Mudra Compass

Bank Ombudsman is a judicial authority functioning under India’s Banking Ombudsman Scheme, 2006. This was launched to address the customer’s issue regarding banking service. The Banking Ombudsman is an official who has been granted a duty to investigate the complaints, and allegations made by customers against the banks, with respect to maladministration and unlawful practices by bank executives. The prime function of an ombudsman is dispute resolution between the citizens, and banks. However, it is imperative to note that as per the hierarchical structure, a court is undoubtedly at a higher ranking and a decision made by it will supersede a decision by the ombudsman. Thus, if a matter is pending before a court, it is understood that the jurisdiction of the ombudsman stands limited. 

Recently, we have come across to a report which raises a question on the working pattern of the banking ombudsman. It seems like the banking ombudsman is meant to support banks rather than consumers. Because of the banking ombudsman has not helped the people in their bank related complaints, but the banks are getting the necessary relief.

It may be mentioned that The Banking Ombudsman was appointed to take measurable action on the complaints received related to various banks of India regarding operational services, mobile banking issues, ATM issues, debit and credit card issues, and other banking related services across the country. The work of the ombudsman is to address the customer’s issue, investigate accordingly and provide solutions by taking appropriate action against the offender.

However, during the last 3 year, the Banking Ombudsman has received a total 8 lakhs 61 thousands and 159 complaints from customers against 13 major banks. The Statistics are staggering. An internal report was prepared in this regard and handed over to the Ministry of Finance.  The Ombudsman has initiated investigation but more than 1 lakh 3 thousand complaints have been rejected due to lack of proper evidence, non-continuation of cases by complainant, inappropriate complaints or other reasons, whereas around 2000 cases were resolved by mutual agreements.  In some cases, the Banking Ombudsman has given an instruction to improve banking service quality by rectifying banking deficiencies, and in some cases the plaintiff was also rewarded.

Surprisingly, in only 3 cases in the last 3 years, the banking ombudsman found a fault with a bank employee and convicted them. Not only was that, only two cases were prosecuted in the conviction case. In one case a convicted bank employee of Bank of Baroda was given a warning notice and warned not to make the same mistake again in the future.

This is not just of the last 3 years, but before that also the figures say the same thing that the banking ombudsman is working to provide an ease to banks. In 2018-2019 total 1.95 lakh complaints were heard by the 21 banking ombudsmen set up across the country. But in only 98 cases the verdict came in favor of the customers.  All the remaining complaints were either not eligible for hearing or these decisions were given in favor of the bank. In hearing all these cases 61 crore was spent. As per the Annual Report of RBI for 2018-2019, the number of complaints has increased by 50% in two years.

Among all complaints, 19% of complaints were related to banking services, 18.65% of complaints were related to ATM and Debit Cards and 7.55% of the complaints were related to reduction in mobile and internet services. In Experts’ opinion, in most cases the customer withdraws and compromises complaints to avoid frequent trips. In only 78 or 0.04% of the cases, the complainants went to appeal against the decision of the banking ombudsman.

Recently in February 2021, RBI has stated in its annual report on Banking Ombudsman Scheme that there was an increase of complaints by 57.54% in FY 20 compared to last year FY 19. There were a total of 3,08,630 complaints in the FY20 as against 1,95, 901 in FY 19. Of these, 85.65% were received electronically i.e. through the online CMS portal and through email, as against 72.19% in the previous year. 21.97% of complaints were related to ATM/Debit cards, 13.38% of complaints were related to mobile and internet services and 11.73% of complaints were related to baking services. This shows that the percentage of complaints is higher than previous year. The Complaints received on grounds relating to Credit Cards, failure to meet commitments, levy of charges without notice, loans and advances, and non-adherence to the Banking Code Standard Board of India (BCSBI) codes increased this year. The number of complaints pertaining to Direct Sales Agent (DSA) and recovery agents’ increased from 626 complaints in 2018-19 to 1,406 complaints this year. Complaints against NBFCs have increased by 387%. The Ombudsman for NBFCs received total complaints of 19,432 complaints in the FY 20 as against 3,991 in FY 19.

The share of total complaints received against SBI and nationalized banks have decreased from 61.90% in 2018-2019 to 59.65% in 2019-2020, while the share of private sector banks increased from 28.04% to 31.96% in FY 20. The highest numbers of complaints in NBFCs were against Bajaj Finance Limited followed by Indiabulls Consumer Finance Limited, and HDB Financial Services Limited.

Individual customers constituted the largest segment 77.23% of complaints during the year 2019-2020. Senior citizens accounted for 1.01% of the total complaints. The number of maintainable complaints rejected has increased in absolute numbers to 47,873 in 2019-20 from 26,905 in 2018-19. Maximum numbers of maintainable complaints were rejected on the ground of not on the grounds of complaint or not filed in accordance with required provisions of clause 9(3) of banking ombudsman scheme. According to the RBI annual report, High rejection rates were observed in complaints related to loans and advances (40.01%), fair practice code (36.6%) and mobile and electronic banking (36.1%). There is a need for proper education for consumers, so that, they know the correct way to approach the escalation for their complaints. Beside this there is a need to change the way banks are dealing with consumers, so that, the number of complaints can be reduced and of course the banking ombudsman has to take strict action against offenders rather than giving them an ease and rejecting consumer’s complaint.