Banking Ombudsman Scheme in India

The scheme, which came into effect from June14, 1995 and amended recently in 2002 provides an opportunity to the public to approach Banking Ombudsman for grievances against a bankwhich are not resolved within a period of two months provided their complaints pertain to any of the matters specified in the scheme. The scheme covers all scheduled commercial banks, Regional Rural Banks and all scheduledprimary cooperative banks having a place ofbusiness in India whether incorporated in Indiaor outside India. The scheme is not a substitution for Consumer Protection Act but anadditional grievance settlement mechanism available to the banks’ consumers.

Powers of the Banking Ombudsman

He has the powers to receive complaints relating to the provision of banking services and to consider such complaints and facilitate their satisfaction or settlement by agreements by making a recommendation or award in accordance with this scheme. His authority also includes matters referring toall complaints concerning, i) non payment/inordinate delay in thepayment or collection of cheques. ii) non acceptance, without sufficient cause,of small denomination notes tendered forany purpose. iii) non issue of drafts to customers and othersand non adherence to prescribed working hours. iv) failure to honour guarantee/letter of creditcommitments by banks. v) complaints pertaining to operations in SB/CA/NRI accounts and interest rates. vi) non observance of RBI instructions regarding time schedule for disposal of loanapplications.

Procedure for Redressal

The complaint has to be in writing duly signed by the complainant or his authorised representative containing name and address ofthe complainant and name and address of thebank against which the complaint is made. Itshould also contain facts giving rise to the complaint supported by documents where necessary. Finally, it should also mention about the relief sought from the ombudsman.

Action by the Ombudsman

For the purpose of carrying out his duties underthis scheme, a banking ombudsman may require the bank named in the complaint to provide information or furnish copies of anydocument relating to the complaint. Upon scrutinizing the relevant particulars, the ombudsman calls for a meeting with both theparties and endeavours to promote a settlement Banking Briefs 97 (For private circulation only) through conciliation or mediation. If that is notachieved within a period of one month from thedate of the complaint, he makes arecommendation to the complainant and thebank concerned. The recommendations of the ombudsman will be open for acceptance by thecomplainant only if he accepts all terms in fulland final settlement of his claim within 2 weeksfrom the date of

receipt of the recommendations. A copy of this recommendation will also beforwarded to the bank. The bank will have 2 weeks time to accept the recommendations. Otherwise it should inform the ombudsman within two weeks.

If the complaint is not settled by agreement or recommendation within a period of two months from the date of receipt of complaint, the ombudsman will pass an award after affording both the complainant and the bank reasonable opportunity to present their case. An award isnot binding on the bank against which it is passed unless the complainant furnished to it within aperiod of one month from the date of the award, a letter of acceptance of the award in full andfinal settlement. Within 15 days of the receipt ofthe acceptance of the award by the complainant, the bank has to comply with it and intimate the banking ombudsman. The ombudsman can award compensation for an amount upto Rs.10 lacs. Banks can seek review of the Awardbefore Deputy Governor of RBI.