Role of Banking Ombudsman in India - An Analysis

The best quality of service supplied to a customer is currently the most significant thing to consider in the banking system. If the customer service offered meets the client's expectations, the bank's growth and development will be aided. Because banks are service businesses, they are prone to receiving consumer complaints on a daily basis. Customers had been complaining about the bank's defective services for a time, despite the bank's efforts, which took into account the RBI's advice. Banks have accepted their role as a 'bank of the masses,' rather than a 'bank of the class,' and as a result, they must demonstrate their efficiency to their clients. As a result, the RBI established the Banking Ombudsman Scheme in order to meet the demands of customers in a more efficient manner. Through this article we can analyse the role played by banking Ombudsman.

The banking business has encountered a number of issues as a result of technological advancements. In order to keep consumers, banks are always attempting to resolve client complaints. The consumer forum has been burdened with an upsurge in cases in recent years due to the lack of a proper grievance redressal forum. As a result, the RBI established the Banking Ombudsman Scheme under Section 35A of the Banking Regulation Act, 1949 to improve bank efficiency and to meet the demands of clients. There were about 15-20 Banking Ombudsman centres in place at the time. The Banking Ombudsman Scheme covers all types of banks, including rural banks, commercial banks, and Scheduled Primary Co-operative Banks, and so any complaint relating to a lack of banking services can be filed under this scheme.

Customers can only use this method after they've filed a complaint with the relevant bank. The customer must first approach the bank with their complaint, and if they do not receive an appropriate response from a bank representative within a month, or if the bank fails to take any action regarding the complaint filed, or if the bank takes action that does not fulfil the purpose of the complaint, the customer may contact the Banking Ombudsman. If the customer is still dissatisfied with the Banking Ombudsman's judgement, they have the option of filing a complaint with the appeal body. The RBI's Deputy Governor has appellate authority. This approach has shown to be extremely effective and has aided a number of consumers, resulting in customer satisfaction.

BACKGROUND OF THE CONCEPT

The public, several committees, and the legislature all criticised the banks' grievance procedure in the 1960s. Customers reacted angrily to banks and the RBI since there was no process in place when a client had a complaint with the bank. The RBI was interrogated and pressured by the authorities to take action in this regard.

To address the problem, the RBI directed the affected banks to come up with a plan to adequately address the complaints. The RBI forwarded the complaints to the appropriate banks. Several committees and advisory organisations were formed shortly after to examine the issue and formulate a policy that would not generate any reaction against the banking sector.

Shri R.G. Saraiya led the banking Commission, which was succeeded by R.K. Talwar, who was subsequently superseded by Goipora. By forcing the RBI to advise banks on their grievance redressal procedures, these individuals finally contributed to strengthen the banking sector.

Several steps were attempted to improve the system, as well as ideas and plans, however none of them were successful. Customers were continually disappointed by the system's failures. Finally, the Narasimha Committee on Banking and Financial Sector Reforms produced a report that aided the banking sector greatly. The Banking Ombudsman Scheme was founded in 1995 as a result of this report's emphasis on checks and balances. This plan was favourably received and favoured liberalisation and privatisation.

Dr. Rangarajan, the RBI governor at the time, unveiled the new Banking Ombudsman Scheme on 14 June 1995. The RBI established the Banking Ombudsman Scheme under Section 35A of the Banking Regulation Act of 1949. In addition, modifications were made in 2002, 2006, 2007, 2009, and most recently in 2017.

In the year 2006, the Scheme came into effect. The plan outlined the authority that banks would receive as well as the areas that would need to be investigated. The Banking Ombudsman Scheme covers all types of banks, including rural banks, commercial banks, and Scheduled Primary Co-operative Banks, and so any complaint relating to a lack of banking services can be filed under this scheme.

The RBI broadened the scope of the plan in order to combat bank restrictions on the sale of insurance, mutual funds, and other third-party enterprises. For example, if the Jammu and Kashmir Bank sells mutual funds on behalf of Reliance and Reliance refuses or is unable to perform the promised services, the Jammu and Kashmir Bank will be held accountable.

With this mechanism in place, a client can file a complaint with the bank, and if the issue is not rectified, the customer can file a complaint against the bank for failing to follow the RBI's standards.

GROUNDS FOR COMPLAINTS

The customer must first approach the bank with their complaint, and if they do not receive an appropriate response from a bank representative within a month, or if the bank fails to take any action regarding the complaint filed, or if the bank takes action that does not fulfil the purpose of the complaint, the customer may contact the Banking Ombudsman. As required by law, the respective bank must show which branch of the banking ombudsman has responsibility over their bank.

A customer can file a complaint if-

• There is a delay or non-payment of cheques, drafts, bills, etc., then the bank would be held liable for the same.

• Any note or coins are rejected for no valid reason, by the bank.

• An account of an individual is closed without any prior notice for no valid reason.

• A bank charges their customer for services (as mentioned above) without any authority.

• The deposit accounts are forcefully closed without any advance warning or explanation for the delay in closing any form of account held by the customer.

• Delay in payment or Non-payment of inward remittances, as well as non-compliance with the operating hours of the bank.

• A bank fails or constantly delays to deliver facilities that were promised by authorities.

• A bank does not open an account for the customer for no valid reason and delays the process or non-remittance of money

• A bank adds any extra costs for a previous transaction without informing in prior

• A bank does not follow the guidelines that have been laid down by the RBI in case of ATMs or Debit Cards or Credit cards that have either been stolen or if double the amount has been debited from the account or any wrong charges levied in the bill.

• Any agent follows an approach which is inappropriate and does not fall in line with the RBI guidelines.

• The bank does not follow the guidelines laid down by the RBI in relation to Internet Banking facilities.

• The bank refuses to issue redemption of government securities.

• The bank does not comply with interest rates as per the RBI.

• The bank does not provide loans based on irrelevant or baseless reasons.

In the case of M/S Athena Energy Ventures Pvt. Ltd. v. State of Andhra Pradesh, REED 2019 Del 05005,the Court held that "if a customer is not informed about the pre-payment charges, then the bank cannot levy those charges for the unexpired period of the Bank Guarantee."

In the case of Corporate Bank v. Navin Shah, AIR 2000 SC 761, the bank did not receive the respondent's money in foreign currency and therefore, the respondent prayed for damages. The Court held that the bank had fulfilled their duty and there is no lack of service as per the contract. Furthermore, the Court stated that customers must not take undue advantage of their right to approach the Banking Ombudsman and the Ombudsman must not be bias and assume that the banks are always in the wrong position.

IMPACT

The relationship between clients and banks has improved over time since the formation of the Ombudsman. Customers can seek aid for their concerns by filing a complaint with the Ombudsman, as the Ombudsman does not intervene in the affairs of other courts or overstep its jurisdiction. It is critical that the Ombudsman's conclusions are unbiased, and that the Ombudsman does not always follow previous decisions. The Ombudsman was established to assist customers who have no other remedy, and as a result, in some situations, they waive legal requirements that would be considered crucial in a typical court case, such as the filing of evidence.

The number of complaints received by the Ombudsman has risen dramatically over the years. The cause for this increase is technological innovation, which opens the door to a variety of cyber-crimes such as data privacy breaches, phishing, cyber fraud, data theft, and so on. These are significant concerns to the financial sector, and they have been striving to address them. The Ombudsman receives a large number of complaints as a result of these fraud operations, which has hampered the Ombudsman's ability to address cases quickly.

The Internal Ombudsman (IO) Institution was established in 2015 to assist the Ombudsman in resolving difficulties and strengthening the mechanism. Every public sector bank, as well as a few private sector and international banks, implemented the IO programme. Following this, every scheduled commercial bank in India with a minimum of 10 outlets, with the exception of rural banks, will be covered by the IO plan.

The IO's goal was to give consumers a more personal experience by giving them a personalised review of their issue and giving them undivided attention so that their complaints could be resolved quickly, without their having to go to the banking ombudsman. In addition, the RBI launched a Complaint Management System (CMS) in 2019. Customers could file complaints online, and the complaints would be received by the banking ombudsman offices as well as the Customer Education and Protection Cells. On the RBI website, you may find the CMS.

The banking industry has some weaknesses that may be addressed by improving corporate governance. The banking industry has been working hard to improve the system, and there is still room for improvement. If a bank fails to assist a customer or violates the consumer's right to seek assistance from the bank, the bank must pay a penalty. This would make it more difficult for other banks to repeat the same error. Several proposals have been made to improve the system's efficiency so that it can better serve its clients. Since technology has advanced, the banking sector has had to keep up and improve the situation by improving personal customer care.

In order to manage cases in the future, a strategy must be created after following specific precedents. In order to promptly settle new complaints, the Ombudsman must also deal with all current matters.

Since the introduction of new payment systems such as UPI, the number of transactions has increased, opening up the possibility of more complaints. It is critical that complaints are dealt with correctly. If the consumer is dissatisfied with the bank's services, the customer retention rate will drop. There are a lot of complaints, yet there aren't enough banking ombudsman offices to deal with them. As a result, the RBI must address this issue. Customers will be able to rely on the system to resolve their complaints once these concerns are resolved.

ANALYSIS

Earlier, banks have failed to resolve the grievances of the customers. The Banking Ombudsman Scheme provided customers an option to go further with their complaints if the respective banks failed to do so. This helps improve customer satisfaction as well as customer retention. The banking ombudsman scheme has been successful, but over the last few years, the complaints have increased and there are less ombudsman offices to resolve these issues due to which cases have been pending and customers have to wait for a long time before their issue is resolved. People in the rural areas are unaware of the scheme and therefore, they must be educated regarding the same. The banks have been working on a solution to fix cyber-crimes which would help reduce the number of complaints being filed. Banks have been working on their grievance redressal mechanism by making it more personal in nature. The Ombudsman must not assume that the "customer is always right" and should be unbiased in the situation. The Internal Ombudsman Mechanism has helped resolve issues that are faced by the Banking Ombudsman by giving customers an individual review for their issue and pay undivided attention to customers so as to resolve their grievances efficiently, leaving no opportunity for them to approach the banking ombudsman. It can be seen that although several mechanism have been introduced, they fail to address the basic issues such as giving undivided attention to customers, delays in addressing grievances, and no enhancement in the corporate governance.

CONCLUSION

The RBI launched the Ombudsman scheme, which has aided clients over the years and continues to do so. The initiative does not involve any legal formalities, such as hiring an advocate, and instead intends to personalise the experience by allowing customers to speak with a single representative who will work to resolve their difficulties. The scheme's framework makes it accessible to people from all walks of life in the country. It has greatly aided clients in gaining influence over banks.

Despite the fact that the Ombudsman Scheme has been a success, there is still room for improvement. Many individuals are ignorant of the scheme, particularly in rural regions, and hence more awareness is needed. It would be unreasonable and unfair to customers if they were unaware of their rights, and this would lead them astray from the system completely.