Banking Ombudsman Scheme Expanded

The RBI has extended the scope of Banking Ombudsman Scheme. Under the amended scheme, a customer would also be able to lodge a complaint against the bank for its non-adherence to RBI instructions with regard to mobile banking/ electronic banking services in India.

As per the amendment, the pecuniary jurisdiction of the Banking Ombudsman to pass an award has been increased from existing Rs. 10 lakh to Rs. 20 lakh.

Compensation not exceeding Rs. 1 lakh can also be awarded by the Banking Ombudsman for loss of time, expenses incurred, as also harassment and mental anguish suffered by the complainant.

The procedure for complaints settled by agreement under the scheme has also been revised.

An appeal has now been allowed for complaints closed under Clause 13 (c) of the existing scheme relating to rejection, which was not available earlier. The Reserve Bank released the notification on June 16 and it lists amendments to the scheme that provide for non-adherence to RBI instructions on ATM / debit card / credit card/ prepaid card operations and mobile banking/ electronic banking services in India by the bank or its subsidiaries or on para-banking activities like sale of insurance / mutual fund /other third party investment products by banks, among other things.

The Reserve Bank extended the scope of Banking Ombudsman Scheme under which banks could be penalised for mis-selling third-party products like insurance and mutual funds via mobile or electronic banking.

Banking Ombudsman in India:

Banking Ombudsman is a quasi judicial authority functioning under the Banking Ombudsman Scheme, 2006. The authority was created to enable resolution of complaints of customers of banks relating to services rendered by the lenders.

Banking Ombudsman Scheme is a mechanism created by the RBI to address the complaints raised by bank customers. It is run by the RBI directly to ensure customer protection in the banking industry. According to the RBI, “The Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks.”

The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995. The present Ombudsman scheme was introduced in 2006.

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India. He has the responsibility to redress customer complaints against deficiency in certain banking services. At present fifteen Ombudsmen were appointed by the RBI to settle complaints and they are appointed in state capitals.

All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

The Banking Ombudsman can receive and consider any complaint relating to a number of deficiencies related to banking operations including internet banking. RBI has mentioned a large number of service deficiencies by banks to customers where the customers can approach the Ombudsman through a complaint.

Following are some of the instances:

• non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.;
• non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission in respect thereof;
• non-acceptance, without sufficient cause, of coins tendered and for charging of commission in respect thereof;
• non-payment or delay in payment of inward remittances ;
• failure to issue or delay in issue of drafts, pay orders or bankers’ cheques;
• non-adherence to prescribed working hours ;

A customer can file a complaint before the Banking Ombudsman if the bank doesn’t gives a reply to the customer within a period of one month or the bank rejects the complaint, or if the complainant is not satisfied with the reply by the bank.