Analysis of Banking Ombudsman Scheme

Submitted by
K.M.C.Arunmokan
BA0130014

Project Submitted to
Mr. Mohammed Azaad

TAMILNADU NATIONAL LAW SCHOOL

(A State University established by Act No. 9 of 2012)
Navalurkuttapattu, Srirangam (TK), Tiruchirappalli- 620009

1
 ACKNOWLEDGEMENT

I am immensely happy to express my heartfelt thanks to our Vice Chancellor Kamala

Sankaran, for having given me this opportunity to do a doctrinal Research project on
“Analysis of Banking Ombudsman Scheme” at under graduate level.

With sense of gratitude, I would like to thank, Mr. Mohammed Azaad, Associate Professor of
Law, Tamil Nadu National Law School, Tiruchirappalli - 620 009, for his valuable guidance
and encouragement given to me at every stage of this small Doctrinal Research work.

THANK YOU AGAIN TO ALL WHO HELPED ME.

2
 DECLARATION

I, K.M.C.Arunmokan, Register Number BA0130014, hereby declare that this project work
entitled “Analysis of Banking Ombudsman Scheme” has been originally carried out by me
under the guidance and supervision of Mr. Mohammed Azaad, Associate Professor of Law,
Tamil Nadu National Law School, Tiruchirappalli - 620 009. This work has not been
submitted either in whole or in part of any Degree / Diploma in this Institution or any other
Institution/University.

Place: Tiruchirappalli

Date: 16th September 2017 K.M.C.Arunmokan

3
 INDEX

ACKNOWLEDGMENT
DECLARATION

ABSTRACT …5
INTRODUCTION …10
I. Banking Ombudsman Scheme Overview …11
A. Scheme 1995 …11
B. Scheme 2002 …16
C. Scheme 2006 (Amended upto 2017) …16
II. Need for Revision …19
III. Effectiveness of the scheme …21

CONCLUSION …29

BIBLIOGRAPHY

4
Abstract:

Introduction:

Banking Ombudsman is person who is appointed under this scheme for taking up the

complaints made by the customers against the bankers. The objective of the Banking

Ombudsman Scheme is to be a visible and reliable system of dispute resolution mechanism

for bank customers. The Ombudsmen generally resort to conciliation or mediation for

settlement of complaints.

The Banking Ombudsman Scheme was revised in 2002 to cover Regional Rural Banks and to

permit a review of the Banking Ombudsman’s Awards against the banks by the Reserve

Bank. The Scheme was further revised in 2006 giving it a much wider scope by including

several new areas of customer complaints. The Banking Ombudsmen currently have their

offices in 20 Centers spread across the country and are fully funded by the Reserve Bank.

The Banking Ombudsmen are serving Officers of Reserve Bank in the rank of Chief General

Managers and General Managers.

In the present scenario banks are inevitable for every monetary transaction and customers of

banks who are put to any difficulties need a regulatory authority to complaint before. Being

in a country like India where we follow the concept of checks and balance, we need a

banking Ombudsman who would be superior regulatory authority over every bank in a

particular region. Therefore, it is necessary for us to enhance our knowledge about Banking

Ombudsman and the scheme under which he is appointed.

5
Aim:

This research paper tries to analyze Banking Ombudsman Scheme which was introduced by

RBI under section 35A of Banking Regulation Act in the year 1995 to provide an expeditious

and inexpensive forum to bank customers for resolution of their complaints relating to

banking services. This research paper basically tries to analyze need for Banking

Ombudsman Scheme, procedural aspect of Banking Ombudsman such as appointment of

Ombudsman, jurisdiction of Ombudsman and how disputes are settled down after a

complaint being made to Ombudsman. This Scheme tries to cover banking services rendered

by scheduled commercial banks and scheduled primary cooperative banks.

Limitation:

For analysing the effectiveness of Banking Ombudsman scheme, the researcher has restricted

himself to rely only on the latest annual report submitted by the Banking Ombudsman for the

year 2015-2016.

Hypothesis:

By this research, Researcher feels that Banking Ombudsman Scheme is functioning

effectively in our country and it is reason for effective maintenance of customer and bankers

relationships. Banking Ombudsman is indispensable for our present scenario.

Literature Review:

1. A Brief Analysis Of The Banking Ombudsman Scheme In India by Pragya

Mishra

In this article, the author has clearly dealt with scope of Banking Ombudsman Scheme

2006. The author has detailed about the appointment of Ombudsman, Powers and

Jurisdiction, grounds for complaint, procedures that has to be followed for filing a

6
 complaint and appeals on the same complaint. The author has also mentioned about

similar schemes which are in implementation in other countries such as Canada, USA

and Switzerland. The author has also briefly distinguished between Ombudsman

Scheme 1995 and 2002.

2. Analysis of Banking Ombudsman Scheme by Girivasuki. K and

Dr. Dinakaran. G

In this Article, author has given a clear picture about functioning of Banking

Ombudsman. Author has collected data regarding total number of complaints received

by Ombudsman along with a bank wise classification. Author has extended his

research work to the different types of complaints which customers had lodged along

with number of disposals made by Ombudsman within a period of 2010 to 2013.

Author has also made an extensive research and collection of data in regard with

rejection of complaints along with its reasoning given by RBI, Age wise classification

of pending complaints and service charges fixed by Ombudsman. This extensive

study has given a clear cut picture of effective functioning of Ombudsman along

during the period of 2010-13.

3. Success of Banking Ombudsman Scheme - Myth or reality by Mayiladri, Pacha

and Sirisha. S.

In this article, author has made an analytical study about the performance Banking

Ombudsman from the year 1999-2010. By her extensive research, author has come to

a conclusion that 75% of the complaints have been file in the year 1999 and the

number of complaints has drastically reduced over the period of time. As of 2010 the

percentage of pending complaints is 6. Author has also inferred that complaints

lodged by the customer are more against the service rendered by Private Banks. By

the research work of author it is inferred that 46% of complaints were lodged from

7
 metropolitan areas in the year 2007-08 but this has reduced to 33% in the year 2009-

10. But ironically the complaint percentage from rural areas has gone high from 18%

to 32% during the same period of time. The author has concluded that scheme of

banking ombudsman is working effectively in urban and metropolitan areas but it

lacks its mechanism in rural areas.

4. Banking Ombudsman Scheme, Annual report 2004 issued by RBI

In this issue, RBI has explained about the scope of the scheme, operationalisation and

performance of Banking Ombudsman for period expanding from 1999-2004. The

Article also gives an analysis of complaints with respect to number of complaints

received over the particular period, number of complaints disposed and pending. The

Article provides clear cut analysis of complaints in accordance with bank wise. This

shall be an effective tool for understanding of effective functioning of Banking

Ombudsman. This shall prove the efficiency of banking Ombudsman in sorting out

the customer’s complaints.

Research Methodology:

The Researcher has conducted Doctrinal Research. The Researcher has purely relied upon the

secondary data such as reports submitted by RBI in their website along with other journals

and articles.

Research Questions:

1. What are the changes made in Banking Ombudsman Scheme 2006?

2. Why there was a need for revision in banking Ombudsman Scheme 1995 and 2002?

3. Whether the Banking Ombudsman Scheme is effective?

8
Tentative Chapterization:

1. Introduction

2. Banking Ombudsman Scheme- An Overview

3. Banking Ombudsman- Powers, Jurisdiction and Functions

4. Analysis of performance of Ombudsman

5. Conclusion

9
Introduction:

The old India had typical Gazana system for storage of wealth during Monarchy Period.

Earlier in India, there was no proper Banking system, unless a proper banking system was

introduced from the west. Eventually, Reserve Bank of India Act was introduced in the year

1934 which was the first legislation passed in regard with Banking in modern India. Over the

period of time, many banking regulations have been introduced. In the present scenario, bank

plays a vital and inevitable role for every monetary transaction. As the role and indispensable

nature of banks grows day by day, so do their problems arising out of customer and banking

relationship.

So this research paper primarily emphasizes about the Banking Ombudsman scheme and the

various revisions which has been brought by RBI under this scheme over the years in the first

chapter of the study. The first chapter is followed by the analysis of the scheme and the need

for revision with a logical reasoning in the second chapter. The third chapter completely deals

with the effectiveness of scheme for which the researcher has relied up on the latest report

submitted by the Banking Ombudsman for the year 2015-16.

Research Methodology:

The Researcher has conducted Doctrinal Research. The Researcher has purely relied upon the

secondary data such as reports submitted by RBI in their website along with other journals

and articles.

10
 Chapter I

Banking Ombudsman Scheme- An overview:

So, The Banking Ombudsman Scheme is introduced under Section 35 A of the Banking

Regulation Act1, 1949 by RBI with effect from 1995 to provide an expeditious and

inexpensive forum to bank customers for resolution of their complaints relating to banking

services. The Scheme covered banking services rendered by scheduled commercial banks and

scheduled primary cooperative banks2. The objective of the Banking Ombudsman Scheme is

to be a visible and reliable system of dispute resolution mechanism for bank customers. The

Ombudsmen generally resort to conciliation or mediation for settlement of complaints.

The Banking Ombudsman Scheme was revised in 2002 to cover Regional Rural Banks and to

permit a review of the Banking Ombudsman’s Awards against the banks by the Reserve

Bank. The Scheme was further revised in 2006 giving it a much wider scope by including

several new areas of customer complaints. The Banking Ombudsmen currently have their

offices in 20 Centers spread across the country and are fully funded by the Reserve Bank.

The Banking Ombudsmen are serving Officers of Reserve Bank in the rank of Chief General

Managers and General Managers.

A. Banking Ombudsman Scheme 1995:3

This scheme was introduced for the first time and it was very general in nature. This scheme

is applicable to Business banks in India and Scheduled Primary Co-operative Banks. This

scheme did not have definition clause. So it was difficult to understand the meaning of the

terms used in the scheme. The scheme did not explain clearly about the appointment of

1
Under this section RBI has the power make regulations relating to banking services.
2
This is inserted in the amendment rules 2002.
3
Banking Ombudsman Scheme 1995

11
banking ombudsman. The qualification for ombudsman was not detailed in the scheme. The

scheme did not explain about the way of settlement of issues faced by or complaints made by

the customers towards the bankers. Procedure for voluntary resignation of Banking

Ombudsman from his post was mentioned in the scheme.

In regard with complaints made, this scheme mandates the complainant to file complaint

before the respective banks. The customers are allowed to be entertained under this scheme

only when the Bank hasn’t responded to the complaint made or has rejected the complaint or

hasn’t taken any proper remedial steps. Unless these aforesaid conditions are met, one shall

not be entertained under this scheme. Apart from these, when the complaint is being taken by

Ombudsman, the aftermath procedures of award decided by the Banking Ombudsman were

not clearly explained in this scheme. By this scheme, it does not necessitate the Ombudsman

to follow any rule of evidence and empowers him to take evidences which he may consider

just and proper.

This scheme did not have provisions for Review Authority. This scheme did not explain

clearly about the grounds for rejection of complaint by Ombudsman. By this scheme, it

mandates Ombudsman to submit a report to Governor of Reserve Bank in regard with

activities of his office during the preceding year. By this scheme Ombudsman is provided

with the power to draw his office’s budget for the succeeding year along with its

expenditures, which shall be further approved by the Reserve Bank and it shall disburse the

expenses among the banks. This scheme mandates the Ombudsman to settle the complaint

within a period of 2 months. This scheme provides provision for call of information for

ombudsman such as documents for settlement of complaints. If it is unsettled it mandates the

Ombudsman to intimate the parties about his intension and mandates him to pass an award.

12
By this scheme Award shall not be binding on a bank against which it is passed unless the

complainant furnishes to it, within a period of one month from the date of the Award, a letter

of acceptance of the award in full and final settlement of his claim in the matter. Within

fifteen days from the date of receipt by it, of the acceptance in writing of the Award by the

complainant the bank shall comply with the Award and intimate the compliance to the

Banking Ombudsman. Banking Ombudsman is additionally given the power to award

compensation for the mental agony and pain suffered by the complainant which cannot

exceed the value of Rs. 10 lakhs. This scheme seems to be one sided since this doesn’t

provide any remedial measures to bank in case of the complaint being unproven or not in

favour of the complainant.

B. Banking Ombudsman Scheme 2002:4

This scheme had definition clause which gives meaning to words used in the scheme. This

scheme is applicable to all banks which fall under the purview of “Bank” as per the definition

clause of this scheme. Appointment and Tenure of Ombudsman was explained in detail in

this scheme. This scheme provided qualifications for a person to be appointed as Banking

Ombudsman. This scheme also provided provisions for removal of Banking Ombudsman

either voluntarily or by Governor. This scheme explained the method of resolution of

disputes faced by the customers towards the bankers. Grounds of complaints in this scheme

are much similar to the previous scheme, but a clause mentioning the problems in regard with

deposit accounts were added. Similar to the previous scheme, this scheme also does not

necessitate the Ombudsman to follow any rule of evidence and empowers him to take

evidences which he may consider just and proper.

4
Banking Ombudsman Scheme 2002

13
In this scheme, the time limit provided to Banking Ombudsman in settling a dispute is

reduced to 1 month from 2 months. The scheme mandates the Ombudsman to direct the

complainant to furnish indemnity in favour of bank to undertake to pay the award along with

interest as per date, in case of decision of Court or Tribunal trying the case concludes that

there was no part of omission or commission of bank which has made the complainant suffer

loss. In case of non-compliance with the aforesaid indemnity clause, bank is free to move to

court to execute the clause. In this scheme, the time duration for binding nature of award as

mentioned in clause 20(6) is reduced to 15 days. If permission for extension of time is

requested before Ombudsman, a further period of 15 days may be provided as extended time.

This scheme also mandates the Bank to comply with the award within a period of 1 month

and requires the Bank to intimate its compliance to Ombudsman in writing.

This scheme is has a provision for Review authority who shall be hierarchically at the top

beyond Ombudsman. It shall hear the complaints if the Ombudsman has erred. In the scheme,

provision for filing a review petition is provided in case if the bank feels that award passed

against them is based on appreciation of wrong facts or in accordance with other aspects as

mentioned in clause 16(9) of the scheme. The scheme has also provided provision for the

complainant to approach review authority if the complaint has not been settled down within

the prescribed time limit.

According to this scheme, application for review should be submitted before the review

authority within a period of one month from the date of passing of award by Ombudsman.

Scheme mandates the application to be approved by Chairman or Managing Director or Chief

Executive Officer or any other authority in the similar rank. Scheme mandates the review

authority to take up only the documents which were already produced before Ombudsman. If

Review Authority feels that the matter is deem fit to be reviewed, it shall send back the

14
dispute to Ombudsman. Scheme mandates, such a dispute to be settled down within a

maximum period of 6 weeks. If suppose, reviewing authority feels it is unnecessary for

dispute to be reviewed, then it shall direct the Bank to execute the award within a maximum

period of 6 weeks.

Scheme has given various grounds on which complaint can be rejected by Ombudsman.

Scheme provides Ombudsman an additional duty of acting as a arbitrator if both the parties

agree provided that the monetary value of the dispute should not exceed Rs. 10 Lakhs. The

scheme also mandates the Ombudsman to abide Arbitration and Conciliation Act 1996, when

he acts as Arbitrator. Scheme mandates the prior arbitration proceedings to be completed

within a period of 3 months followed by regular arbitral proceedings such as claims, counter

claims or reply which should be made within a period of 15 days from the date of receipt of

claims. Notification of first hearing, pleadings, notification and communication proceedings

are much similar to general arbitration proceedings. Scheme mandates Ombudsman to draw

terms of reference which shall include particulars of the parties. Parties to the proceedings are

allowed to raise new claims with the consent of Ombudsman. Time limit for the entire

proceedings to get over is fixed as 6 months as per the scheme and it can be extended by

Arbitrator if it is necessary. Parties have the freedom to settle the dispute during the

proceedings and the same has to be intimated to Ombudsman. Then Ombudsman after the

dispute is settled shall pass an award which has to be enforced as per the norms laid down by

Arbitration and Conciliation Act 1996.

Apart from all these, the scheme mandates all the banks which are covered under this scheme

to display the salient features of this scheme for the knowledge of public. Scheme mandates

the Ombudsman to submit a report to Governor by 31st May of every year. This scheme

15
provides provisions for the complaint made under Banking Ombudsman Scheme 1995 to be

governed under the same scheme.

C. Banking Ombudsman Scheme 2006 (Amended upto 2017):5

This is basically a revised scheme of previous one, so it has many similarities with the

previous scheme. So this scheme, as like the previous scheme shall apply to all banks which

falls under the bank definition of this scheme. This scheme does not explain about the

qualifications and appointment procedures of a banking ombudsman. Scheme mandates the

tenure of Banking Ombudsman to be maximum period of 3 years. By this scheme the date of

submission of report to the Governor is postponed from 31st May to 30th June of every year.

Other than that, the powers and jurisdiction conferred upon Ombudsman is much similar to

the previous scheme. The ground of complaint has been slightly updated with view in regard

with complaints made on basis of additional charges levied by the bank without prior

information and issues in regard with ATM cards, credit card options, Mobile

banking/Electronic Banking etc.

The procedure for filing a complaint under this scheme is much similar to the previous

scheme. Additionally, in this scheme there is an explicit proviso which explains about the

procedure of filing complaint in regard with credit cards and debit cards. Owing to

technological development, this scheme also approves the complaints which are made

through electronic means.

Ombudsman power to call for Information is much similar to the previous two schemes.

Similar to the earlier schemes, this scheme also does not necessitate the Ombudsman to

follow any rule of evidence and empowers him to take evidences which he may consider just

5
Banking Ombudsman Scheme 2006 (Amended up to 2017)

16
and proper. This scheme provides provision for Ombudsman to call parties to the dispute to a

meeting to attain an amicable resolution, in case if the Ombudsman cannot come to

conclusion by the documentary evidences furnished by the parties. If an amicable resolution

is attained, proceedings of the meeting and the resolution attained shall be documented and

shall be signed by both the parties. This scheme also provides provisions for the Ombudsman

to consider the dispute resolved on the circumstances as explicitly mentioned under the

scheme. By this scheme, the Ombudsman is empowered to award a maximum award of 2

million rupees apart from compensatory amount that shall be exclusive of amount involved in

the dispute. This scheme also curtails Ombudsman from passing an additional compensatory

award which cannot exceed 0.1 million rupees. This scheme has increased the maximum days

within which the award copy to be furnished to concerned bank from 15 days to 30 days. If it

fails so, then award shall not be binding on the bank. The provision also provides that no such

acceptance shall be furnished by complainant if he had made an appeal under sub-clause 1 of

clause 14. The said clause is also applicable to Banks under this scheme. This scheme

provides a separate clause for rejection of complaints which provide grounds on which a

complaint can be rejected by the Ombudsman.

Apart from the said clauses, this scheme has Appellate Authority whose functions are similar

to that of Review authority of 2002 Scheme. Whoever is aggrieved by the award of

Ombudsman or whose complaint has been rejected for the reasons referred in the scheme can

prefer an appeal before the appellate authority within 30 days of receipt of communication of

award or rejection of complaint. In case of Bank, the count of 30 days shall start from the

date on which the complainant receives the letter of acceptance of award. This period of 30

days shall be further extended to another 30 days by Appellate Authority if he considers to be

deem fit. This scheme mandates the appeal to be filed before Chairman or Vice-Chairman or

any other officer of Appellate Authority as prescribed by the scheme.

17
Appellate Authority shall dismiss or allow the appeal. The Appellate Authority is vested the

power to remand the matter back to Ombudsman, modify the award or pass any other award

he thinks deem fit. Award passed by the Appellate Authority shall have the same binding

effect as award passed by Ombudsman. This scheme does not explicitly prohibit the parties to

dispute from producing any new document which has not been produced before the

Ombudsman.

This scheme mandates every bank to display prominently the salient features of Banking

Ombudsman Scheme. This scheme also makes it compulsory that copy of the scheme is

available with a designated officer of bank for perusal if anyone desires so. By the

development of technology, this scheme makes it compulsory for all the banks to display the

salient features of the scheme in their respective websites. This scheme makes it mandatory

for all the banks covered under this scheme to appoint a nodal officer at their regional/zonal

office and inform the respective office of Banking Ombudsman under whose jurisdiction the

Regional/Zonal office falls. The nodal officer’s function is to furnish information to the

Banking Ombudsman in regard with complaints filed against the bank. When there are one or

many regions falling under the jurisdiction of Banking Ombudsman then one among all

Nodal officer shall be appointed as Principal Nodal Officer.

Similar to the previous scheme, this scheme also provides provisions for the complaint made

under Banking Ombudsman Scheme 1995 and 2002 to be governed under the respective

schemes.

18
 Chapter II

Need for Revision of Banking Ombudsman Scheme:

By this study it is understood that the scheme has been revised twice from the original

scheme which was brought in the year 1995. The major revision which the researcher sees in

the revision of scheme is that the present scheme is much revised and does not seem like a

one sided scheme unlike the old 1995 scheme. The present scheme is an unbiased one and

gives equal opportunity of hearing and appeal to banks as well. Whereas in the earlier scheme

there were no provision for indemnity clause and the cost shall not be borne by complainant

in case of false or wrongful accusation against the bank.

Other than that, basic need for revision of the scheme which researcher sees personally is

that, the time has flown with regard to technology. The Banking Ombudsman Scheme which

was introduced in 1995 had no definition clause, which makes people to understand the

meaning of words used in the scheme. The same was rectified in the latter scheme i.e 2002.

Similarly the method of dispute resolution was not mentioned in the original scheme. So it

makes the common man as well as the authorities have rethought about the scheme. The

qualification and appointment process of banking ombudsman were absurd in the previous

scheme which were rectified and revised for greater understanding of the scheme.

Apart from this, Scheme was majorly revised in terms of grounds of complaints and modes

of complaints. Even though ATM cards were introduced to Indian Banking industry in early

1990s, its usability was more only from 21st Century. The card operations have increased

only by 2000s. This was the major reason by which RBI has been forced to insert provisions

in regard with complaint made to ATM cards, be that non-dispense of amount or service

charges on ATM cards without proper reasons. The study has led to a greater understanding

19
that major complaints which are made to Ombudsman are based on issues or disputes arising

out of card transactions.

Another major revision which researcher consider as important is the replacement of review

authority with Appellate Authority. Even though the function is one and the same with slight

changes, the term appellate authority itself makes it understandable that, it is a quasi-judicial

authority. But still the present scheme is absurd in terms of appeal above appellate authority.

There is no proper explanation in regard with nature of Appellate Authority. Let us assume

for a moment it as Tribunal, but the scheme does not speak about the appeal which every

party to dispute is entitled to before respective High Courts or the Apex Court in case of

grievance with the award passed by Appellate Authority.

The major revision which has been brought in the scheme is method of complaining. Since

21st century has become a century of internet, the e-banking customers are increasing in

numbers day by day. This is an evident reason for insertion of clauses in regard with

electronic means of complaint. Apart from the complaint mode, the present scheme also

mandates every bank to display the salient features of the scheme in their respective official

websites. This shows the rapid development in terms of technology in our nation.

Apart from these, the scheme has also revised the maximum award that can be granted by

Ombudsman from 10 lakhs to 2 millions, which has in turn showed the economic growth in

our country. Another important revision made in the present scheme is provision for

appointment of nodal officer. Since the banking sector is becoming inevitable in India and so

the disputes arising out of it. Therefore, nodal officer for each region is need of the hour and

it is met by the present scheme. This is a sign of prosperity in our country which has led to

greater understanding of inevitability of Banks in people’s lives and the amount of care taken

by the legislation in framing the laws for amicable resolution of their disputes.

20
The scheme has also made trivial changes such as change of date of submission of report 31st

of May to 30 of June, which provides more time to the authority to draw a complete report on

the activities of Banking Ombudsman for the previous year. Other than that, the scheme has

also revised the number of days in which order copy of award to be furnished to the parties to

the dispute from 15 to 30. This shows that, inspite of rapid growth in terms of technology, our

legislative body still believes in natural justice principle and unforeseen circumstances by

which there can be a delay in delivery of award copy.

Comparison Table of Evolution of Banking Scheme:

S.No Provisions 1995 Scheme 2002 Scheme 2006 Scheme

1. Definition clause No Yes Yes
2. Tenure of 3 years 2 years 3 years
Ombudsman
3. Age limit of 65 years 65 years Not mentioned
Ombudsman
4. Indemnity Clause No Yes Yes
5. Method of No Mediation and Arbitration
Dispute Reconciliation
Resolution
6. Grounds of No clear Ombudsman Ombudsman was retained
Complaint explanation was empowered with previous jurisdiction.
given jurisdiction with Along with that specific
matters of addition of grounds in
default in regards with issues
cheque, drafts, pertaining to ATM card
failure to honour transactions, penalty
guarantee, imposed without prior
complaints information, non-adherence
pertaining to with RBI instructions on
account credit card operations, non-
transactions, adherence of banks with
complaints in instructions given by RBI
regard with in regard with mobile/e-
remittance of banking.
funds by NRI,
complaints in
regard with
loans, non-

21
 compliance with
interest rates etc.
7. Method of In writing In writing In writing through
Lodging through through Fax/Post/Courier/Electronic
Complaint Fax/Post/Courier Fax/Post/Courier means
8. Period for 2 months or else 1 month or else 1 month or else
settlement of proceedings has proceedings has proceedings has to be
complaint to be started by to be started by started by Ombudsman
Ombudsman Ombudsman
9. Maximum award Not mentioned 10 lakhs 2 million rupees
that shall be
passed by OBS
10. Date of Not mentioned 31st May every 30th June every year
submission of year
Report to RBI
Governor
11. Authority to pass Not mentioned Not mentioned Maximum of 0.1 million
additional can be passed
compensatory
award
12. Maximum period 1 month 15 days 30 days
within which
award copy to be
furnished
13. Grounds of Not explained Explained Explained
rejection clearly
14. Provision for Not mentioned Review Appellate Authority
appeal Authority
15. No. of Days to Not mentioned 1 month 1 month
appeal to
authority
16. Provisions for Not mentioned Not mentioned Mentioned
nodal officers
17. Provisions for Not mentioned Not mentioned Mentioned
Principal nodal
officers
18. Scheme to be Not mentioned Mentioned Mentioned
published
19. Copy to be had Not mentioned Not mentioned Mentioned
by designated
officer

22
 Chapter III

Effectiveness of Banking Ombudsman Scheme:6

This chapter tries to analyse the effectiveness of the scheme. For this particular analysis

researcher has completely relied upon the report submitted by Banking Ombudsman Scheme

Annual Report 2015-16 which is available on the RBI website.

Profile of customer complaints handled by OBOs:7

Particulars 2013-14 2014-15 2015-16

Complaints brought 5479 3307 3778
forward from
previous year
Complaints received 76573 85131 102894
Total No of 82052 88438 106672
complaints handled
Complaints disposed 78745 84660 101148
Complaints pending 3307 3778 5524
at the end of the year (4%) (4%) (5%)
Complaints Pending 2432 2375 3136
for less than one (3%) (2.55%) (2.9%)
month
Complaints Pending 838 1207 1675
for one to two (1%) (1.23%) (1.5%)
months
Complaints Pending 36 105 481
for two to three (0.04%) (0.12%) (0.4%)
months
Complaints Pending 1 91 232
for more than three (0.001%) (0.1%) (0.2%)
months

6
Banking Ombudsman Scheme 2006, Annual Report 2015-16
7
Supra note 6

23
Appeals pending at 0 30 15
beginning of the year
Appeals received 107 73 34
Total no. of Appeals 107 103 49
handled
Appeals Disposed 77 88 46
Appeals pending at 30 15 3
the end of the year
Representations to 531 810 855
review the decision
of BOs

Compared to previous year there was 21 % increase in the complaints received in the OBOs

during the year 2015-16. This gives an indication about increasing awareness amongst bank

customers about their rights and how to exert them. This also shows that the consistent and

concerted efforts of RBI and OBOs of spreading awareness about the BOS are yielding the

desired results.

OBO-wise receipt of Complaints:8

8
Supra note 6

24
OBO New Delhi received the highest number of complaints (22554) with 22% of the total

complaints received. Four metro centres OBOs viz. New Delhi, Chennai, Kolkata, Mumbai

and two non-metro centres viz. OBO Kanpur and Bhopal put together, accounted for 62 % of

the total complaints received. The complaints received at OBO New Delhi increased by 53%

during the year 2015-16 vis-s-vis previous year 2014-15. RBI has conducted a

comprehensive study to ascertain the reasons for the spurt in complaints from the jurisdiction

of OBO New Delhi.

Zone wise distribution of complaints:9

9
Supra note 6

25
Northern Zone accounted for 40% of the complaints received in all zones. Western and

Southern Zones accounted for 23% each respectively, whereas, Eastern Zone accounted 14%

of the total complaints received. Compared to last year there was 34.67% increase in

complaints received in Northern Zone followed by 14.99% in Western, 14.70% in Southern

and 7.50% in Eastern Zone.

26
Population wise distribution of complaints:10

The trend of urban centric receipt of complaints continue to remain the same. Urban and

Metropolitan population are the major group of complainants under the BOS with 73%

complaints from this strata. Year-on-year basis, Urban population group recorded

phenomenal increase of 40% in complaints received. Complaints from Rural and Semi-urban

population groups increased by 8.2% and 12.6% respectively, whereas in Metropolitan

population group, complaints increased by 9.7%.

10
Supra note 6

27
Mode wise receipt of complaints:11

Though for lodging complaints with OBOs, the physical mode (Post/Fax/Courier/hand

delivery) remained the dominant mode, it may be seen that over the years the share of physical

mode in lodging of complaints is witnessing a downward trend. From 67% in 2013-14 it has

come down to 51% in 2015-16. On year-on year basis, the proportion of complaints lodged

through electronic mode (Email and Online) has increased by 62%. This is one of the major

factors for increase in number of complaints received during 2015-16.

11
Supra note 6

28
Category wise distribution of complaints:12

Based on the analysis, majority of complaints are made upon the reason of failure to meet

commitments or non-observation of fair practices code/ BSCBI Code with 33.9% of total

complaints accounting to the above said category. Apart from that people majorly suffer from

car related issues which the ratio of card related complaints to be 21.2% of the total

complaints filed. Out of a total of 21821 card related complaints, 13081 complaints were

pertaining to ATM/Debit Cards (12.7% of complaints received). Of these, 8259 complaints

were regarding failed ATM withdrawal transactions involving short dispensation/non-

dispensation of cash, including alleged fraudulent withdrawals from ATMs. Whereas, 8740

complaints were pertaining to credit cards operations (8.5% of complaints received). The main

causes for credit card complaints were issue of unsolicited cards, sale of unsolicited insurance

policies and recovery of premium along with card charges, charging of annual fees in spite of

being offered as 'free' card, authorization loans of over phone, wrong billing, settlement offers

12
Supra note 6

29
conveyed telephonically, non-settlement of insurance claims after the demise of the card

holder, exorbitant charges, inappropriate practices by recovery agents, wrong reporting of

credit information by banks to Credit Information Companies etc.

Disposal of complaints:13

By the analysis of data provided, it seems that Banking Ombudsman has efficiently disposed

95% of the complaints which has been filed. The rest 5% has been carried forward to next

year. But when compared with previous years, the rate of disposal of complaints has been

dropped down by 1%. Though this seems trivial, this should be strictly taken into

consideration by RBI and it should bring up percentage of rate of disposal of complaints.

13
Supra note 6

30
Conclusion:

Therefore, on overall analysis of the Banking Ombudsman scheme, it has evolved so

magnificently and the need for revisions in the scheme has been well met up by RBI which is

evident with the present scheme. Apart from this report shows the effective functioning of

Banking ombudsman.

So by analysing the data which has been reported in Annual Report of Banking Ombudsman

for the year 2015-16, it has been understood that complaint number has been increased by

21%. The good part of the increase in number of complaints made is that, people are now

becoming aware about the scheme and they are getting utilized by the same. The sad part of

the analysis, since the number is keeping on increasing it seems like banks have to still

improve their way of relationship with customers. Other than that, people from Urban areas

are making use of the scheme, whereas people from rural areas still lag behind. This seems

like, still awareness on the scheme should be well spread and RBI and other banks have to

take more concern about spreading awareness in rural areas.

Since by the study it is evident that, people suffer more from banks failing to meet up their

commitments or card related issues, these issues are to meant to be given more importance and

the same has to be resolved as quickly as possible through a way of amicable resolutions.

Banks must further take measures in such a way that these issues are not raised by any other

customer again or should at least spend more interest on mitigating the problems faced by

customers, particularly on these issues.

By the analysis of data provided, it seems that Banking Ombudsman has efficiently disposed

95% of the complaints which has been filed. The rest 5% has been carried forward to next

year. But when compared with previous years, the rate of disposal of complaints has been

dropped down by 1%. Though this seems trivial, this should be strictly taken into

consideration by RBI and it should bring up percentage of rate of disposal of complaints.

31
Overall, by the analysis of Banking Ombudsman Scheme, the revision of scheme by

legislation having the latest developments in mind and the work of Ombudsman in resolving

the dispute faced by the customers towards the bankers should not go unappreciated.

32
Bibliography:

List of Schemes referred:

1. Banking Ombudsman Scheme 1995

2. Banking Ombudsman Scheme 2002
3. Banking Ombudsman Scheme 2006 (Amended up to 2017)

List of Reports referred:

1. Banking Ombudsman Scheme 2006 Annual Report 2015-16

List of Articles referred:

1. A Brief Analysis Of The Banking Ombudsman Scheme In India by Pragya

Mishra available at

http://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=42b81d8e-b2ae-

4c91-8a0c-085a3cd84eda&txtsearch=Subject:%20Banking last accessed on

12/08/2017 15.10 P.M. IST

2. Analysis of Banking Ombudsman Scheme by Girivasuki. K and Dr. Dinakaran.

G IJEMR – August 2015 - Vol 5 Issue 8 - Online - ISSN 2249–2585 Print - ISSN

2249-8672 available at

http://ijemr.in/Analysis%20of%20Banking%20Ombudsman%20Scheme.pdf last

accessed on 12/08/2017 15.58 P.M. IST

3. Success of Banking Ombudsman Scheme - Myth or reality by Mayiladri, Pacha

and Sirisha. S. International Journal of Research Studies in Management 2012

April, Volume 1 Number 1, 17-24 Online ISSN: 2243-7789 available at

file:///C:/Users/user/Downloads/21-73-1-PB.pdf last accessed on 12/08/2017 16.50

P.M. IST

4. Banking Ombudsman Scheme, Annual report 2004 issued by RBI, Rural

Planning Credit Department Central Office Mumbai available at

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https://www.rbi.org.in/Upload/Publications/PDFs/55994.pdf last accessed on

12/08/2017 16.32 P.M. IST

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