exporter. Under discounting agreement, he entrusted documents identifying with fare and bills of exchange with the appellant bank to arrange the equivalent through a foreign bank. Respondent affirmed that the bank had neglected to collect money in foreign currency showed in documents yet rather collected in local currency, hence the service was deficient with respect to the appellant bank, and hence a claim for damages was made.

In appeal, the Commission held that there was no deficiency of service with respect to the bank as the appellant bank, acting for the respondent, had arranged the documents as given under agreement. Anyway, the conversion of local currency in the U.S. dollar got troublesome on account of the policy of the Sudan Government. It was seen that everything necessary to be done under the terms of the agreement and under contract had been finished by the two banks.

(c) Non-payment of premium. In Manohar Singh Chouhan and Ors Vs. Central Bank of India, the complainants have purchased a tractor in the wake of taking advance from the respondent bank. The respondent bank didn't transmit the premium amount to the insurance agency with which the complainants have protected their tractor because of which the loss endured when the tractor met with an accident could not be recovered from the insurance agency. The question for consideration is whether non-payment of the premium amount by the bank amounted to deficiency in service.

It was held that when the recruit purchase agreement between the bank and purchaser of a vehicle with the assistance of bank credit didn't contain a condition creating obligation with respect to the bank to transmit premium for protection policy, complainant purchaser of a vehicle could not hold bank blameworthy of deficiency in service.

(d) Absence of security. For a situation concerning the security at the banking premises, cash was grabbed from the hands of the complainant at the entryway of the respondent bank. The appellant asserts that the absence of security on the entryway and the non-provision of steps like siren/alarm system and so forth amounts to deficiency in service with respect to the respondent bank.

The State Commission held that the non-provision of security on the entryway of the bank on the date of occurrence viz. grabbing of cash in bank premises can't be held to amount deficiency in service recruited by the complainant.

(Also Read: Banking Codes and Standards Board of India (BCSBI))