Banking Ombudsman Scheme Explained

February 24, 2020
SEBI Grade A Test Series

The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995. Presently the Banking Ombudsman Scheme 2006 (As amended upto July 1, 2017) is in operation. The Banking Ombudsman Scheme is an expeditious and inexpensive forum for bank customers for resolution of complaints relating to certain services rendered by banks

Banking Ombudsman Scheme

Who is a Banking Ombudsman?

The Banking Ombudsman is a officer in the rank of Chief General Manager or General Manager appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services covered under the grounds of complaint specified under Clause 8 of the Banking Ombudsman Scheme 2006. He is appointed for a period not exceeding three years at a time.

Location of Banking Ombudsman

As on date, twenty Banking Ombudsmen have been appointed with their offices located mostly in state capitals.

Banks covered under Scheme

All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

Complaints Covered under Banking Ombudsman Scheme

The Banking Ombudsman can receive and consider any complaint relating to the following deficiency in banking services:

  • 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 in respect thereof;
  • non-acceptance, without sufficient cause, of coins tendered and for charging of commission in respect thereof;
  • 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 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 ;
  • complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank related matters;
  • refusal to open deposit accounts without any valid reason for refusal;
  • levying of charges without adequate prior notice to the customer;
  • Non-adherence to the instructions of Reserve Bank on ATM / Debit Card and Prepaid Card operations in India by the bank or its subsidiaries
  • Non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on credit card operations
  • Non-adherence to the instructions of Reserve Bank with regard to Mobile Banking / Electronic Banking service in India by the bank
  • 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;
  • 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 ;
  • Non-observance of Reserve Bank guidelines on engagement of recovery agents by banks;
  • Non-adherence to Reserve Bank guidelines on para-banking activities like sale of insurance / mutual fund /other third party investment products by banks

A customer can also lodge a complaint on the following grounds of deficiency in service with respect to loans and advances

  • 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-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;
  • 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.

When can one file a complaint

One can file a complaint before the Banking Ombudsman if the reply is not received from the bank within a period of one month after the bank concerned has received one’s complaint, or the bank rejects the complaint, or if the complainant is not satisfied with the reply given by the bank.

Procedure of filling complaint

One can file a complaint with the Banking Ombudsman simply by writing on a plain paper. One can also file it online or by sending an email to the Banking Ombudsman.

Cost of filing complaints with Banking Ombudsman

The Banking Ombudsman does not charge any fee for filing and resolving customers’ complaints.

Compensation awarded by Banking Ombudsman

  • Any amount to be paid by the bank to the complainant by way of compensation for any loss suffered by the complainant is limited to the amount arising directly out of the act or omission of the bank or ₹ 20 lakhs (₹ Two Million), whichever is lower
  • The Banking Ombudsman may award compensation not exceeding ₹ 1 lakh (₹ One Hundred Thousand) to the complainant for mental agony and harassment.

Reason of Rejection of Complaint by Banking Ombudsman

The Banking Ombudsman may reject a complaint at any stage if it appears to him that a complaint made to him is:

  • not on the grounds of complaint referred to above
  • compensation sought from the Banking Ombudsman is beyond ₹ 20 lakh (₹ Two Million).
  • requires consideration of elaborate documentary and oral evidence and the proceedings before the Banking Ombudsman are not appropriate for adjudication of such complaint
  • the complaint is without any sufficient cause
  • the complaint that it is not pursued by the complainant with reasonable diligence
  • in the opinion of the Banking Ombudsman there is no loss or damage or inconvenience caused to the complainant.

Appellate Authority

Any person aggrieved by an Award issued by Banking Ombudsman rejecting the complaint can approach the Appellate Authority. The Appellate Authority is vested with a Deputy Governor of the RBI

One can file the appeal against the award or decision of the Banking Ombudsman rejecting the complaint within 30 days of the date of receipt of the Award, The Appellate Authority may, if he/ she is satisfied that the applicant had sufficient cause for not making an application for appeal within time, also allow a further period not exceeding 30 days

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