BANKING OMBUDSMAN, POWER AND FUNCTIONS

 Introduction:
 The Banking Ombudsman Scheme was introduced under section 35A of the Banking
Regulation Act, 1949 by RBI.
 The Scheme is introduced in the Year 1995.
 The present Ombudsman Scheme was introduced in the year 2006.
 Banking Ombudsman Scheme is a mechanism created by RBI to address the
complaints raised by bank customers.
 It is run by the RBI directly to ensure customer protection in the banking industry.
 Banking Ombudsman is a quasi-judicial authority functioning under the Banking
Ombudsman Scheme, 2006.
 According to RBI, “The Scheme enables an expeditious and inexpensive forum to bank
customers for resolution of complaints relating to certain services rendered by banks.”
MEANING OF OMBUDSMAN:

 The Banking Ombudsman is a senior official appointed by the RBI.

 He has the responsibility to    redress customer complaints against deficiency
in certain banking services.
 All Scheduled Commercial Banks, Regional Rural Banks and Scheduled
Primary Co-operative Banks are covered under the Scheme.
 The Banking Ombudsman can receive and consider any complaint relating to
number of deficiencies related to banking operations including internet
banking.
 At present 15 ombudsmen were appointed by the RBI to settle complaints and
they are appointed in state capitals.
 RBI has mentioned a large number of service deficiencies by banks to
customers where the customers can approach the Ombudsman through a
complaint.
 Scope of Banking Ombudsman Scheme:
 Under the amended scheme, a customer would also be able to lodge a
complaint against the bank for its non-adherence to RBI instructions with
regard to mobile banking/electronic banking services in India.
 As per the amendment, the pecuniary jurisdiction of the Banking
Ombudsman to pass an award has been increased from existing Rs. 10 lakh
to Rs. 20 lakh.
 Compensation not exceeding Rs. 1 Lakh can also be awarded by the
Banking Ombudsman for loss of time, expenses incurred, as also harassment
and mental anguish suffered by the complainant.
 The RBI extended the scope of Banking Ombudsman Scheme under which
banks could not be penalized for mis-selling third-party products like
insurance and mutual funds via mobile or electronic banking.
OBJECTIVES OF BANKING OMBUDSMAN SCHEME IN INDIA”

 The role and importance of banks for everyone has increased manifold.
 The banks are, today, not accepting only deposits from public rather they
are providing various types of services. In this process, the arising of
disputes between banks and their customers are natural.
 The Scheme came into force on January 1,2006. This scheme has been
introduced for quick and inexpensive resolution of complaints submitted
by the customers against the banks. Broadly, this scheme has following
objectives-
 To enable resolution of complaints relating to certain services rendered by
banks and
 To facilitate the satisfaction or settlement of such complaints
POWERS AND FUNCTIONS OF OMBUDSMAN:

 1.An important function of Ombudsman is to protect the rights and

freedoms of citizens and needless.
 2.The ombudsman shall have the power to supervise the general
civil administration. On this point the duty of ombudsman is closely
connected with the public administration. Because the protection of
freedom, execution of policies and other fall within the jurisdiction
of public administration and whether these are properly performed
or not that requires to be examined-and ombudsman does this job.
 A common experience is that people’s rights and freedoms are not
properly protected and public administration does not always take
care of it. In this regard the Ombudsman has a lot of duties to
perform. In many states the problems of common men are neglected
and the general administration does not always rise to the occasion.
 3.In many states Ombudsman supervises the general
administration. It is also called general surveillance of the functioning
of the government.
 4.In some countries the Ombudsman enjoys enormous power. For
examples in Sweden the Ombudsman has been empowered to
investigate the cases of corruption (in any form) not only against the
government officers but also against the judges of the highest court.
But the supervising power of Ombudsman over the judges does not
erode the independence of the judiciary. The judges are prosecuted
or fined for corruption, negligence of duties, or delay in delivering
judgment.
 5.An important function of Ombudsman is the exercise of
discretionary powers. The discretionary powers are really
vast and how to use these powers depend upon the person
concerned. Discretionary powers include corruption,
negligence, inefficiency, misbehavior etc.
 6.To receive complaints relating to the provision of banking
services to consider such complaints and facilitate their
satisfaction or settlement by agreement, by making a
recommendation, or award in accordance with this scheme.
 7.The banking ombudsman's authority will include:-all complaints
concerning deficiency in service such as:- non-payment/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 in respect thereof; non-issue of
drafts to customers and others; non-adherence to prescribed working
hours by branches; failure to honour guarantee/letter of credit
commitments by banks.
PROCEDURE FOR REDRESSAL OF GRIEVANCE GROUNDS OF
COMPLAINT

 (1) Any person may file a complaint with the Banking Ombudsman
having jurisdiction on any one of 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)refusal to accept or delay in accepting payment
towards taxes, as required by Reserve
Bank/Government;
 (m). refusal to issue or delay in issuing, or failure to
service or delay in servicing or redemption of
Government securities;
 (n). forced closure of deposit accounts without due
notice or without sufficient reason;
 (o). refusal to close or delay in closing the accounts
 (p)non-adherence to the fair practices code as
adopted by the bank;
PROCEDURE FOR FILING COMPLAINT
 (1) Any person who has a grievance against a bank on any
one or more of the grounds mentioned in Clause 8 of the
Scheme may, himself or through his authorised
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.
 Provided that a complaint arising out of the operations of
credit cards and other types of services with centralized
operations, shall be filed before the Banking Ombudsman
within whose territorial jurisdiction the billing address of the
customer is located.
 (2) (a) The complaint in writing shall be duly signed by the
complainant or his authorized representative and shall be, as far
as possible, in the form specified in Annexure ‘A’ or as near as
thereto as circumstances admit, stating clearly:
 i. the name and the address of the complainant,
 ii. the name and address of the branch or office of the bank
against which the complaint is made,
 iii. the facts giving rise to the complaint,
 iv. the nature and extent of the loss caused to the complainant,
and v. the relief sought for.
 (b). The complainant shall file along with the complaint, copies of the
documents, if any, which he proposes to rely upon and a declaration
that the complaint is maintainable under Sub-Clause (3) of this Clause.
 (c) A complaint made through electronic means shall also be accepted
by the Banking Ombudsman and a print out of such complaint shall be
taken on the record of the Banking Ombudsman.
 (d) The Banking Ombudsman shall also entertain complaints
covered by this Scheme received by Central Government or Reserve
Bank and forwarded to the Banking Ombudsman for disposal.
 (3) No complaint to the Banking Ombudsman shall lie unless:-
 (a) the complainant had, before making a complaint to the
Banking Ombudsman, made a written representation to the bank
and the bank had rejected 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;
 (b) the complaint is made 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;
 (c) the complaint is not in respect of the same cause of action
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
cause of action ;
 Case Study:
 The Complainant, when he tried to withdraw cash through ATM, there
was power supply failure and he could not withdraw cash whereas his
account was debited by Rs. 500/-. The customer reported the matter to
bank. But in-spite of his request and telephonic talk the bank did not
take any action and replied that he might have withdraw the cash as per
list of transactions available with them.
 Decision: On perusal of the disputed transactions and cash summary as
per ATM, the bank found that the cash was not dispensed for the
disputed transaction and they reimbursed the amount.