Context

Recently, the Reserve Bank of India released the banking ombudsman annual report for 2017-2018.

About

Banking Ombudsman Scheme

• This scheme is an expeditious and inexpensive forum for bank customers for resolution of complaints relating to certain services rendered by banks, which was introduced under the Banking Regulation Act of 1949 by RBI with effect from 1995.
• Presently the Banking Ombudsman Scheme 2006 (As amended upto July 1, 2017) is in operation.
• The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services.
• Currently, twenty Banking Ombudsmen have been appointed with their offices located mostly in state capitals.
• All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.
• One can file a complaint before the Banking Ombudsman if the reply is not received from the bank within a period of one month after the bank concerned has received one's complaint, or the bank rejects the complaint, or if the complainant is not satisfied with the reply given by the bank.
• Complaints can be made online and one does not need to make a physical complaint.
• The RBI introduced an NBFC Ombudsman scheme to redress complaints with regard to NBFCs in 2018.

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

• Non-payment/ inordinate delay in the payment or collection of cheques, drafts, bills etc.;
• Non-payment/delay in payment of inward remittances;
• Failure/delay to issue drafts, pay orders or bankers’ cheques;
• Non-adherence to prescribed working hours;
• Refusal to open deposit accounts without any valid reason for refusal;
• Levying of charges without adequate prior notice to the customer;
• Refusal/delay in closing the accounts;
• Non-observance of Reserve Bank guidelines on engagement of recovery agents by banks.

Major highlights of this report are:

• It stated about the Low number of complaints pertaining to mis-selling of third party products by banks. Its reasons are investors may not be aware that they can approach banking ombudsman for such cases.
• According to latest report, 0.4% of the total complaints were received by the ombudsman in 2017-18 regarding mis-selling. The major cause behind it is that customers are not aware of how they can make complaints.

Way Forward

• RBI needs to disseminate more information about the grievances, especially relating to mis-selling that can be handled by the banking ombudsman.
• The facility of making online complaints and the process must be highlighted properly.