Banking Ombudsman – Consumer complaints against banks

The Reserve Bank of India launched the Banking Ombudsman Scheme in the year- 2006. It was launched under the Banking Regulation Act, 1949 as a forum to hear and address consumer complaints. As a consumer, it is essential to be heard when one is not satisfied with the banking service. The main objective behind setting up the scheme was to give customers a platform to file complaints and resolve issues on a priority basis. When the bank fails to reply and address the complaint within 30 days, a customer can approach the Ombudsman.

Role of a Bank Ombudsman

The Bank Ombudsman is a senior official whose principal role is to redress customer grievances and complaints against banking services. The Reserve Bank of India appoints the office, and till date, there are 20 RBI-appointed officers. The officer addresses the claims and customer complaints about commercial banks, co-operative banks and regional rural banks. However, there are only specific categories of banking faults and complaints that can be lodged with a Bank Ombudsman.

When can a consumer file a complaint with the Ombudsman?

A consumer cannot directly file a complaint and redress grievances with the Ombudsman in all cases. There are situations and circumstances which require a special address. There are many scenarios under which a consumer can approach the Bank Ombudsman office for registering the complaint. Hence, a consumer-first needs to complain to the bank, and if they fail to take any action, one can approach the Ombudsman. If the bank fails to reply to the consumer within one month of receiving the complaint/rejects the complaint/not satisfied with the response, the consumer can approach the Banking Ombudsman.

What are the eligible categories of complaint?

The complaints can be made on various grounds relating to either deposit, account, and remittances or regarding loans. Here are some scenarios based on which the complaint can be made.

● Non-payment or delay in collection or payment of draft, bills, cheques.

● Non-acceptance of small denomination notes or coins without any sufficient cause.

● Delay or failure of providing appropriate banking facilities as promised by the bank or the selling party.

● Failure to delay or issue the drafts, banker's cheque and pay orders.

● Failing to observe the RBI directives for the rate of interest applicable on deposit in saving, current or other related accounts.

● Non-payment of deposit or delay of credit of money.

● Refuse to open a deposit or savings account.

● Adding or levying banking charges on the customer account without prior notice.

● Delay or non-disbursement of pension and non-acceptance /refusal of tax payment as required by government or RBI.

● Non-adherence to instructions provided by RBI on ATM/ debit or credit card functioning.

● Delay or refuse to close an account.

● Closure of an account without valid cause or prior notice.

● Delay, refusal to issue or fail to use redemption of government securities.

● Non-adherence of the bank to instructions by the RBI for mobile banking or electronic banking service.

● Not following fair practice code by the bank as issued by the RBI.

● Non-adherence of code of the bank's commitment to customs as issued by the Banking Codes and Standards Board of India.

● Non-adherence of guidelines by RBI on the engagement of recovery agents by the bank.

● Non-adherence to guidelines by RBI on para-banking services like insurance sale, mutual fund, other investment products provided by the bank.

● No update of CIBIL records.

● Delay in sanction or disbursement of loan application beyond the schedule.

● Rejecting loans or non-acceptance of loan application without providing a valid reason.

Any grievance against the bank can be raised with the Bank Ombudsman so that a settlement can be done between both parties. In one incident, an 81-year schoolteacher Laxmi Bhandarkar was harassed and threatened by recovery agents for two months for non-payment of credit card due on her son's credit card. He had not done the transaction on the credit card, and he sent a letter addressing the error. However, the bank refused to help, and in such cases, the settlement needs to be done through the Bank Ombudsman.

The original scheme was set up in 1995, but major revisions were done to the scheme in 2006 which covered ATM as well as debit/credit card transactions. As per a survey, it is found that nearly 65% of people face issues with banks, and a lot of cases need to be settled through a written complaint with the Bank Ombudsman. In another case of harassment, a senior citizen was compensated by the BO scheme, a sum of Rs 1 Lakh for receiving recovery calls for a loan he never took. However, it was found that a third party took the loan, and he received the calls due to a KYC lapse.

Who and how can one file a complaint?

Any consumer can file a complaint using the banking facility and against any of the private or co-operative or rural banks. The complaints can be made by NRIs as well with an account in India regarding remittances from abroad or deposit. The other option is the consumer can authorize a representative for filing the complaint other than the advocate.

The complaint can be made in writing on plain paper or even file it online through the official website or via email to the Banking Ombudsman. The complaint can be lodged at the Banking Ombudsman office under whose jurisdiction the bank branch falls. The compensation amount to be paid by the bank for the loss of the complainant is either limited to amount which is lost during the act, or bank fault or maximum of Rs 20 lakh, whichever is lower is applicable.