Consumer Protection Laws for

Bank-Customers
Dr. Sujata Bali
Associate Professor,
UPES School of Law, Dehradun
sbali@ddn.upes.ac.in
The Consumer Protection Act, 1986
THE CONSUMER PROTECTION ACT, 2019
• An Act to provide for protection of the interests
of consumers and for the said purpose, to
establish authorities for timely and effective
administration and settlement of consumers'
disputes and for matters connected therewith or
incidental thereto.
• W.e.f. July 20, 2020
• Extends to the whole of India except the State
of Jammu and Kashmir.
 Who can complain under the Act?
"complainant" means—
• (i) a consumer; or
• (ii) any voluntary consumer association registered under any law for
the time being in force; or
• (iii) the Central Government or any State Government; or
• (iv) the Central Authority; or
• (v) one or more consumers, where there are numerous consumers
having the same interest; or
• (vi) in case of death of a consumer, his legal heir or legal
representative; or
• (vii) in case of a consumer being a minor, his parent or legal guardian;
Section 2(5), Consumer Protection Act, 2019.
Who is a consumer of Services?
2 (7)(ii) hires or avails of any service for a consideration which has
been paid
• or promised or partly paid and partly promised, or under any
system of deferred payment and
• includes any beneficiary of such service other than the person
• who hires or avails of the services for consideration paid or
promised, or partly
• paid and partly promised, or under any system of deferred
payment, when such
• services are availed of with the approval of the first mentioned
person, but does
• not include a person who avails of such service for any commercial
purpose.
What is service?
 (42) "service" means service of any description
which is made available to potential users and
includes, but not limited to, the provision of facilities
in connection with banking, financing, insurance,
transport, processing, supply of electrical or other
energy, telecom, boarding or lodging or both, housing
construction, entertainment, amusement or the
purveying of news or other information, but does not
include the rendering of any service free of charge or
under a contract of personal service;
Whether Bank-customer is a consumer or
not?

• Standard Chartered Bank Ltd. v. B.N. Raman

(2006) 5 SCC 727.

• Vimal Chandra Grover v. Bank of India, AIR

2000 SC 2181.
Deficiency in service
S. 2 (11) "deficiency" means any fault, imperfection,
shortcoming or inadequacy in
the quality, nature and manner of performance which is
required to be maintained by or under any law for the time
being in force or has been undertaken to be performed by a
person in pursuance of a contract or otherwise in relation
to any service and includes—
(i) any act of negligence or omission or commission by such
person which causes loss or injury to the consumer; and
(ii) deliberate withholding of relevant information by such
person to the consumer;
Deficiency in banking service:
• dishonour of cheque without justification,
• dishonour of demand draft due to employee’s
negligent drafting,
• payment despite stop payment instructions,
• non-disbursement of sanctioned loan
• missing articles from bank-locker,
• delay in preparation of drafts/cheques,
• not making payment of cheque,
Contd.
• refusal to pay maturity amount of STDR,
• refusal to grant financial assistance despite
agreement,
• dishonour of cheque inspite of sufficient funds in
account,
• issuance of fake foreign currency,
• charging higher rate of interest against terms of
agreement or under RBI’s directions
Contd.
• refusal of payment of demand draft,
• wrongful freezing of saving bank account,
• freezing personal bank account of a person on
State Government’s Instructions,
• failure to pay the bank-guarantee,
• misplacing share application form,
• failure to return cheque within reasonable time
causing loss in allotment of shares,
What is held not to be deficiency in banking
service?

• levying charges for the issue of cheque book,

• not providing banking services due to strike by
employees,
• non-sanction of loan,
• dishonour of cheque under rules,
• adjustment of loan according to terms of
agreement,
• encashing cheque certified as “good for
payment”,
Contd.
• failure to provide financial assistance to small scale
industries,
• non-return of pledged documents when some
amount remained due,
• mistake in calculation of interest by bank manager,
• not honouring cheque or not issuing draft due to
non-completion of formalities by complainant,
• refusal to pay maturity value of FDR due to pending
CBI investigation regarding that account,
Contd.
• stopping payment on drawer’s instructions,
• not stopping payment on instruction of
purchaser of draft (as payee alone is entitled to
stop payment),

• returning cheque on the ground that signature

differed
Banking Ombudsman Scheme
• First introduced by RBI in 1995
• Revised in 2002 to cover the RRBs and to permit
review of the Banking Ombudsman’s decision by
RBI
• A revised Banking Ombudsman Scheme, 2006
issued with effect from January 1, 2006.
• Now, applicable to all scheduled commercial
banks, RRBs, SBI, subsidiaries of SBI and
Scheduled Primary Cooperative Banks.
Banking Ombudsman Scheme, 2006
• covered new areas such as credit card complaints,
deficiencies in providing promised services even by
banks sales agents, levying service charges without
prior notice to customer and non-adherence to the
fair practices code as adopted by individual banks.
• fully staffed and funded by the RBI instead of the
banks, and the bank customers were allowed to file
complaints in any form, including online.
• Amended in 2007, 2009, 2017.
 amendments in 2007, 2009, 2017
• 2007- effective changes in the compliance of Banking Ombudsman’s
award, and appeal against the award.
• 2009- internet banking, non-adherence to the provisions for the fair
practice Code for lenders or the Code of Bank’s Commitment to
Customers issued by BCSBI, non-observance of the RBI’s guidelines
on engagement of recovery agents by banks, compensation up to Rs.
One Lakh in case of complaints arising out of credit card operations.
• 2017 - non-adherence to RBI instructions with regard to Mobile
Banking/ Electronic Banking services in India.
• The pecuniary to rupees two million. Compensation not exceeding
rupees hundred thousand for or loss of time, expenses incurred as
also, harassment and mental anguish.
• Appeal against rejection.
Jurisdiction of Banking Ombudsman
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 to the instructions of Reserve
Bank on ATM /Debit Card and Prepaid Card
operations in India by the bank or its subsidiaries on
any of the following:
i. Account debited but cash not dispensed by ATMs
ii. Account debited more than once for one
withdrawal in ATMs or for POS transaction
iii. Less/Excess amount of cash dispensed by ATMs
iv. Debit in account without use of the card or
details of the card
v. Use of stolen/cloned cards
vi. vi. Others
(m) non-adherence by the bank or its subsidiaries to the
instructions of Reserve Bank on credit card operations on
any of the following:
i. Unsolicited calls for Add-on Cards, insurance for cards etc.
ii. Charging of Annual Fees on Cards issued free for life
iii. Wrong Billing/Wrong Debits
iv. Threatening calls/ inappropriate approach of recovery by
recovery agents including non-observance of Reserve Bank
guidelines on engagement of recovery agents
v. Wrong reporting of credit information to Credit
Information Bureau
vi. Delay or failure to review and correct the credit status on
account of wrongly reported credit information to Credit
Information Bureau.
vii. Others
• (n) non-adherence to the instructions of Reserve
Bank with regard to Mobile Banking / Electronic
Banking service in India by the bank on any of the
following:
i. delay or failure to effect online payment / Fund
Transfer,
ii. unauthorized electronic payment / Fund
Transfer
(o) 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);
(p)refusal to accept or delay in accepting payment
towards taxes, as required by Reserve
Bank/Government;
(q). refusal to issue or delay in issuing, or failure to
service or delay in servicing or redemption of
Government securities;
(r). forced closure of deposit accounts without due
notice or without sufficient reason;
(s). refusal to close or delay in closing the
accounts;
(t). non-adherence to the fair practices code as
adopted by the bank;
u). 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 ;
(v). non-observance of Reserve Bank guidelines on engagement
of recovery agents by banks;
(w). non-adherence to Reserve Bank guidelines on para-banking
activities like sale of insurance /mutual fund /other third party
investment products by banks with regard to following: i.
improper, unsuitable sale of third party financial products ii.
non-transparency /lack of adequate transparency in sale iii. non-
disclosure of grievance redressal mechanism available iv. delay
or refusal to facilitate after sales service by banks
(x). any other matter relating to the violation of the directives
issued by the Reserve Bank in relation to banking or other
services.
deficiency in banking service in respect of loans and advances:
(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.
Limitation period for filing application
before ombudsman:
• not later than one year after the complainant has
received the reply of the bank to his
representation or, where no reply is received, not
later than one year and one month after the date
of the representation to the bank;
Possible awards by Banking
Ombudsman:
• actual loss suffered by the complainant as a
direct consequence of the act of omission or
commission of the bank or twenty lakh
rupees whichever is lower.
• compensation not exceeding Rs. one lakh
for mental agony and harassment to the
complainant, taking into account the loss of
complainant’s time, expenses incurred by the
complainant.
 Appeal before the Appellate authority
• Appellate authority is a designated Deputy Governor of
RBI.

• within 30 days

• power to dismiss the appeal, or to allow the appeal and

set aside the award, or to remand the matter to Banking
Ombudsman for fresh disposal in accordance with the
directions as it may deem necessary or proper, or
modify the award and give effect to modified award or
pass any other order as it may deem fit.
Questions?