Author: Nishtha Chaturvedi
Background
Etymologically Swedish, an ombudsman means representative’[i], understandably an intermediary between the state and an internal/external entity, representing their concerns while settling grievances. With the liberalisation, privatisation, and globalisation (“LPG”)surge engulfing India in the ’90s, an immediate need to make Indian banks competent and internationally viable was felt[ii]. Accordingly, the Narasimham Committee was appointed and as per its recommendations from Committee Reports I-II, the Banking Ombudsman Scheme 1995[iii](“the Scheme”) was implemented through Section 35A of the Banking Regulation Act, 1949[iv]. The Scheme has been further modified/amended in 2002[v], 2006[vi], 2007[vii], 2009[viii] and 2017[ix].
Existing Framework
The Scheme encompasses all scheduled commercial banks, rural banks, cooperative banks in the country[x]. It allows an aggrieved customer to file a complaint of any nature irrespective of the amount value[xi]. The Banking Ombudsman (“BO”) is a senior official with a stipulated jurisdiction – appointed by the Reserve Bank of India (“RBI”) – who receives and considers the complaints filed for settlement[xii].
In 2017, RBIincreased the pecuniary limits for passing an Award; included compensation up to one million rupees for loss of time, mental anguish et al suffered by the complainant; expanded grounds for an appeal against the decision of the BO; and made appealable closed cases wherein the complaint required detailed investigation or oral / documentary evidence.[xiii]
In 2018, the Internal Ombudsman (“IO”) mechanism was launched to review complaints rejected by the banks, thus reinforcing the internal grievance redressal system, and minimizing the need to approach other fora.[xiv] In 2019, RBI digitised the Complaint Management System (“CMS”), enabling online filing of complaints, acknowledgement through SMS/Email notification(s), status tracking through unique registration number, receipt of closure advises and filing of Appeals, where applicable[xv].
Redressal Mechanism
Any person who has a grievance may, himself or through his authorised representative (other than an advocate), make a written/electronic complaint, duly signed and in the form specified in Annexure ‘A’ or stating clearly pertinent details in accordance with Clause 9 which also specifies conditions where a complaint shall NOT lie. Commonly, such a complaint is filed only when no satisfactory reply has been received after one month from the time a complaint was raised with the IO.
Clause 11 pertains to the settlement of the complaint by agreement between the parties through conciliation or mediation. The proceedings are summary in nature and the BO shall not be bound by any rules of evidence and may follow such procedure as he may consider just and proper, subject to principles of natural justice. The complaint may be deemed as resolved, in any of the following:
- Where the grievance has been resolved by the bank/subsidiary of a bank with the intervention of the BO; or
- The complainant agrees, in writing/otherwise, to the resolution provided by the BO via the conciliation/mediation efforts; or
- TheBO opines that the bank has complied with the applicable banking norms and practices and while the complainant has been informed to this effect, objections, if any to the same are not received within the time frame provided.
If a complaint is not settled by agreement within a period of one month from the date of receipt of the complaint/such period as allowed, the BO may pass a reasoned Award or reject the complaint under Clause 12after the parties present their respective cases. However, the BO shall not have the power to pass an Award directing payment of compensatory amount more than the actual loss suffered by the complainant due to the act of omission/commission of the bank, or two million rupees, whichever is lower[xvi]. An Award shall lapse and be ineffective unless the complainant furnishes to the bank concerned within thirty days from the date of receipt of a copy of the Award, a letter of acceptance of the Award in full and final settlement of the claim, unless if an Appeal has been preferred by either party.
Clause 13 pertains to rejection of the complaint. If it appears at any stage that the complaint pertains to the same cause of action, for which any proceedings before any fora are pending or a decree/Award/order has been passed therein, such complaint shall be rejected. Accordingly, courts have upheld: “If one chooses to move the BO eight years after the first refusal of the bank on that issue, the complainant is time-barred for this action under Clause 16(3)(b)”[xvii]. Further, “when a series of litigation is pending in courts on the same subject matter, then the BO has no jurisdiction on that matter”[xviii].
Clause 14 deals with Appeals, to be made within thirty days of the date of receipt of communication of dismissal, allowance/setting aside of Award. The order of the Appellate Authority shall have the same effect as the Award passed by the BO under Clause 12 or the order rejecting the complaint under Clause 13.
Criticisms
While the massive outreach programs by banks raised awareness and accessibility, the ratio of BOS to the number of complaints made is inadequate for a streamlined resolution[xix]. Despite the Scheme being touted as a mutual, amicable option, several complaints were rejected/dismissed, over technicalities, eliminating any remaining trust of the aggrieved[xx].
Conclusion
This mechanism is an interesting form of dispute resolution wherein the BO employs discretion and prudence in retaining aggrieved customers while keeping the banks accountable. Suitably utilized, this Scheme saves time, costs and on a lighter note, could infinitesimally brighten the prospect of those inevitable bank visits.
Author: Nishtha Chaturvedi, Final Year Law Student, Symbiosis Law School, NOIDA. Currently, she is a researcher at the Indian Society for Legal Research. She can be followed on LinkedIn.
[i]Inken Dose,Ombudsman, (2019),Aarhus University. Can be accessed here: https://nordics.info/show/artikel/preview-ombudsman-1/#:~:text=The%20Nordic%20institution%20of%20the,Swedish%20origin%20meaning%20’representative’.
[ii] Roland, Christian. (2008). BANKING SECTOR LIBERALIZATION IN INDIA: EVALUATION OF REFORMS AND COMPARATIVE PERSPECTIVES ON CHINA, Physica-Verlag Heidelberg, p.3.
[iii]Banking Ombudsman Scheme, 1995. Can be accessed here:https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/13038.pdf
[iv] The Banking Regulation Act, 1949. Can be accessed here: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.PDF
[v] Banking Ombudsman Scheme, 2002. Can be accessed here: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/29807.pdf
[vi] Banking Ombudsman Scheme, 2006.Can be accessed here: https://rbidocs.rbi.org.in/rdocs/Content/PDFs/67933.pdf
[vii] Banking Ombudsman Scheme, 2007 Amendment. Can be accessed here:
https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=16621
[viii] Banking Ombudsman Scheme, 2009 Amendment. Can be accessed here:
https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=20025
[ix]Banking Ombudsman Scheme, 2017 Amendment. Can be accessed here: https://rbidocs.rbi.org.in/rdocs/Content/PDFs/BOS2006_2302017.pdf
[x]Substituted via RBI Notification Ref.CEPD.PRS. No.6317/13.01.01/2016-17. Can be accessed here: https://m.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=3370
[xi]Clause 8
[xii] Clause 3(4) read with Clause 4(1)
[xiii]Annual Report on Banking Ombudsman Scheme, 2016-17. Can be accessed here: https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=18052
[xiv]The Reserve Bank introduces Internal Ombudsman Scheme, 2018for Scheduled Commercial Banks. Can be accessed here: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=44900
[xv]Launch of Complaint Management System by RBI. Can be accessed here:https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=47383
[xvi]Substituted via RBI Notification Ref.CEPD.PRS.No .6317 /13.01/01/2016-17 dated June 16, 2017. Can be accessed here: https://rbidocs.rbi.org.in/rdocs/Content/PDFs/NOTIFICATIONA96DEC253A504C969510C67959EC9A3F.PDF
[xvii]United Commercial Bank (UCO Bank) and Bihar State Food and Civil Supplies Corporation Limited v. The Banking Ombudsman and Ors. and The Union of India and Ors., 2006 SCC OnLine Pat 427.
[xviii]Durga Hotel Complex v. Reserve Bank of India and Ors., (2007) 5 SCC 120.
[xix]MalyadriPacha, & SirishaSolety, (2012). Success of Banking Ombudsmen Scheme: Myth Or Reality. International Journal of Research Studies in Management 1(1). Can be accessed here:https://www.researchgate.net/publication/272696300_Success_of_banking_ombudsmen_scheme_Myth_or_reality
[xx]Neil Borate, Shaikh Zoaib Saleem, Is Banking Ombudsman Consumer-Friendly? 30 Apr 2019, 10:09 PM IST. Can be accessed here: https://www.livemint.com/money/personal-finance/is-banking-ombudsman-consumer-friendly-1556641401646.html
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