Big Bank Theory - Banking Ombudsman Scheme

Banking/ Financial Awareness is an important segment of most of the bank exams, especially SBI PO Exam. To help you all prepare for this segment better, we have started our series, ‘Big Bank Theory’. Today we are going to discuss about Banking Ombudsman Scheme.

Big Bank Theory - Banking Ombudsman Scheme

Banking Ombudsman Scheme came into picture in order to resolve the complaints of bank customers related to certain services rendered by the banks.  It was introduced in India for the first time in 1995  under Section 35 A of the Banking Regulation Act, 1949 by RBI and underwent a revision in 2002. Banking Ombudsman Scheme became operational in the country on 1st January 2006, and also replaced the previously operational Scheme of 2002.  Banking Ombudsman resolved around 36000 complaints in the period of 2002 to 2006.

At present, Banking Ombudsman have 17 regional offices in the country. The latest regional office was inaugurated in Dehradun in December 2016.

An important question that arises is, Who exactly is a Banking Ombudsman?

Banking Ombudsman is basically an official appointed by the RBI, who is responsible for redressal of the complaints of the customers in case of issues with certain banking services. 

Now, let us have a look at the times when a customer can lodge complaint under the Banking Ombudsman Scheme.

In case of deficiencies in the banking services, the customer may lodge complaint under the following circumstances -

Non Acceptance of small denomination notes or coins and/or charging of commission for the same, without sufficient cause.

Non payment or delay in the payment of the cheques, bills, drafts, inward remittances etc.

Failure or Delay in issue of drafts, pay orders, banker’s cheque etc.

Non Adherence of the prescribed work hours

Failure or delay in providing any banking service (other than loans and advances), promised in writing by a bank or its direct selling agents.

Delay or non - credit of proceeds to the party accounts, non - payment of deposits and non - observance of the RBI directives

Complaints related to remittances from abroad, deposits and other bank related matters from the Non - Resident Indians having accounts in India

Refusal to open bank accounts, without sufficient cause/ reason

Levying extra/ unnecessary charges without prior information

Non - adherence to the ATM/ Debit/ Credit Card operations as instructed by RBI

Non - disbursement or delay in disbursement of pension by the bank

Refusal or delay in acceptance of payment towards taxes as required by RBI or the Government

Refusal or Delay in issuing, or failure or delay in servicing or redemption of Government securities.

Forced closure of Deposit Accounts without prior notice or sufficient reason

Refusal or Delay in Closure of accounts

Non adherence to fair practice codes or provisions of the code of bank’s commitment to customers as issued by Banking Codes and Standards Board of India (BCSBI)

Non observance of RBI Guidelines on engagement of recovery agents by Banks.

Any matter related to violation  of the directives issued by RBI for banking and other services.

In cases pertaining to Loans and Advances, a customer can also lodge complaint on the following grounds of deficiency in service -

Non Observance of interest rates as per RBI directives

Delay in sanction, disbursement or non observance of prescribed time schedule for disposal of loan applications

Non acceptance of loan applications without producing valid reasons.

Non adherence to provisions of fair practice codes for lenders as per Code of Bank’s commitment to Customers

Non observance of any direction/ instruction of RBI for this segment

Highlights of Banking Ombudsman Scheme -

• The Appellate authority of Banking Ombudsman is vested with the Deputy Governor of the Reserve Bank of India.  
• The complaint of the customer may be filed by his/ her authorized representative as well.
• There is a limit on the compensation that is offered by the bank. The amount to be paid by the bank as compensation for any loss suffered by the complainant is restricted to the amount arising directly out of the act or Rs 10 lakhs, whichever is lower.
• The customer may also be awarded a compensation of amount not exceeding Rs. 1 lakh to the complainant, only in case of complaints related to credit card operations for mental agony or harassment.
• In case the customer is not satisfied with the decision passed by the Banking Ombudsman, he/she can approach the appellate authority against the Banking Ombudsman's decision. Such an appeal has to be made within 30 days of the date of receipt of the award.
• Banking Ombudsman is appointed for a  period of 3 years.
• The Banking Ombudsman Scheme covers all Scheduled Commercial Banks, Regional Rural Banks as well as Scheduled Primary Co-operative Banks.