Functions of RBI ( The India's Central Bank ) List

As a central bank, the Reserve Bank has significant powers and duties to perform. For smooth and speedy progress of the Indian Financial System, it has to perform some important tasks. Among others it includes maintaining monetary and financial stability, to develop and maintain stable payment system, to promote and develop financial infrastructure and to regulate or control the financial institutions.

For simplification, the functions of the Reserve Bank are classified into the traditional functions, the development functions and supervisory functions. Traditional Functions of RBI

Traditional functions are those functions which every central bank of each nation performs all over the world. Basically these functions are in line with the objectives with which the bank is set up. It includes fundamental functions of the Central Bank. They comprise the following tasks. 1. Issue of Currency Notes : The RBI has the sole right or authority or monopoly of issuing currency notes except one rupee note and coins of smaller denomination. These currency notes are legal tender issued by the RBI. Currently it is in denominations of Rs. 2, 5, 10, 20, 50, 100, 500, and 1,000. The RBI has powers not only to issue and withdraw but even to exchange these currency notes for other denominations. It issues these notes against the security of gold bullion, foreign securities, rupee coins, exchange bills and promissory notes and government of India bonds. 2. Banker to other Banks : The RBI being an apex monitory institution has obligatory powers to guide, help and direct other commercial banks in the country. The RBI can control the volumes of banks reserves and allow other banks to create credit in that proportion. Every commercial bank has to maintain a part of their reserves with its parent's viz. the RBI. Similarly in need or in urgency these banks approach the RBI for fund. Thus it is called as the lender of the last resort.

3. Banker to the Government : The RBI being the apex monitory body has to work as an agent of the central and state governments. It performs various banking function such as to accept deposits, taxes and make payments on behalf of the government. It works as a representative of the government even at the international level. It maintains government accounts, provides financial advice to the government. It

manages government public debts and maintains foreign exchange reserves on behalf of the government. It provides overdraft facility to the government when it faces financial crunch. 4. Exchange Rate Management : It is an essential function of the RBI. In order to maintain stability in the external value of rupee, it has to prepare domestic policies in that direction. Also it needs to prepare and implement the foreign exchange rate policy which will help in attaining the exchange rate stability. In order to maintain the exchange rate stability it has to bring demand and supply of the foreign currency (U.S Dollar) close to each other.

5. Credit Control Function : Commercial bank in the country creates credit according to the demand in the economy. But if this credit creation is unchecked or unregulated then it leads the economy into inflationary cycles. On the other credit creation is below the required limit then it harms the growth of the economy. As a central bank of the nation the RBI has to look for growth with price stability. Thus it regulates the credit creation capacity of commercial banks by using various credit control tools.

6. Supervisory Function : The RBI has been endowed with vast powers for supervising the banking system in the country. It has powers to issue license for setting up new banks, to open new braches, to decide minimum reserves, to inspect functioning of commercial banks in India and abroad, and to guide and direct the commercial banks in India. It can have periodical inspections an audit of the commercial banks in India. Developmental / Promotional Functions of RBI

Along with the routine traditional functions, central banks especially in the developing country like India have to perform numerous functions. These functions are country specific functions and can change according to the requirements of that country. The RBI has been performing as a promoter of the financial system since its inception. Some of the major development functions of the RBI are maintained below. 1. Development of the Financial System : The financial system comprises the financial institutions, financial markets and financial instruments. The sound and efficient financial system is a precondition of the rapid economic development of the nation. The RBI has encouraged establishment of main banking and non-banking institutions to cater to the credit requirements of diverse sectors of the economy. 2. Development of Agriculture : In an agrarian economy like ours, the RBI has to provide special attention for the credit need of agriculture and allied activities. It has successfully rendered service in this direction by increasing the flow of credit to this sector. It has earlier the Agriculture Refinance and Development Corporation (ARDC) to look after the credit, National Bank for Agriculture and Rural Development (NABARD) and Regional Rural Banks (RRBs).

3. Provision of Industrial Finance : Rapid industrial growth is the key to faster economic development. In this regard, the adequate and timely availability of credit to small, medium and large industry is very significant. In this regard the RBI has always been instrumental in setting up special financial institutions such as ICICI Ltd. IDBI, SIDBI and EXIM BANK etc.

4. Provisions of Training : The RBI has always tried to provide essential training to the staff of the banking industry. The RBI has set up the bankers' training colleges at several places. National Institute of Bank Management i.e NIBM, Bankers Staff College i.e BSC and College of Agriculture Banking i.e CAB are few to mention. 5. Collection of Data : Being the apex monetary authority of the country, the RBI collects process and disseminates statistical data on several topics. It includes interest rate, inflation, savings and investments etc. This data proves to be quite useful for researchers and policy makers.

6. Publication of the Reports : The Reserve Bank has its separate publication division. This division collects and publishes data on several sectors of the economy. The reports and bulletins are regularly published by the RBI. It includes RBI weekly reports, RBI Annual Report, Report on Trend and Progress of Commercial Banks India., etc. This information is made available to the public also at cheaper rates. 7. Promotion of Banking Habits : As an apex organization, the RBI always tries to promote the banking habits in the country. It institutionalizes savings and takes measures for an expansion of the banking network. It has set up many institutions such as the Deposit Insurance Corporation-1962, UTI-1964, IDBI-1964, NABARD-1982, NHB-1988, etc. These organizations develop and promote banking habits among the people. During economic reforms it has taken many initiatives for encouraging and promoting banking in India.

8. Promotion of Export through Refinance : The RBI always tries to encourage the facilities for providing finance for foreign trade especially exports from India. The Export-Import Bank of India (EXIM Bank India) and the Export Credit Guarantee Corporation of India (ECGC) are supported by refinancing their lending for export purpose. Supervisory Functions of RBI

The reserve bank also performs many supervisory functions. It has authority to regulate and administer the entire banking and financial system. Some of its supervisory functions are given below. 1. Granting license to banks : The RBI grants license to banks for carrying its business. License is also given for opening extension counters, new branches, even to close down existing branches. 2. Bank Inspection : The RBI grants license to banks working as per the directives and in a prudent manner without undue risk. In addition to this it can ask for periodical information from banks on various components of assets and liabilities.

3. Control over NBFIs : The Non-Bank Financial Institutions are not influenced by the working of a monitory policy. However RBI has a right to issue directives to the NBFIs from time to time regarding their functioning. Through periodic inspection, it can control the NBFIs.

4. Implementation of the Deposit Insurance Scheme : The RBI has set up the Deposit Insurance Guarantee Corporation in order to protect the deposits of small depositors. All bank deposits below Rs. One lakh are insured with this corporation. The RBI work to implement the Deposit Insurance Scheme in case of a bank failure. Reserve Bank of India's Credit Policy

The Reserve Bank of India has a credit policy which aims at pursuing higher growth with price stability. Higher economic growth means to produce more quantity of goods and services in different sectors of an economy; Price stability however does not mean no change in the general price level but to control the inflation. The credit policy aims at increasing finance for the agriculture and industrial activities. When credit policy is implemented, the role of other commercial banks is very important. Commercial banks flow of credit to different sectors of the economy depends on the actual cost of credit and arability of funds in the economy.
http://kalyan-city.blogspot.com/2010/09/functions-of-reserve-bank-of-india-rbi.html
Fuctions: The fuctions are classified into three heads,viz., A) Traditional functions B) Promotional functions and C) Supervisory functions. lets see the detailed accont in these heads., A) Traditional functions 1.Monopoly of currency notes issue 2.Banker to the Government(both the central and state) 3.Agent and advisor to the Government 4.Banker to the bankers 5.Acts as the clearing house of the country 6.Lender of the last resort 7.Custodian of the foreign exchange reserves

8.Maintaining the external value of domestic currency 9.Controller of forex and credit 10.Ensures the internal value of the currency 11.Publishes the Economic statistical data 12.Fight against economic crisis and ensures stability of Indian economy. B) Promotional functions 1.Promotion of banking habit and expansion of banking systems. 2.Provides refinance for export promotion 3.Expansion of the facilities for the provision of the agricultural credit through NABARD 4.Extension of the facilities for the small scale industries 5.Helping the Co-operative sectors. 6.Prescribe the minimum statutory requirement. 7.Innovating the new banking business transactions. C) Supervisory functions 1.Granting licence to Banks. 2.Inspects and makes enquiry or determine position in respect of matters under various sections of RBI and Banking regulations 3.Implements Deposit insurance scheme 4.Periodical review of the work of the commercial banks 5.Giving directives to commercial banks 6.Control the non-banking finance corporation 7.Ensuring the health of financial system through on-site and off-site verification. These are all the functions which are protective to the Indian Economy, that's why RBI is considered as the head of all banks. regards

http://wiki.answers.com/Q/What_is_the_various_functions_of_rbi_in_India

The functions of the Reserve Bank today can be categorised as follows:

gulation and supervision of the banking and non-banking financial institutions, including credit information companies

certain financial derivatives ntral and State Governments

current and capital account management

rsight of the payment and settlement systems Currency management

http://rbidocs.rbi.org.in/rdocs/Content/PDFs/FUNCWWE080910.pdf

Reserve Bank of India (RBI) is the central bank of India. It monitors, formulates and implements Indias monetary policy. Established in the year 1935, RBI was nationalized in the year 1949. Owned fully by the Government of India, Reserve Bank has 22 regional officesin various state capitals of India with its headquarters located in Mumbai. It has a majority stake in the State Bank of India.

Functions of the Reserve Bank of India

RBI formulates the monetary policy, thus regulating and supervising the economy of India. RBI is the supreme banking authority in India. It sets the guidelines according to which the banking operations and financial systems within the country functions. The RBI issues currency notes and coins of various denominations. It destroys and exchanges soiled currencies to ensure that only good ones are in circulation.

RBI is the banker to the Government of India. The Reserve Bank performs merchant banking function for the central and the state governments. Also, all major banks bank with the RBI. The RBI maintains banking accounts of all scheduled banks in India. As a regulator, RBI monitors the functioning of other banks; it tries to protect depositors interests and provides cost-effective banking services to the public. The Banking Ombudsman scheme setup by RBI, addresses the grievances of banks customers. The Reserve Bank of India acts as the bankers bank. On the basis of eligible securities the scheduled banks can borrow money from the Reserve Bank of India. At times of need or stringency, by re-discounting bills of exchange, the banks can get financial accommodation from the RBI. Reserve Bank becomes not only the bankers bank but also the lender of the last resort. In times of banking crisis, the Reserve Bank of India offers credit to the help the commercial banks recover. RBI controls the monetary policy of India by controlling cash liquidity in the country. Frequent alteration of the values of financial tools like Cash Reserve Ratio (CRR), Repo Rate, Reverse Repo Rate, and Statutory Liquidity Ratio (SLR), restricts the cash flow within the country. As an anti-inflationary measure, RBI limits huge foreign capital inflows to stabilize the Rupee value. RBI regulates the foreign exchange inflow and outflow, by the Foreign Exchange Management Act, 1999 of RBI. All money transfer out of India is subject to limits defined by the RBI. To maintain the exchange rate of Indian Rupee versus foreign currencies like the US Dollar, Euro, Pound sterling, and Japanese yen, RBI buys and sells foreign currencies. The Reserve Bank of India has the power to influence the volume of credit created by banks in India, which means that it is the controller of credit. Carrying out open market operations or changing the Bank rate helps RBI to achieve this. Through quantitative and qualitative measures, it controls the credit operations of other banks. The gold trade is also regulated by the Reserve Bank of India. RBI has functioned as the backbone of the Indian financial system since its inception. It has given stability to the Indian economy when most of the other developing economies failed. With its prudent approach, RBI steered the economy effectively through the recent financial crisis.

http://www.moneyguideindia.com/reserve-bank-of-india-its-role-and-functions/

RBI & its Functions

Intoduction
o o o o

RBI was started after the recommendations of "Hilton Young Committee" which submitted its report in 1926, fol the formation of RBI Act in 1934. Thus, RBI was established on 1st April 1935 at Kolkata. RBI was started with the total capital of 5 Crore rupees in which there were 5 lakh shares of Rs. 100 each. In the year 1937, the headquarter of RBI was shifted to Mumbai. So, currently headquarter of RBI is in Mumbai. It has 22 regional branches across India.

Governor
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First Governor of RBI - Sir O A Smith (1935-1937) First Indian Governor of RBI - C D Deshmukh (1943-49) Present Governor of RBI - Mr. D. Subbarao

Deputy Governors
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K C Chakraborty Subir Gokarn Anand Sinha H R Khan (Harun Rashid Khan) - Latest

RBI remain the Central Bank of Myanmar till 1947 & Central Bank of Pakistan till June 1948.

RBI is governed by Central Board of Directors who are appointed for a period of 4 years and should not be more than 10 i the Governor & 4 Deputy Governors.

There are 6 training establishments of RBI out of which 3 are under RBI and 3 are autonomous.

Under RBI
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College of Agriculture Banking Banker's Training College Bharatiya Reserve Bank Staff College

Autonomous

o o o

National Institute of Bank Management IGIDR (Indira Gandhi Institute of Development & Research) IDBRT (Institute of Development & Research in Banking Technology)

Subsidiaries of RBI

Fully Owned (100% Shares)

o o o

NHB (National Housing Bank) DICGC (Deposit, Insurance & Credit Guaranteed Corporation) Bhartiya Reserve Bank Note Mudran Private Ltd.

Majority Shares with RBI (More than 51%)

o

NABARD (National Bank for Agriculture & Rural Development)

In the year 2008, the Govt of India paid Rs. 35333.33 crore to RBI and took 51.73% shares of SBI and its control.

Printing Press

There are 4 printing press which print notes in India.

o o o o

Dewas (MP) Nasik (Maharashtra) Mysore (Karnataka) Salboni (West Bengal) - Recent

Security Paper - It is at Hoshangabad which makes production of Bank and Currency Notes Paper.

Mints

Coins are printed under the Govt of India in cities o

Mumbai

o o o

Kolkata Hyderabad Noida - Recent

Rs. 1 Note

The Rs 1 note used to issued by the Ministry of Finance, Govt of India. Printing of these notes have been stopped in 1994 Secretary, Govt of India. It has 1 Rupee written in 13 Regional language on back of the Banknote below coin imag

Functions of RBI

1. Issuer of Currency: Issues notes above Rs. 1. In order to print notes, the minimum reser which Rs. 115 crore needs to be in Gold & Rs. 85 Crore in cash). 2. RBI is "the lender of last resort": It means that in the most worst condition the RBI giv 3. Regulatory body of the banking sector in India & it is the Central Bank of India 4. Custodian of the foreign exchange reserves of India 5. Advisor to the Govt of India in the financial matters 6. Represents India in the International arena such as IMF & World Bank 7. Banker to the bank: It means that no personal accounts can be opened or operated from 8. Controller of the Monetary policy: It controls monetary policy by issuing 2 types of the

Quantitative Measures

1. Bank Rate: The rate of interest at which the RBI gives loan to the Commercial banks for long period of time in ord April 2002, it was 6%. In Feb 2012, it was changed to 9.5%. Currently, it is 9%. 2. Repo Rate (Repurchase Option): The rate of interest at which commercial banks takes loans from RBI for short pe agreement between the RBI and commercial banks under which commercial banks sells their securities to the RB time. Presently, it is 8%. 3. Reverse Repo Rate: The rate of interest at which commercial bank deposit their surplus liquidity with RBI or in th from the commercial banks is called Reverse Repo Rate. Presently, it is 7%. 4. CRR (Cash Reserve Ratio): Every commercial bank is required to deposit a certain percentage of its total capital to Presently, it is 4.75%. 5. SLR (Statutory Liquidity Ratio): Every commercial bank is required to keep a certain percentage of its deposits in bills, Gold, etc) is called SLR. Presently, it is 24%.

Key Points
o o o o

The minimum difference between the Repo rate and Reverse Repo rate should be at least 1%. All these above rates are decided by the RBI. They have the inverse relationship with liquidity. At the time of Inflation, these rates increase but at the time of Recession, these rates decrease.

Qualitative Measures

1. Selective Credit Control: It is a discriminatory credit policy of RBI in favour of certain sector of the economy is cal 2. Priority Sector Lending: Under this, all the commercial banks are required to give 40% of their total loan amount Govt at concessional rates. Priority sector includes - Agriculture (18% at 7% rate of interest), Weaker sections (10 3. Differential rate of Interest Scheme: It was started in 1972 under the banner of "Garibi Hatao" by Mrs. Indira Gan are required to give 1% of their total loan amount to the poorest section of the society at the fixed rate of interes 4. Open Market Operations: When the RBI sell and purchase the govt securities in order to inject and absorb the liq

Types of Lending Rates

1. Prime Lending Rate (PLR): The rate at which the banks give loan to its most credit worthy customer or prime cust banks. So, it varies from banks to banks between 7.5% to 9% generally. 2. Benchmark Prime Lending Rate (BPLR): Prsently, PLR and BPLR are same. 3. Base Rate: The minimum rate of interest at which the banks give loan to its any customer is called Base rate. No b by the individual banks so it varies from banks to banks. Base rate < PLR. 4. Sub Prime Lending Rate (SPLR): When the Govt wants to promote any sector of the economy. It gives loan at an a Sector. Key points
o

BPLR, PLR, SPLR & Base Rates are all decided by the individual banks and have inverse relationship with the liquid

Marginal Standing Facility (MSF): It is a new facility started by RBI under which the banks will get loan for overnight purp

Liquidity Adjustment Facility (LAF): Under this facility, the RBI increases the Repo Rate in order to absorb the liquidity an the liquidity.

Key Points

o o

Policy rates are - Bank Rate, Repo Rate, Reverse Repo Rate, MSF Rate Reserve Ratios are - CRR, SLR

Current News about RBI

o o o o o o o o o o

Lok Sabha Approves Reserve Bank (Amendment) Bill 2005 on May 17, 2006. This bill amends the RBI Act for prov This bill also allows the RBI to regulate derivatives, repo instruments and securities. The New Environmental Friendly Policy of Reserve Bank to Destroy the Worn and Torn Currency Notes - Earlier t smoke problem, those are cut into pieces and make spring roles or thick bricks. These bricks can be used for seve New Series of "Star" Bank Note Issued by RBI - This will be printed in Rs 10, 20 and 50 denominations to replace one difference - a star in the number panel. On July 6, 2005 - a new department named "Financial Market Department" in RBI was constituted for surveillan RBI has announced to issue new coins of Rs. 2 and 5 to commemorate the Commonwealth Games held in New D RBI decides to circulate Plastic Notes of Rs. 10. Later on 20, 50 and 100 will be available in the market. RBI buys 200 tonnes Gold from IMF - This has made the RBI the 10th largest gold holding central bank of the wor RBI transferred 59.73% stake in SBI to Union Govt. RBI has divested its 71.5% stake in NABARD to the GOI. Now, RBI shareholding in NABARD is 1% and GOI stake is Tenure of Deputy Governor "K C Chakraborty" has been extended recently.

https://sites.google.com/site/narendrasvirtualclassroom/banking/rbi

Discuss / Explain the various functions of RBI. Ans. A.RESERVE BANK OF INDIA (RBI) :The Reserve Bank of India is the central bank of India it was established as a shareholders bank on 1st April 1935. Its share capital was Rs. 5 crore, divided in to 5 lakhs fully paid up shares of Rs. 100 each. On 1st January 1949 it was nationalized. Its headquarters is at Mumbai. RBI, like any other bank performs almost all traditional Central banking functions. Due to countrys development it has also undertaken developmental and promotional functions. A. FUNCTIONS OF RBI :RBI performs many functions, some of them are:1. Issue Of Currency Notes :Under section 22 of RBI Act, the bank has the sole right to issue currency notes of all denominations except one rupee coins and notes. The one-rupee notes and coins and small coins are issued by Central Government and their distribution is undertaken by RBI as the agent of the government. The RBI has a separate issue department which is entrusted with the issue of currency notes. 2. Banker To The Government :The RBI acts as a banker agent and adviser to the government. It has obligation to transact the banking business of Central Government as well as State Governments. E.g.:- RBI receives and makes all payments on behalf of government, remits its funds, buys and sells foreign currencies for it and gives it advice on all banking matters. RBI helps the Government both Central and state to float new loans and manage public debt. The bank makes ways and

meets advances of the government. On behalf of central government it sells treasury bills and thereby provides short-term finance. 3. Bankers bank And Lender Off Last Resort :RBI acts as a banker to other banks. It provides financial assistance to scheduled banks and state co-operative banks in form of rediscounting of eligible bills and loans and advances against approved securities. RBI acts as a lender of last resort. It provides funds to bank when they fail to get it from other sources. It also acts as a clearing house. Through RBI, banks make interbanks payments. 4. Controller Of Credit :RBI has power to control the volume of credit created by banks. The RBI through its various quantitative and qualitative techniques regulates total supply of money and bank credit in the interest of economy. RBI pumps in money during busy season and withdraws money during slack season. 5. Exchange control And Custodian Of Foreign Reserve :RBI has the responsibility of maintaining fixed exchange rates with all member countries of IMF. For this, RBI has centralized all foreign exchange reserves (FOREX). RBI functions as custodian of nations foreign exchange reserves. It has to maintain external valu of Rupee. RBI achieves this aim through appropriate monetary fiscal and trade policies and exchange control. 6. Collection And Publication Of Data :The RBI collects and complies statistical information on banking and financial operations of the economy. The Reserve Bank Of India Bulletian is a monthly publication. It not only provides information, but also results of important studies and investigations conducted by reserve bank are given. The Report on currency and finance is an annual publication. It provides review of various developments of economic and financial importance. 7. Regulatory And Supervisory Functions :The RBI has wide powers of supervision and control over commercial and co-operative banks, relating to licensing, establishment, branch expansion, liquidity of Assets, management and methods of working, amalgamation, re-construction and liquidation. The supervisory functions of RBI have helped a great in improving the standard of banking in India to develop on sound lines and to improve the methods of their operation. 8. Clearing House Functions :The RBI acts as a clearing house for all member banks. This avoids unnecessary transfer of funds between the various banks. 9. Development And Promotional Functions :The RBI has helped in setting up Industrial Finance Corporations of India (IFCI), State Financial Corporations (SFCs), Deposit Insurance Corporation, Agricultural Refinance and Development Corporation (ARDC), units Trust of India (UTI) etc. these institutions were set up to mobilize savings, promote saving habits and to provide industrial and agricultural finance. RBI has a special Agricultural Credit Department (ACD) which studies the problems of agricultural credit. For this Regional Rural banks, Co-operative, NABARD etc. were established.

The RBI has also taken measures to promote organized bill market to create elasticity in Indian Money Market in order to satisfy seasonal credit needs. Thus RBI has contributed to economic growth by promoting rural credit, industrial financing, export trade etc. http://study-material4u.blogspot.in/2012/07/chapter-3monetary-policy-of-reserve.html

What is Banking Ombudsman (BO)?

Appointment & Tenure Jurisdiction Procedure for getting justice? 1. How does BO settle complaint? 2. Punishment 3. Appellate authority for Banking Ombudsman Reforms and Issues 1. #1: Netbanking frauds 2. #2: Need more BOs Location of Offices

What is Banking Ombudsman (BO)?

He hears customers complaints against banks. BO was first setup in UK. In India, RBI started this scheme in 1995.

Appointment & Tenure

Earlier RBI used to appoint reputed persons from banking, finance, management, legal etc. sectors as Banking Ombudsmen (BO). But now RBI has reserved this BO post for its own Chief General Managers and General Managers.

Tenure: 3 years at a time. Reappointment: yes possible.

Jurisdiction

Banking Ombudsman (BO) Scheme applies to whole of India (including Jammu and Kashmir).

Banking Ombdusmen have jurisdiction over 1. All commercial banks (scheduled and non scheduled, public and private) 2. Regional rural banks 3. scheduled primary co-operative banks 4. NBFCs (BOs Jurisdiction limited to loan part.)

BO is not a replacement of Consumer forum/courts. He merely supplements them. BO deals with matters less than or equal to Rs.10 lakhs. Here are some examples situation where BO can help you: Regular banking

1. Demand draft, cheques, pay orders etc. not issued on time. (or not paid on time) 2. Credit card related complaints (e.g. bank putting hidden charges. Your credit card was stolen but bank did not disable it even after you called them.) 3. You asked the bank to close your account / credit card but they are not doing it. 4. Bank refuses to open your account without giving valid reasons. 5. Bank closes down your account without valid reasons. 6. Government / your company deposited salary / pension in your account but the bank is not releasing it on time. 7. Bank is taking out money from your account in pretext of some flimsy charges. 8. Branch office notice board says 10.30 to 5 but staff refuses to provide you service after 3.30PM.

9. NRIs having bank account in India and facing problems about remittances etc. (e.g. he deposited money from America, but his parents are not given money on time.) Loans 1. Your loan application is not processed in time. 2. Your loan application is rejected without valid reasons. 3. You loan application is accepted but money is not released in time. (and still bank is charging interest on it!) 4. Bank doesnt follow RBI guidelines regarding loan-recovery agents (e.g. bank hires some criminals to bully and harass you.) 5. Bank doesnt follow RBI guidelines regarding loan interest rates.

Procedure for getting justice?

Youre unhappy with the bank for xyz reason. But you cannot directly approach BO. First youve to give written complaint to the concerned bank that Ive so and so problem. and IF the bank doesnt deal with your complaint within one month, then you can approach BO. On the other hand, you cannot approach BO if the matter is older than 1 year. You dont need lawyer to approach BO. You dont need to pay any fees/ stamp papers for approaching BO. You cant approach BO in following situations

1. Matter is higher than Rs.10 lakh. 2. If the matter is pending before any other court, tribunal, forum then you cannot approach BO. 3. If any other court, tribunal, forum has already passed an order on the same matter. 4. You cannot approach BO for frivolous or vexatious complaints (e.g. AC or water cooler was off when I went to the branch. Someone jumped the queue but security guard did nothing.)

How does BO settle complaint?

Upon receiving your complaint, first BO will try to solve the matter via settlement /arbitration (=try to achieve a compromise, conciliation or amicable solution between bank and its customer.) This has to be done within one month after receiving complaint. But if either party (customer/bank) is not accept this (compromise/negotiation/settlement) then after 1 month, BO will have to pass order. Now, hell ask both parties to present their case/documents etc. And hell pass the order accordingly. Two things can happen

1. He rejects your complaint (=bank is not guilty). OR 2. He finds the bank guilty and orders punishment.

Punishment

BO can order the Bank to compensate the actual money loss OR Rs.10 lakh (whichever is lower). In case of Credit card related cases, BO can order the bank to pay additional fines (upto Rs.1 lakh) for the mental harassment caused to the customer.

Appellate authority for Banking Ombudsman

If either party (Bank / Customer) is unhappy with Ombudsmans order, then they can approach the Appellate authority (=Deputy Governor of RBI.)

1. If youre the customer, you can directly approach him. 2. But if youre the Bank, then you can approach him only after getting permission from your Chairman/CMD/MD or CEO. (This ensures Banks lower staff doesnt automatically go for frivolous appeals against every order).

Reforms and Issues

Banking Ombudsman scheme was originally started in 1995. But in subsequent years, RBI made many reforms in it, some of them are: Originally After reforms

Reputed persons from law, Only RBIs own officers can become finance, banking, Management, BO. (=outsiders not allowed for this administration etc. can become post.) BO. Banks provided Money+Staff for RBI itself gives the money and staff to Ombudsmans office in their Ombudsman. area. He only accepted paper complaints. Accepts Paper + online complaints. Regional Rural Banks put under jurisdiction of Ombudsman. Ombudsman can look into internetbanking related complaints. Banks are required to display salient features of the scheme for common knowledge of public. (e.g. posters in the branch office.)

#1: Netbanking frauds

According to RBIs scheme, Ombudsman can also look into internet banking related matters.

But Ombudsmen across the country often wash away their hands and ask the victim to wait for police investigation to finish. And on the other hand, Banks donot take responsibility saying net banking frauds as most of them happen due to customers negligence and cyber-crime. So ultimately customer has to depend on the police to get justice.

#2: Need more BOs

A Committee formed by RBI has recommended that instead of having only 15 Banking ombudsman across country, have one BO appointed for every bank. The upper limit (of Rs.10 lakh) should be increased.

Location of Offices

Banking Ombudsman has total 15 offices throughout India Those whore preparing for IBPS/SBI PO should prepare this table for MCQs, others need not worry much. Gujarat + UT of Diu, Daman, Haveli Karnataka. MP+Chattisgarh Odisha HP+Punjab+part of Haryana TN+Andaman, Nico All north Eastern states minus Sikkim AP

1. Abad 2. Banglore 3. Bhopal 4. Bhuvneshwar 5. Chandigarh 6. Chennai 7. Guwahati 8. Hyd.

9. Jaipur 10. 11. 12. 13. 14. 15. am Kanpur Kolkata Mumbai Delhi Patna Thiruvanthapur

Raj UP (some areas excluded though) WB+Sikkim Mah+Goa Delhi+J&K+part of UP+Part of Haryana Bihar+Jharkhand Kerala+Lakshdweep+Puducherry

Mock questions
Q1. Which of the following falls under the jurisdiction of Banking Ombudsman 1. Regional Rural Banks 2. Scheduled commercial banks 3. Non Scheduled primary co-operative banks Answer choice a. b. c. d. Only 1 and 3 Only 2 and 3 Only 1 and 2 All of them.

Q2. Find correct statements 1. BO is selected and appointed by Finance ministry. 2. BOs staff and office expenditure are charged on the consolidated fund of India.

a. b. c. d.

Only 1 Only 2 Both None

Q3. Find incorrect statement 1. If the promises made by a sales agent, are not kept by the bank, you cannot approach BO. 2. If the matter involves loss of more than Rs.10 lakhs, you cannot approach BO. 3. The appellate authority for BO is High court of the concerned State. 4. There is one separate BO for Union Territories of India. Answer choices a. b. c. d. Only 2 2 and 4 1,3 and 4 All of them.

Q4. Which of the following are included in the purview of BO? 1. 2. 3. 4. Net banking Credit cards ATM cards Harassment by Loan recovery agents

Answer choices a. b. c. d. Only 2 and 3 Only 1, 2 and 3 Only 2,3 and 4 All of them.