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A Brief Analysis of the Banking Ombudsman Scheme in India

Pragya Mishra*
Abstract
Banking Ombudsman is a quasi judicial authority functioning under India's Banking
Ombudsman Scheme, and the authority was created pursuant to the a decision by the
Government of India to enable resolution of complaints of customers of banks relating to
certain services rendered by the banks1. This article attempts to give a brief introduction of
the concept of Ombudsman; lay down the role of Banking Ombudsman as a complaint
redressal mechanism; study the provisions of the Banking Ombudsman Scheme 2006;
compare the provisions relating to Banking Ombudsman in various jurisdictions; highlight
the achievements of the Banking ombudsman mechanism in India and give suggestions for
the improvement of the working of banking Ombudsman.
Introduction
An ombudsman is a person who has been appointed to look into complaints about an
organization2. Using an ombudsman is a way of trying to resolve a complaint without going
to court. Banking Ombudsman is a quasi judicial authority functioning under India's Banking
Ombudsman Scheme, and the authority was created pursuant to the a decision by the
Government of India to enable resolution of complaints of customers of banks relating to
certain services rendered by the banks.
The institution of Banking Ombudsman was introduced in 1995 in India, through the
Banking Ombudsman Scheme 1995. The Scheme was implemented through direction issued
by the Reserve Bank in terms of Section 35A of the Banking Regulation Act, 1949, to protect
the banking in public interest and in the interest of banking policy3.
It was a mechanism to look into the banking customer grievances. After the review of the
scheme, a new scheme came into picture in 2002 and further in 2006. Over the past five
years, around 36,000 complaints have been dealt by the Banking Ombudsmen.4.
Banking Ombudsman : In the wake of the failure in the efficient services of the banks, the
RBI brought the Banking Ombudsman Scheme for the prompt, efficient and courteous
services and also to protect the rights of the customers5.
The Banking Ombudsman is an official authority to investigate the complaint from the
customers6 and address the complaint and thereby bring the solution among the aggrieved
parties7. So the Banking Ombudsman plays the role of a mediator and serves the purpose of
reconciliation8. The Banking Ombudsman has been defined under clause 4 of the Banking
Ombudsman Scheme, 20069. Clause 4 lays down that:
 4. Appoint & Tenure.
(1) The Reserve Bank may appoint one or more of its officers in the rank of
Chief General Manager or General Manager to be known as Banking
Ombudsmen to carry out the functions entrusted to them by or under the
Scheme.
(2) The appointment of Banking Ombudsman under the above Clause may be
made for a period not exceeding three years at a time.
Banking Ombudsman Scheme, 2006
Scope of the Scheme: In 2006, the Reserve Bank of India announced the revised Banking
Ombudsman Scheme with enlarged scope that included customer complaints on certain new
areas, such as, credit card complaints, deficiencies in providing the promised services even
by banks' sales agents, levying service charges without prior notice to the customer and non
adherence to the fair practices code as adopted by individual banks.
Application of the Scheme: The scheme is applicable to all commercial banks, regional
rural banks and scheduled primary cooperative banks having business in India.
Funding: Unlike the old scheme, the revised Banking Ombudsman Scheme is fully staffed
and funded by the Reserve Bank instead of the banks.
Filing of Complaint:. Under the revised Banking Ombudsman Scheme, the complainants
can file their complaints in any form, including online.
Appeal: The bank customers would also be able to appeal to the Reserve Bank against the
awards given by the Banking Ombudsmen.
Forum for the complaints : The 2006 scheme provides a forum to bank customers to seek
redressal of their most common complaints against banks, including those relating to credit
cards, service charges, promises given by the sales agents of banks, but not kept by banks, as
also, delays in delivery of bank services.
New areas of Complaint: The bank customers can complain about non-payment or any
inordinate delay in payments or collection of cheques towards bills or remittances by banks,
as also non-acceptance of small denomination notes and coins or charging of commission for
acceptance of small denomination notes and coins by banks.
Provisions of the Scheme: The Banking Ombudsman Scheme 2006 provides a wide scope
and extent to the schemes of 1995 and 2002. Many new changes have been made in the old
scheme. The most essential provisions of the scheme are as follows:
1. Appointment and tenure. The Section 4 of the scheme provides for the
appointment of one or more of the officers of the Reserve Bank of India in the rank of
Chief General Manager or General Manager to be known as Banking Ombudsmen to
carry out the functions entrusted to them by or under the Scheme. Their tenure would
not be more than a period of five years.
2. Location of the office. Generally, the office of the banking ombudsman is located
at the place specified by the Reserve Bank of India. For the expedite disposal of the
complaints, a banking ombudsman may hold office at such places, under his
 jurisdiction which he deems fit for the disposal of the complaints10.
3. Powers and Jurisdictions. The scheme lays down the following
provisions11 dealing with powers and functions of the Banking Ombudsman:
• Authority of each Banking Ombudsman extends to the territorial limits
entailed by the Reserve Bank of India.
• The Banking Ombudsman has power to receive and consider complaints
relating to the deficiencies in banking or other services filed on the grounds of
complaints12. He has to facilitate their satisfaction or settlement by agreement
or through conciliation and mediation between the bank concerned and the
aggrieved parties or by passing an Award in accordance with the Scheme.
• The Banking Ombudsman exercises general powers of superintendence and
control over his Office and is responsible for the conduct of business thereat.
• The Office of the Banking Ombudsman draws up an annual budget for itself
in consultation with Reserve Bank and exercises the powers of expenditure
within the approved budget on the lines of Reserve Bank of India Expenditure
Rules, 2005.
The Banking Ombudsman has to send to the Governor, Reserve Bank, a
report, as on 30th June every year, containing a general review of the
activities of his Office during the preceding financial year. He has to furnish
such other information as the Reserve Bank may direct and the Reserve Bank
may, if it considers necessary in the public interest so to do, publish the report
and the information received from the Banking Ombudsman in such
consolidated form or otherwise as it deems fit.
The case Balla Rama Rao v. the Office of Banking Ombudsman13, relates to the issue of
jurisdiction of a banking ombudsman. In this case, a house in the name of B. Narayanama
was given on lease to the bank in 1982. Subsequently, the lady died. The Bank did not pay
rent from June 1992 to Feb. 1997. Balla Ramarao, the appellant approached the bank. Bank
immediately paid around Rs. 3 lacs. Balla contended that the interest should also be paid for
the period of 1992 to 1997. The bank refused to pay interest. The appellant approached to the
banking ombudsman. But he rejected the complaint, holding no merit in the case as it was
outside the jurisdiction of the banking ombudsman. Balla approached to the Andhra Pradesh
high court. The high court rejected the appeal, finding that it was outside the jurisdiction of
the banking ombudsman.
4. Grounds of complaints. Clause 8 of the scheme lays down the following grounds
on which a banking customer may seek the redressal from the banking ombudsman:
• 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 for this service;
• Non-acceptance, without sufficient cause, of coins tendered and for charging
 of commission for this service;
• 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;
• 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;
• 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;
• 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;
• 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.
5. Procedure for filing complaint. Clause 9 of the Banking Ombudsman Scheme, 2006 lays
down the procedure to file a complaint before the Banking Ombudsman as well as the
conditions in which a complainant cannot approach the banking ombudsman.
1. Any person who has a grievance against a bank on any one or more of the grounds
mentioned in the Scheme may, himself or through his authorized representative (other
than an advocate), make a complaint to the Banking Ombudsman within whose
jurisdiction the branch or office of the bank complained against is located. But the
complaint arising out of the operations of credit cards, has to be filed before the
Banking Ombudsman within whose territorial jurisdiction the billing address of the
card holder is located and not the place where the bank concerned or the credit card
processing unit is located.
2. The complaint in writing has to be duly signed by the complainant or his
authorized representative. The complainant has to show the copies of the documents,
which he proposes to rely upon and a declaration under Clause 9(3) of the scheme.
He has to mention the following things in the complaint:
• the name and the address of the complainant,
• the name and address of the branch or office of the bank against which the
complaint is made,
• the facts giving rise to the complaint,
• the nature and extent of the loss caused to the complainant, and
• The relief sought for.
The Banking Ombudsman also entertains complaints covered by this Scheme
received by Central Government or Reserve Bank and forwarded to him for disposal.
Following conditions have to be fulfilled for making a complaint before the
Banking Ombudsman:
• Before making a complaint to the Banking Ombudsman, the complainant
had to, make a written representation to the bank. If the bank rejects the
complaint or the complainant had not received any reply within a period of
one month after the bank received his representation or the complainant is not
satisfied with the reply given to him by the bank.
• The complaint should be made before one year, from the day the
complainant has received the reply of the bank to his representation or, where
no reply is received, before one year and one month from the date of the
representation to the bank;
• The complaint does not touch upon matter which was settled or dealt with on
merits by the Banking Ombudsman in any previous proceedings whether or
not received from the same complainant or along with one or more
complainants or one or more of the parties concerned with the subject matter;
• The complaint does not pertain to the same subject matter, for which any
proceedings before any court, tribunal or arbitrator or any other forum is
pending or a decree or Award or order has been passed by any such court,
tribunal, arbitrator or forum;
• The complaint is not frivolous or vexatious in nature; and
 • The complaint is made before the expiry of the period of limitation
prescribed under the Indian Limitation Act, 1963 for such claims.
Appeal: If the customer is not satisfied with the award of the Banking Ombudsman, he can
approach to the RBI, to the appellate authority called Deputy Governor. Still he is not
satisfied, after approaching to the RBI, he can go to the High Court14
Cases Concerning the Banking Services:
Following are the cases, through which it can be ascertained that what the grievances have
been handled by the Banking Ombudsman Scheme:
1. Failure to issue bank guarantee. The bank was alleged to have failed to issue
bank guarantee despite sufficient security and the complainant suffered financial loss.
It was held that the non-issuance of bank guarantee despite security deposit with the
bank would amount to deficiency in service and the complainant was held entitled to
interest on that security amount15.
2. Failure to confirm remittance. In one of the cases, the complainant's son remitted
an amount from abroad to be credited to his NRI account with appellant bank. The
remittance was not confirmed till a long time. Appellant bank pleaded that non-
confirmation was due to failure of computers. The issue is whether this delay on the
part of the bank amounted to deficiency in service. The Commission in appeal
observed that bank officials could have verified vouchers and cheques received by
post or confirmation and could have given correct reply within a reasonable time. It
was held that failure of the bank to confirm remittance received from outside country
within a reasonable period amounts to deficiency in service16.
3. Deficiency in services. In most of the cases against the banks, the costumers have
alleged the deficiency in services provided by the banks.
a. Issues of cash credit facility. The appellant had the cash credit facility
from 1994 with respondent bank and also he had issued two cheques of which
one was en-cashed and the other was dishonored. Respondent bank averred
that appellant had overdrawn account. It was held that when there was credit
in favour of the complainant, dishonour of the cheque issued by the
complainant could not be said to be bona fide. Respondent bank was held
guilty of deficiency of service and appellant was held entitled for
compensation17.
b. Issues of discounting agreement. Further in the case of Corporation Bank
& Anr v. Navin J. Shah,18 the Respondent was an exporter. Under discounting
agreement, he entrusted documents relating to export and bills of exchange
with appellant bank to negotiate the same through a foreign bank. Respondent
alleged that the bank had failed to collect money in foreign currency indicated
in documents but instead collected in local currency, hence there was
deficiency in service on the part of the appellant bank and hence a claim for
damages was made. In appeal, the Commission held that there was no
deficiency of service on the part of the bank as the appellant bank, acting for
an on behalf of the respondent, had negotiated the documents as provided
under agreement. However the conversion of local currency in U.S. dollar
became difficult on account of policy of Sudan Government. It was observed
that all that was required to be done under terms of the agreement and under
contract had been done by the two banks.
c. Issues of dividend warrants. In the case of Anthony C. Vaz v. M/s
Himachal Futuristic Communication Ltd & Anr19, dividend warrants were
issued by respondent No.1 and were sought to be encashed by respondent
No.2, Banker at Panaji. The appellant filed a complaint before the District
Forum as the warrants were returned unpaid with the remarks 'No advice'
despite a letter dispatched to them by Industrial Financial Branch of SBI,
Chandigarh. Respondent No.2 took the defense that they cannot honour
dividend warrants unless they received intimation from local Head Office at
Mumbai. The State Commission however held that refusal to clear the
dividend warrant was deficiency in service as question of respondent No.2
having no authority to honour the warrants could not arise in view of the letter
from Industrial Financial Branch of SBI, Chandigarh. Respondent No. 2 and
Respondent No. 1 were held to be jointly liable.
d. Non-payment of premium. In Manohar Singh Chouhan & Ors Vs.
Central Bank of India20, the complainants have purchased a tractor after
taking loan from the respondent bank. The respondent bank did not remit the
premium amount to the insurance company with which the complainants have
insured their tractor as a result of which the loss suffered when the tractor met
with an accident could not be recovered from the insurance company. The
issue for consideration is whether non- payment of premium amount by the
bank amounted to deficiency in service. It was held that when hire purchase
agreement between the bank and buyer of vehicle with the help of bank loan
did not contain a condition creating obligation on the part of the bank to remit
premium for insurance policy, complainant buyer of vehicle could not hold
bank guilty of deficiency in service.
e. Absence of security. In a case concerning the security at the banking
premises, cash was snatched from the hands of the complainant at the gate of
the respondent bank. The appellant alleges that the absence of security on the
gate and the non-provision of steps like siren/alarm system etc. amounts to
deficiency in service on the part of the respondent bank. The State
Commission held that the non-provision of security on the gate of the bank on
the date of occurrence viz. snatching of cash in bank premises cannot be held
to be amounting to deficiency in service hired by complainant21.
f. Charging for services without consent. The Bank charged, unilaterally
without prior information or consent of the Bank Customer, for providing
their services by supply of MICR Cheque. Consumer Forum and State
Commission held it as deficiency of service but National Commission held
that it was related to pricing and not in jurisdiction of the Consumer Fora to
decide. The Supreme Court held that the charges by bank for issuance of
MICR cheques, is not against the directives of the Reserve Bank of India. The
question of it, being unilateral or with the consent of each customer does not
arise22.
g. Issue of Overdraft facility. In the case of India Export Corporation & ors
 Vs. Chairman-cum-MD, Syndicate Bank & ors,23 the complainant withdrew
overdraft facility sanctioned to him by the bank only after availing facility to
the extent of Rs.1,20,000/-. The facility was availed by the complainant for
business purpose. It was held that where complaint alleging banking service
deficiency was found connected with commercial purpose, the consumer
complaint would not be maintainable.
h. Cancellation of Pay Order. In the case of Ratanchand Morarkar v. Bank
of Maharashtra,24 the complainant had deposited amount for issue of pay order
in favour of a particular firm. However, the said pay order was cancelled by
the bank and was issued in favour of another party. It was held that when the
bank has acted in good faith in cancellation of bank pay order and issuance of
fresh pay order in favour of another party on the request made by Manager of
the complainant firm, there would be no deficiency in service.
Banking Ombudsman Scheme- How Different From the Schemes of 1995 And 2002.
The extent and scope of the new Scheme is wider than the earlier Scheme of 2002.
The new Scheme also provides for online submission of complaints. The new Scheme
additionally provides for the institution of an 'appellate authority' for providing scope
for appeal against an award passed by the Ombudsman both by the bank as well as
the complainant.
Power to Arbitrate
The powers of the Banking Ombudsman have been widened to include the powers to
arbitrate between inter-bank disputes and bank-customer disputes. The ombudsmen,
thus, can address disputes pertaining to regional rural banks in addition to commercial
banks and scheduled primary co-operative bank.25
Achievements
During the year 2010-11, the complaints received against member banks were quite
reduced to 573 as compared to 750 complaints in the previous year26. This is
according to the Banking Codes and Standards Board of India indicative of greater
awareness among bank customers.27 The table given below explains the type of
complaints filed in recent years.
On the contrary, the number of complaints against banking services has been on rise
in Northeast India. The Banking Ombudsman for Northeast India has received 708
numbers of complaints till June 201228.
Provision in other Countries
Ombudsman for Banking Services and Investments (OBSI): The OBSI was founded in
1996 in Canada as the Canadian Banking Ombudsman to review complaints by small
business against the chartered banks29.
Today, there are more than 600 participating firms across the banking services and
investment sectors30. Any regulated firm of the banking services and investment fields
is eligible to join OBSI. It resolves disputes between participating banking services
and investment firms and their customers if they are not able to solve them on their
 own31 .
Swiss Banking Ombudsman: The Swiss Banking Ombudsman deals with specific
complaints which are raised against banks based in Switzerland. The institution took up its
duties in April 1993. Since then it deals with an increasing number of enquiries (currently
about 1,400 a year)32. The office of the Swiss Banking Ombudsman is supported by the
Swiss Banking Ombudsman Foundation, established by the Swiss Bankers Association 33 . As
per the annual report of 2011, a total of 1889 cases were submitted, which represents a small
decrease as against 201034.
Financial Ombudsman Service. This is the institution based in the UK, which deals with
the consumer complaints regarding banking services. It deals with financial complaints
related to banking, insurance, pensions, loans, stocks, shares etc35 :
In the annual report for the financial year 2010-11, it was found that the number of banking
complaints fell by 9%36.
The Office of the Comptroller of the Currency (OCC): It is the institution of the USA,
which charters, regulates, and supervises all national banks and federal savings associations.
It also supervises the Federal branches and agencies of foreign banks37. Its function also
includes conducting onsite reviews of national banks and federal savings associations (or
federal thrifts) and providing sustained supervision of their operations. In regulating national
banks and federal savings associations, the OCC has the power to examine the banks and
thrifts, approve or deny applications for new charters, branches, capital, or other changes in
corporate or banking structure, take supervisory actions 38 :
Conclusion
Banks being the institutions of financial importance in every part of the world, the resolution
of the complaints relating to their conduct is also an essential attribute of consumer
satisfaction39. Therefore the ombudsman or the officer for dealing with consumer complaints
regarding the banks has been appointed by an authority in various nations40. The Ombudsman
scheme is a boon and a very important channel for redressal of grievances by the general
public against banks and banking services. It is framed in such a manner that it does not oust
the jurisdiction of other courts, and hence, aggrieved people do not hesitate in using the
banking ombudsman as a primary forum for resolution of disputes regarding banks. The
hallmark of the banking ombudsman probably is that it is in position to do justice in an
individual case, in the sense it is not bound by the precedents and in certain circumstances,
can ignore technicalities and legal rules of evidence while resolving disputes between
aggrieved customer and the bank. Apart from above BO?s offices have also started outreach
activities for creating awareness among customers like interface with banks, organizing
awareness camps, participation in exhibitions, responding to readers? queries in newspapers,
broadcasting advertisements through AIR and Doordarshan and many others. So far the
achievements of BOS have been remarkable however there is a lot to achieve.
As number of complaint received are though significant and are handled but total consumer
awareness needs to grow in order to the get total satisfaction of consumer and also BOS
needs to handle complaints efficiently and promptly in order to not deny a consumer justice
as its delayed is denied41. Bank Ombudsman is limited to twenty seven grounds on which a
customer can file a complaint against a bank and there is a dire need to expand the scope of
ombudsman in the changing IT environment.
  
_________________________________
* Student BALLB, Semester IX, Hidayatullah National Law University, Raipur 
1. Law of Banking & Financial Institutions: 2011 Statutory Supplement Richard Scott
Carnell (Sep 6, 2011) 
2. Ellinger's Modern Banking Law by E.P. Ellinger, E. Lomnicka and C. Hare (Jan 7,
2009)
3. Section 35A (a) and (aa).
4. Reserve Bank of India Press Release (2005-2006/783),
http://rbi.org.in/commonman/English/Scripts/AgainstBankPR.aspx
5. Mighty Laws http://www.mightylaws.in/409/banking-ombudsman-scheme 
6. Banking Law and Practice by Hong Kong Institute of Bankers (HKIB) (Dec 11,
2012) 
7. Banking: Law and Practice by R.K. Gupta published by Modern; 2009, Central
Law Publication 
8. Principles of Banking Law by Ross Cranston QC MP (Dec 26, 2002) 
9. Clause (4) of the Banking Ombudsman Scheme, 2006 
10. Clause 5 of the Banking Ombudsman Scheme, 2006 
11. Clause 7 of the Banking Ombudsman Scheme, 2006 
12. Clause 8 of the Banking Ombudsman Scheme, 2006 
13. 2003 117 Comp Cas 201 AP 
14. Clause 14 of the Banking Ombudsman Scheme, 2006 
15. M/s.Anand Lubricating & Pneumatic Systems Ltd., v. State Bank of India, 2003
(2) CPR 53 
16. The AGM, State Bank of India, Pondicherry & Ors V/s N.Ganesan, 2000(3) CPR
423 SCDRC (Pond) 
17. Vettivel Pillai v. Senior Manager Canara Bank 2000(2) CPR 261 SCDRC (Ker) 
18. 2000(2) CPR 13 (SC) 
19. 2000(2) CPR 83 SCDRC (Goa) 
20. 2004 (1) CPR 285 SCDRC(MP). 
21. Col. D.S.Sachar v. Zonal Manager, Punjab & Sind Bank, Chandigarh & anr 2003
(3) CPR 203 SCDRC (Chandigarh). 
22. Brijesh Kumar & A.R.Lakshmanan v. Canara Bank & anr, 2003 (1) CPR 296
(SC). 
23. 2003 (3) CPR 106 (NC). 
24. 2004 (1) CPR 66 (NC). 
25. Introduced by the Banking Ombudsman Scheme 2002 
26. The Annual Report of 2010-11 by Banking Codes and Standards Board of India,
available at http://www.bcsbi.org.in/Pdf/AR10-11.pdf 
27. The Economic Times, Banking ombudsman for Northeast receives 708
complaints till June 2012, http://articles.economictimes.indiatimes.com/2012-08-
22/news/33322297_1_ombudsman-northeast-india-complaints 
28. Id. 
29. Website of OBSI, http://www.obsi.ca/en/about-us/history there are more than 600
participating firms across the banking services and investment sectors 
30. Id. 
31. Id., at http://www.obsi.ca/en/about-us
32. Website of Swiss Banking Ombudsman, http://www.bankingombudsman.ch/en 
33. Id. 
34. Annual Report of 2011, p.2, available at
http://www.bankingombudsman.ch/fileadmin/download/pdf/jahresberichte/bom_Sum
mary%20JB2011_EN .pdf 
35. Website of Financial Ombudsman Service, http://www.financial-
ombudsman.org.uk/about/ind 
36. Annual Review of 2010-11, p. 2, available at http://www.financial
ombudsman.org.uk/publications/ar11/ar11.pdf 
37. Website of the Office of the Comptroller of the Currency (OCC),
http://www.helpwithmybank.gov/about/index-about.html
38. Id. 
39. The Law of Banking and Financial Institutions by Richard Scott Carnell, Jonathan
R. Macey and Geoffrey P. Miller (Oct 7, 2008)
40. Banking and Financial Institutions Law in a Nutshell, William A. Lovett, 7th Ed.,
West Publishing (Aug 18, 2009)
41. Tannan, M L, Tannan's Banking Law and Practice in India, 21st edn., Wadhwa
and Wadhwa, Nagpur, (2007).
  
 

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The Banking Ombudsman Scheme
Author: Mr. Ashwani Yadav |  Subject: Banking/Forex
1
Ashwani Yadav
In today’s life Banking is a sector or place which if surveyed is the most visited and most
working department in the country whether it is private, nationalized, RRB’s, co-operative
etc. Almost all the economy transactions are dealt with banks only.
The load of work is increasing day by day on banks taking into account whether it is
scholarships or farmers loans or subsidy to farmers or for students or corporate sectors. As a
result of increasing work load on banks, there is also an increase of inadequacies and
deficiency of services by the Banks to the customers or the general public.
The Banking Ombudsman Scheme was passed to enable an expeditious and inexpensive
forum to bank customers for resolution of complaints relating to certain services rendered by
banks.
Banking Ombudsman is a quasi judicial authority functioning under India’s Banking
Ombudsman Scheme 2006, and the authority was created pursuant to the a decision by the
Government of India to enable resolution of complaints of customers of banks relating to
certain services rendered by the banks. The Banking Ombudsman Scheme is introduced
under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995 and
was revised in 2002. The current scheme became operative from 1st January 2006, and
replaced and superseded the banking Ombudsman Scheme 2002. From 2002 until 2006,
around 36,000 complaints have been dealt by the Banking Ombudsman.
The type and scope of the complaints which may be considered by a Banking Ombudsman is
very comprehensive, and it has been empowered to receive and consider complaints
pertaining to its jurisdiction on the following grounds alleging deficiency in banking
including internet banking or other services:
(a) non-payment or inordinate delay in the payment or collection of cheques, drafts,
bills etc.;
(b) non-acceptance, without sufficient cause, of small denomination notes tendered
for any purpose, and for charging of commission in respect thereof;
(c) non-acceptance, without sufficient cause, of coins tendered and for charging of
commission in respect thereof;
(d) non-payment or delay in payment of inward remittances ;
(e) failure to issue or delay in issue of drafts, pay orders or bankers’ cheques;
 (f) non-adherence to prescribed working hours ;
(g) 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;
(h) 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 ;
(i) complaints from Non-Resident Indians having accounts in India in relation to their
remittances from abroad, deposits and other bank related matters;
(j) refusal to open deposit accounts without any valid reason for refusal;
(k) levying of charges without adequate prior notice to the customer;
(l) non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank
on ATM/Debit card operations or credit card operations;
(m) 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);
(n) refusal to accept or delay in accepting payment towards taxes, as required by
Reserve Bank/Government;
(o) refusal to issue or delay in issuing, or failure to service or delay in servicing or
redemption of Government securities;
(p) forced closure of deposit accounts without due notice or without sufficient reason;
(q) refusal to close or delay in closing the accounts;
(r) non-adherence to the fair practices code as adopted by the bank;
(s)non-adherence to the provisions of the Code of Bank’s Commitments to Customers
issued by Banking Codes and Standards Board of India and as adopted by the bank ;
(t) non-observance of Reserve Bank guidelines on engagement of recovery agents by
banks; and
(u) any other matter relating to the violation of the directives issued by the Reserve
Bank in relation to banking or other services.
The complaint regarding the loans and advances can also be filed where the Banking
Ombudsman have its jurisdiction on the following grounds:
(a) non-observance of Reserve Bank Directives on interest rates;
(b) delays in sanction, disbursement or non-observance of prescribed time schedule
for disposal of loan applications;
(c) non-acceptance of application for loans without furnishing valid reasons to the
applicant; and
 (d) non-adherence to the provisions of the fair practices code for lenders as adopted
by the bank or Code of Bank’s Commitment to Customers, as the case may be;
(e) non-observance of Reserve Bank guidelines on engagement of recovery agents by
banks; and
(f) non-observance of any other direction or instruction of the Reserve Bank as may
be specified by the Reserve Bank for this purpose from time to time.
 

Banking Ombudsman Scheme has proved to be a boon not only for a educated and rich
person but also for a poor and less educated person also.
According to me if these types of very simple and easily functional schemes are also
launched for other government departments also then it will definitely lead to leasing burdens
on our legal systems which are meant for imparting timely justice but are failing due to these
types of small matters. The most important feature of this scheme is that the filing complaint
under this scheme is free of cost.
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Banking On A Banking Ombudsman?

Anant Raje
Where there is a dispute with a bank, earlier the only recourse was to approach the Consumer
Forum. But with the Banking Ombudsman Scheme, 2006 [Hereinafter refered to as the
Scheme] being brought into effect by the RBI, every Bank Customer has a choice either to
approach the Consumer Forum or the Banking Ombudsman [Hereinafter referred to as B.O.].
However, ambivalence ensues from any situation with options. Where should one go?
Let us first understand what Banking Ombudsman is in the first place.
Banking Ombudsman
Under the Banking Ombudsman Scheme, 2006 the RBI appoints the Banking Ombudsman;
who is an officer of the rank of a Chief General Manager or General Manager. Currently
there are 15 Ombudsman appointed by the RBI with seats in Ahmadabad, Bangalore,
Bhopal, Bhubaneswar, Chandigarh, Guwahati, Hyderabad, Jaipur, Kanpur, Kolkata,
Mumbai, New Delhi, Patna and Tiruvananthpuram. A banking ombudsman deals with all
issues regarding deficiency of services of Banks. However, the scheme provides for a
comprehensive list of topics with regard to which the Ombudsman has jurisdiction. These
majorly deal with deficiency of services on part of the Bank. Namely,
a) Refusal or inordinate delay in payment or collection of cheques, drafts, bills, etc.
b) Refusal without reasonable grounds / or charging commission to accept small
denomination of notes or coins.
 c) Non-adherence to prescribed working hours.
d)Failure or delay in honouring guarantee or letter of credit commitments or in
providing any other specified banking facility.
e) Levying of charges without adequate prior notice to the customer.
f)  Non-adherence by the bank or its subsidiaries to the instructions of RBI on
ATM/Debit card operations or Credit card operations or Fair Practices Code as
adopted by the bank.
g) Closure without due notice / or refusal to close bank accounts of the customers.
h) Violation of directives issued by RBI on any other matters relating to banking or
other services.
i)   A complaint on alleging deficiency in banking service in respect of loans and
advances may be filed with the Banking Ombudsman having jurisdiction in respect of
- non-observance of Reserve Bank 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 direction or instruction of the RBI as may be
specified by the RBI for this purpose from time to time.
j)    Grievances of NRIs in respect of their bank accounts in India pertaining to their
remittances from abroad, matters related to deposits and other bank-related matters.
How does one file a complaint?
Knowing in what cases a Banking Ombudsman can help you with; the next question that one
may ask is how one files a complaint with the Ombudsman. The mode of lodging a
complaint with the B.O. is conveniently flexible, it may be in the prescribed form or though
an e-mail to the B.O. or just on a plain paper addressed to the B.O. or online
atwww.bankingombudsman.rbi.org.in. However, it must be noted that before a complaint is
filed with the ombudsman a written representation should have been made to the bank and
the bank should have either rejected or not responded to the complaint within one month of
receiving such a complaint.
Dispute Resolution
Initially, the Banking Ombudsman seeks to resolve the dispute between the bank and
consumer through a process of settlement. The settlement is in the nature of an agreement
that is binding upon the parties to the complaint; that too when both parties agree to the terms
of settlement. If the complaint is not settled by way of an agreement within a period of one
month then the Banking Ombudsman provides a reasonable opportunity to the parties to
present their case and accordingly passes an award with reasons. Any person aggrieved by
the award of the Banking Ombudsman can file an appeal within forty-five days of issue of
award before the Appellate Authority (Deputy Governor of the RBI). However, the Banks
can make an appeal only with the prior sanction of their Chairman or Managing Director or
the Executive Director or the Chief Executive Director or any person of equal rank.
Consumer Forum v/s Banking Ombudsman
Having understood how the Banking Ombudsman works, the showdown between the
consumer forum and banking ombudsman begins. Which one is better?
1) Complaint
Under the Scheme a complaint can be filed by the customer or his representative. On
the contrary, in a Consumer Forum any number of customers can file one complaint.
2) Jurisdiction
The Scheme provides for a list of topics with regard to deficiency of services on part
of the bank. So, the jurisdiction of the B.O. would be invoked only when the issue of
the dispute falls squarely in one or more of these topics. On the contrary, the
Consumer Protection Act defines ‘services’ in a very wide manner and hence the
jurisdiction is much wider.
3) Appeals
In case of Banking Ombudsman the only appeal against the award lies with one
Appellant Authority. On the other hand, under the Consumer Protection Act, the
dispute may first be dealt with by a district consumer forum and then an appeal lies
with the state forum, then with the national forum and lastly the Supreme Court. So,
the consumer forum route offers greater opportunities of redressal but also makes it a
tedious and long running process.
4) Period of Limitation
Under the Scheme, a complaint has to be filed within 1 year after the bank either
rejects or does not respond to the prior complaint made to it. In case of Consumer
Forum, the complaint may be filed within 2 years of when the dispute had arisen.
5) Award
A banking ombudsman can award compensation equivalent to the actual loss suffered
but not beyond Rs. 10 Lacs. It is only in cases of credit card disputes that the court
can take into account harassment and mental agony. However, in case of Consumer
Forums, they can not only take into account actual loss but harassment and mental
agony suffered by the complainants too.
Conclusion
Taking into consideration, the broad jurisdiction, and the considerations in awards alone
consumer forums have emerged as clear winners. However, it may be noted that with more
number of possible appeals, longer the case would run.  Also, Banking Ombudsman Scheme
with less than a decade of existence is still in evolving stage with two revisions effected up to
date. But its object is to provide speedy justice to those aggrieved with the services of the
banks which it is effectively serving even at the present stage.

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