Banking Ombudsman Banking Ombudsman Scheme 2006Scheme 2006

- Structure & Functioning- Structure & Functioning

31st January 2009

Road map

A historical perspective Legal basis and scope of the Banking

Ombudsman Scheme Vision & Goals Structure and processes Sharing of experiences The way ahead

Backdrop

Growing Public Policy concern Customer dissatisfaction - a topic of discussion in

various fora including the floor of Parliament Growing customer expectations with increasing

Awareness of rights. The satisfaction levels of customers is the touch

stone on which the quality of service is toned. Market discipline issues and need for policy

intervention

Customer Service – Policy Evolution

Formulated the Banking Ombudsman Scheme 1995 and revised in 2002 to enhance the scope of complaint redressal.

Set up the Committee on Procedures and Performance Audit of Public Services in 2003 to look into the issues relating to banking services rendered to the common man.

Banks were advised in December 2003 to constitute an Adhoc Committee to undertake Procedures and Performance Audit on public services rendered by them.

Customer Service – Policy evolution …contd..

Banks were advised in August 2004 to constitute Customers' Service Committee of the Board to bring about ongoing improvement in the quality of customer service rendered.

Banks were asked in April 2005 to convert the Adhoc Committees into Standing Committee on Customer Service to serve as a focal point for customer service in banks with powers to evaluate the functioning in various departments of the banks.

Customer Service – Policy Evolution: contd..

RBI facilitated the formulation of Fair Practices Code for Lenders and Codes of Conduct in respect of credit card operations, direct sales agencies and calculation of dues and repossession of security.

RBI prescribed proper disclosures by banks relating to aspects such as maintenance of minimum balances in accounts, issue of cheque books, entry in pass books, statement of accounts, formulation of transparent cheque collection policy by banks, etc.

Customer Service Policy Evolution: contd

RBI introduced in June 2005 simplified procedures to facilitate expeditious and hassle free settlement of claims of deceased depositors.

RBI issued in November 2005, comprehensive guidelines on credit card operations to protect the interest of credit card holders.

A clean note policy was formulated and implemented to improve quality of currency in circulation and ensure sufficient availability of fresh currency and coins.

Customer Service - Policy Evolution: contd

Banks were also advised to formulate a transparent and comprehensive deposit policy setting out the rights of the depositors in general and small depositors in particular.

RBI has facilitated the setting up of the Banking Code and Standards Board of India.

For the first time, RBI in its report on Trend and Progress of Banking in India 2004-05 listed the complaints received against Scheduled Commercial Banks under the caption "Customer Services in Commercial Banks" to highlight the issue of customer service in banks.

Customer Service - Policy Evolution: contd

RBI advised banks, in April 2005 to place all the awards passed by the Banking Ombudsman before the Customer Service Committee to enable them to address issues of systemic deficiencies existing in banks, if any, brought out by the awards.

RBI also advised banks to place all the awards remaining unimplemented for more than three months with the reasons therefore before the Customer Service Committee to enable the Committee to report to the Board such delays in implementation without valid reasons and for initiating necessary remedial action

Customer Service - Policy Evolution: contd

In December 2005, the Banking Ombudsman Scheme was revised (termed as the Banking Ombudsman Scheme, 2006) to widen its scope and improve its effectiveness and accessibility to the public.

 

GENERAL PARTICULARS OF THE SCHEME

Legal Basis: Notified in terms of Sec 35A of Banking Regulation Act 1949

Purpose of the Scheme: Expeditious and inexpensive redressal of customer complaints.

Areas covered: Deficiency in banking servicesdeficiency in sanctioning of loans and

advances Other specified matters

Banking Ombudsman Scheme

1995 2002 2006Institutions covered

Commercial banks

Scheduled primary cooperative banks

Commercial banks

Scheduled primary cooperative banks

RRBs

Commercial banks

Scheduled primary cooperative banks

RRBs

Stages of Redressal

Settlement

Recommendation

Award

Agreement

Award

Review

Agreement

Award

Appeal

Staffing BO -By a Selection Committee- Retired personnel

Secretary- RBI

Deputy Secretary & Staff- SLBC Bank

BO -By a Selection Committee- Retired personnel

Secretary- RBI

Deputy Secretary & Staff- SLBC Bank

Serving Chief General Manager/ General Manager

Secretary- RBI

Deputy Secretary & Staff- RBI

Banking Ombudsman Scheme

1995 2002 2006Funding Participating

BanksParticipating Banks

RBI

Procedure

Complaint Receipt

Prescribed application in writing

Prescribed application in writing

Online/email/by post Prescribed application not insisted

www.bankingombudsman.rbi.org.in

Nature of Complaints

Not specified Specifically prescribed clause 12

Specifically prescribed clause 8

Cases of fraud cannot be handled

Cases of fraud can be handled

Focus on resolution of grievances

VISION

To provide an inexpensive, transparent and credible mechanism ensuring fair

treatment of the common person utilizing Banking services

Goals To ensure customer facilitation and protection

through redressal of grievances of users of banking services in an inexpensive, expeditious, fair, reasonable and hassle free manner that will provide impetus for improved customer service on a continuous basis

Provide feedback for framing appropriate and timely guidelines

Enhance awareness of the scheme itself

Enhancements provided by the 2006 Scheme :

Wider ScopeSimpler proceduresBetter focus Greater involvement of RBI

Organizational Chart

DeputyGovernor

(Appellate Authority

Executive Director

Customer Services Department

Office of the Banking Ombudsman

Redressal Process

Receipt of complaint

Review by BO

RejectNon Maintainable

Maintainable

Maintainable Complaints

Referred to Bank

Resolved by mutual settlement(Clause 11)

Unresolved Complaints

Award (Clause 12)

Bank & Complainant can File an Appeal

Reject (Clause 13)

Complainant’s right to Appeal

Complainant to accept & Bank to implement

Appellate Authority

CSD, CO

Banking Ombudsman

Customer

Legal Department

Bank to Implement

Set aside the awardRemand the matter to BO

Modify the awardPass any other order

Regulatory Departments

Procedure for lodging complaints

Essential – grievance to be taken up with bank first;

Aggrieved persons not satisfied by a bank’s service and its resolution of complaint can apply to the Banking Ombudsman within one year;

Complaint in prescribed format or in any other but incorporating all the required information.

Complaints can be submitted online/ email/in hard copy

Complaints from individuals/ their representatives( except advocates)/GOI/RBI

Complaints Redressal ProcedureMaintainability of Complaint

Prescribed time –rejection of complaint/non receipt of reply within one month of his representation / non satisfaction of reply

not later than one year after the cause of action not time barred as per the Indian Limitation Act

1963Not a subject matter on which BO decision has

already been takenNot a subject matter which is before court/

tribunal/ arbitrator/ other forum

Grounds of complaint . . . Banking Services

non-payment or  inordinate delay in payment or collection of – cheques, drafts, bills etc.;– inward remittances

non-acceptance of – small denomination notes– coins or charging commission for acceptance

Grounds of complaint . . . Banking Services

failure to issue or delay in issue, of drafts, pay orders or bankers’ cheques;

non-adherence to prescribed working hours; failure to honour guarantee or letter of

credit commitments ; 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;

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 ;

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;

Grounds of complaint . . . Banking Services

Grounds of complaint . . . Banking Services

complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank-related matters;

refusal to open deposit accounts without any valid reason for refusal;

levying of charges without adequate prior notice to the customer;

non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/Debit card operations or credit card operations;

Grounds of complaint . . . Banking Services

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;

refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government;

refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of Government securities;

Grounds of complaint . . . Banking Services

forced closure of deposit accounts without due notice or without sufficient reason;

refusal to close or delay in closing the accounts;

non-adherence to the fair practices code as adopted by the bank; and

any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other services.

Complaints - Loans and Advances

non-observance of RBI directives on interest rates;

delays in sanction, disbursement or non-observance of prescribed time schedule for disposal of loan applications;

non-acceptance of application for loans without furnishing valid reasons to the applicant and

non-observance of any other directions or instructions of the RBI from time to time.

Excluded

Complaints arising out of frauds and forgery and subjudice cases (Supreme Court’s observation that it would not be appropriate for BOs to give a finding on forgery or to form an opinion on cases already referred to courts)

Charges for application . . .

There are no charges to be paid by the applicant to the Banking Ombudsman

Processes

Proceedings are summary in nature Procedure discretionary as the Banking Ombudsman may

consider just and proper Not bound by any rules of evidence Each case is dealt on a stand alone basis and cannot be

cited as precedent Disposals take into account evidence, the principles of

Banking Law & Practice, instructions, guidelines and directions of RBI

Right of the complainant to approach any court or forum at any time during or after the proceedings is not affected

Stages of settlement

The Banking Ombudsman

– first endeavours to promote a settlement between the parties through mediation/ conciliation,

or else

– proceeds to make an Award on merits of the case.

Compliance with the Award

Customer to give acceptance within 30 days

Within one month of receipt of complainant’s confirmation

Appeal against the Award

Both the bank and the complainant can appeal

Time limit: 30 days

Appellation Process

Banks to get the sanction of the Chairman/ CEO Appellate Authority can;

Dismiss the appeal

Allow the appeal and set aside the award

Remand the matter for fresh disposal

Modify the award

Pass any other order as it may deem fit

Dealings with the bankNodal Officers appointed by banks at

Zonal/Regional Office levels

BO to deal through the Nodal Officers.

All bank branches to display the name of the Banking Ombudsman and contact particulars

Finance Ministry instructions vide letter dated August 11, 2005 for computerization and online complaint monitoring system for Banking Ombudsman Scheme by September 30, 2005.

Complaint Monitoring Application was successfully tested and hosted on the RBI’s Secured Internet Website. It is in operation since September 30, 2005 .

Banking Ombudsmen Complaint Monitoring Application on RBI’s

Secured Internet Website

Features of the Monitoring Mechanism

It is common to all Banking Ombudsmen offices. Each Banking Ombudsmen office will feed in the

complaint details on the application. The application generates a unique complaint id,

which can be used by Banking Ombudsmen, RBI and Finance ministry to monitor/track the status of a particular complaint.

Automatic acknowledgement generated on tracking of complaints

RBI and Finance Ministry can monitor the overall status of complaints at all the Banking Ombudsmen offices.

Right to Information Act and Banking Ombudsman SchemeThe following are in the public domain:

The BO Scheme FAQs Complaint Application form BO addresses & email ids Annual Review of the Scheme

Right to Information Act and Banking Ombudsman Scheme

The Complainant can get the status of his complaint till disposal

At disposal the Award gives reasons for decision taken

Each decision of the Appellate Authority is a speaking order

BENEFITS OF THE BO SCHEME

Prompt and impartial resolution of complaints

No cost to the customer Assessment based on overall fairness, good

business practices, accepted banking law and practice

Road Ahead Focus on customer education and financial

literacy Customer Awareness and Empowerment Understanding rights and responsibilities Percolation of the spirit of the Banking

Code and Standards as adopted by the bank down the rank and file to the level of the service delivery interface

ThankThank

YouYou

Average cost per complaint

Year Amount

(Rs)

2003-04 7413

2004-05 6315

2005-06 3045

2006-07 2538

2007-08 2611