49188221 analysis of the banking ombudsman scheme
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8/12/2019 49188221 Analysis of the Banking Ombudsman Scheme
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ANALYSIS OF BANKING OMBUDSMAN
SCHEME
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ANALYSIS OF BANKING OMBUDSMAN SCHEME
History and Developent o! "#e $an%in& o$'dsan s(#ee)
The Banking Ombudsman Scheme is introduced under Section 35 A of
the Banking Regulation Act, 1949 b RB! "ith effect from 1995 to
#ro$ide an e%#editious and ine%#ensi$e forum to bank customers for
resolution of their com#laints relating to banking ser$ices& The Scheme
co$ered banking ser$ices rendered b scheduled commercial banks andscheduled #rimar coo#erati$e banks&The ob'ecti$e of the Banking
Ombudsman Scheme is to be a $isible and reliable sstem of dis#ute
resolution mechanism for bank customers& The Ombudsmen generall
resort to conciliation or mediation for settlement of com#laints&
The Banking Ombudsman Scheme "as re$ised in ())( to co$er
Regional Rural Banks and to #ermit a re$ie" of the Banking
Ombudsman*s A"ards against the banks b the Reser$e Bank& The
Scheme "as further re$ised in ())+ gi$ing it a much "ider sco#e b
including se$eral ne" areas of customer com#laints& The Banking
Ombudsmen currentl ha$e their offices in 15 enters s#read across the
countr and are full funded b the Reser$e Bank& The Banking
Ombudsmen are ser$ing Officers of Reser$e Bank in the rank of hief-eneral .anagers and -eneral .anagers&
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Constit'tion* po+ers and !'n(tions o! $an%in& o$'dsan
• Appointents ten're)
The Reser$e Bank ma a##oint one or more of its officers in
the rank of hief -eneral .anager or -eneral .anager to be kno"n as
Banking Ombudsmen to carr out the functions entrusted to them b or
under the Scheme& The a##ointment of Banking Ombudsman ma be
made for a #eriod not e%ceeding three ears at a time& 1
• Lo(ation o! o!!i(e)
The office of the Banking Ombudsman shall be located at such #laces as
ma be s#ecified b the Reser$e Bank& !n order to e%#edite dis#osal of
com#laints, the Banking Ombudsman ma hold sittings at such #laces
"ithin his area of 'urisdiction as ma be considered necessar and #ro#er b
him in res#ect of a com#laint or reference before him&
1
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,'risdi(tion* po+ers and d'ties o! $an%in& o$'dsan )
1& The Reser$e Bank shall s#ecif the territorial limits to "hich
the authorit of each Banking Ombudsman a##ointed under the
Scheme shall e%tend&
(& The Banking Ombudsman shall recei$e and consider com#laints
relating to the deficiencies in banking or other ser$ices filed on the
grounds mentioned in the scheme and facilitate their satisfaction or
settlement b agreement or through conciliation and mediation
bet"een the bank concerned and the aggrie$ed #arties or b #assing
an A"ard in accordance "ith the Scheme&
3& The Banking Ombudsman shall e%ercise general #o"ers of
su#erintendence and control o$er his Office and shall be res#onsible
for the conduct of business their o"n office&
4& The Office of the Banking Ombudsman shall dra" u# an annual
budget for itself in consultation "ith Reser$e Bank and shall e%ercise
the #o"ers of e%#enditure "ithin the a##ro$ed budget on the lines of
Reser$e Bank of !ndia /%#enditure Rules, ())5&
5& The Banking Ombudsman shall send to the -o$ernor, Reser$e Bank,
a re#ort, as on 3)th 0une e$er ear, containing a general re$ie" of the
acti$ities of his Office during the #receding financial ear and shall
furnish such other information as the Reser$e Bank ma direct and
the Reser$e Bank ma, if it considers necessar in the #ublic interest
so to do, #ublish the re#ort and the information recei$ed from the
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Banking Ombudsman in such consolidated form or other"ise as it
deems fit&
Coplaint #andlin& pro(ed're BY t#e $an%in& o$'dsan
Gro'nds o! (oplaints +#i(# $an%in& o$'dsan is entitled to #ere)
The Banking Ombudsman can recei$e and consider an com#laint
relating to the follo"ing deficienc in banking ser$ices including
internet banking2
1& non#ament or inordinate dela in the #ament or collection of
cheues, drafts, bills etc&6
(& nonacce#tance, "ithout sufficient cause, of small denomination
notes tendered for an #ur#ose, and for charging of commission in
res#ect thereof6
3& nonacce#tance, "ithout sufficient cause, of coins tendered and for
charging of commission in res#ect thereof6
4& non#ament or dela in #ament of in"ard remittances 6
5& failure to issue or dela in issue of drafts, #a orders or bankers*
cheues6
+& nonadherence to #rescribed "orking hours 6
7& failure to #ro$ide or dela in #ro$iding a banking facilit other than
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loans and ad$ances2 #romised in "riting b a bank or its direct
selling agents6
8& delas, noncredit of #roceeds to #arties accounts, non#ament of
de#osit or nonobser$ance of the Reser$e Bank directi$es, if an,
a##licable to rate of interest on de#osits in an sa$ings,current or
other account maintained "ith a bank 6
9& com#laints from onResident !ndians ha$ing accounts in !ndia in
relation to their remittances from abroad, de#osits and other bank
related matters6
1)&refusal to o#en de#osit accounts "ithout an $alid reason for refusal6
11&le$ing of charges "ithout adeuate #rior notice to the customer6
1(&nonadherence b the bank or its subsidiaries to the instructions of
Reser$e Bank on AT.:;ebit card o#erations or credit card
o#erations6
13&nondisbursement or dela in disbursement of #ension to the e%tent
the grie$ance can be attributed to the action on the #art of the bank
concerned, but not "ith regard to its em#loees26
14&refusal to acce#t or dela in acce#ting #ament to"ards ta%es, as
reuired b Reser$e Bank:-o$ernment6
15&refusal to issue or dela in issuing, or failure to ser$ice or dela in
ser$icing or redem#tion of -o$ernment securities6
1+&forced closure of de#osit accounts "ithout due notice or "ithout
sufficient reason6
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17&refusal to close or dela in closing the accounts6
18&nonadherence to the fair #ractices code as ado#ted b the bank or
nonadherence to the #ro$isions of the ode of Bank s ommitments
to ustomers issued b Banking odes and Standards Board of !ndia
and as ado#ted b the bank 6
19&nonobser$ance of Reser$e Bank guidelines on engagement of
reco$er agents b banks6 and
()&an other matter relating to the $iolation of the directi$es issued b
the Reser$e Bank in relation to banking or other ser$ices&
(1&A customer can also lodge a com#laint on the follo"ing grounds of
deficienc in ser$ice "ith res#ect to loans and ad$ances
1& nonobser$ance of Reser$e Bank ;irecti$es on interest
rates6
(& delas in sanction, disbursement or nonobser$ance of
#rescribed time schedule for dis#osal of loan a##lications6
3& nonacce#tance of a##lication for loans "ithout furnishing
$alid reasons to the a##licant6 and
4& nonadherence to the #ro$isions of the fair #ractices code
for lenders as ado#ted b the bank or ode of Bank*s
ommitment to ustomers, as the case ma be6
5& nonobser$ance of an other direction or instruction of the
Reser$e Bank as ma be s#ecified b the Reser$e Bank for
this #ur#ose from time to time&
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+& The Banking Ombudsman ma also deal "ith such other
matter as ma be s#ecified b the Reser$e Bank from time
to time&
Cir('stan(es in +#i(# (oplaint not $e (onsidered $y t#e
O$'dsan )
om#laint "ill not be considered if
a& One has not a##roached his bank for redressal of his
grie$ance first&
b& One has not made the com#laint "ithin one ear from the
date one has recei$ed the re#l of the bank or if no re#l is
recei$ed if it is more than one ear and one month from the
date of re#resentation to the bank&
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c& The sub'ect matter of the com#laint is #ending for dis#osal :
has alread been dealt "ith at an other forum like court of
la", consumer court etc&
d& <ri$olous or $e%atious&
e& The institution com#lained against is not co$ered under the
scheme&
f& The sub'ect matter of the com#laint is not "ithin the ambit of
the Banking Ombudsman&
g& !f the com#laint is for the same sub'ect matter that "as
settled through the office of the Banking Ombudsman in an
#re$ious #roceedings&
pro(ed're !or !ilin& t#e (oplaint $e!ore t#e Ban%in& O$'dsan)
One can file a com#laint "ith the Banking Ombudsman sim#l b
"riting on a #lain #a#er& One can also file it online& One ma lodge his:
her com#laint at the office of the Banking Ombudsman under "hose
'urisdiction, the bank branch com#lained against is situated& <or
com#laints relating to credit cards and other t#es of ser$ices "ith
centrali=ed o#erations, com#laints ma be filed before the BankingOmbudsman "ithin "hose territorial 'urisdiction the billing address of
the customer is located&
details +#i(# are re-'ired in t#e (oplaint)
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The com#laint should ha$e
i& the name and address of the com#lainant,
ii& the name and address of the branch or office of the bank against
"hich the com#laint is made,
iii& facts gi$ing rise to the com#laint su##orted b documents, if an,
i$& the nature and e%tent of the loss caused to the com#lainant,
$& the relief sought from the Banking Ombudsman and
$i& a declaration about the com#liance of conditions "hich are
reuired to be com#lied "ith b the com#lainant&
liit on t#e ao'nt o! (lai and (opensation )
The amount, if an, to be #aid b the bank to the com#lainant b "a
of com#ensation for an loss suffered b the com#lainant is limited to
the amount arising directl out of the act or omission of the bank or Rs
1) lakhs, "hiche$er is lo"er& The Banking Ombudsman ma a"ard
com#ensation not e%ceeding Rs 1 lakh to the com#lainant onl in the
case of com#laints relating to credit card o#erations for mental agon
and harassment& The Banking Ombudsman "ill take into account the
loss of the com#lainant*s time, e%#enses incurred b the com#lainant,
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harassment and mental anguish suffered b the com#lainant "hile
#assing such a"ard&
Sit'ations o! re.e(tion o! (oplaints $y $an%in& o$'dsan)
The Banking Ombudsman ma re'ect a com#laint at an stage if it
a##ears to him that a com#laint made to him is
• not on the grounds of com#laint referred to abo$e
• com#ensation sought from the Banking Ombudsman is beond
Rs 1) lakh &
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• reuires consideration of elaborate documentar and oral
e$idence and the #roceedings before the Banking Ombudsman
are not a##ro#riate for ad'udication of such com#laint
• "ithout an sufficient cause
• that it is not #ursued b the com#lainant "ith reasonable
diligence
• in the o#inion of the Banking Ombudsman there is no loss or
damage or incon$enience caused to the com#lainant&
Coplaint #andlin& pro(ed're)
-enerall on recei#t of an com#laint, the Banking Ombudsman
endea$ors to resol$e the com#laint b agreement bet"een the
com#lainant and the bank named in the com#laint through a #rocess of
conciliation or mediation& <or the #ur#ose of such resolution of the
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com#laint, the Banking Ombudsman follo"s such #rocedures as he ma
consider a##ro#riate and he is not bound b an legal rule of e$idence& !f
a com#laint is not settled b agreement "ithin a #eriod of one month
from the date of recei#t of the com#laint or such further #eriod as the
Banking Ombudsman ma consider necessar, he ma #ass an A"ard
after affording the #arties reasonable o##ortunit to #resent their case&
>e shall be guided b the e$idence #laced before him b the #arties, the
#rinci#les of banking la" and #ractice, directions, instructions and
guidelines issued b the Reser$e Bank from time to time and such other
factors, "hich in his o#inion are necessar in the interest of 'ustice&
• the ste#s in$ol$ed in com#laint handling b the banking
ombudsman are Recei#t of com#laints
;ecision to handle or not
Ackno"ledgement of those co$ered under the Scheme
Return of those that cannot be handled under the Scheme
all for comments from Banks
?romote a settlement through conciliation or #ass an
a"ard
Appeal)
!f one is not satisfied "ith the decision #assed b the Banking
Ombudsman, one can a##roach the a##ellate authorit against the
Banking Ombudsmen*s decision& A##ellate Authorit is $ested "ith a
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;e#ut -o$ernor of the RB!& One can also e%#lore an other recourse
and:or remedies a$ailable to him:her as #er the la"& The bank also has
the o#tion to file an a##eal before the a##ellate authorit under the
scheme&
tie liit !or !ilin& an appeal
!f one is aggrie$ed b the decision, one ma, "ithin 3) das of the
date of recei#t of the a"ard, a##eal against the a"ard before the
a##ellate authorit& The a##ellate authorit ma, if he: she is satisfied
that the a##licant had sufficient cause for not making an a##lication for
a##eal "ithin time, also allo" a further #eriod not e%ceeding 3) das&
Appeal #andlin& pro(ed're
The a##ellate authorit ma
i& dismiss the a##eal6 or
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ii& allo" the a##eal and set aside the a"ard6 or
iii& send the matter to the Banking Ombudsman for fresh dis#osal
in accordance "ith such directions as the a##ellate authorit
ma consider necessar or #ro#er6 or
i$& modif the a"ard and #ass such directions as ma be
necessar to gi$e effect to the modified a"ard6 or
$& #ass an other order as it ma deem fit&
En!or(eent o! t#e a+ard passed $y t#e $an%in& o$'dsan
A co# of the A"ard shall be sent to the com#lainant and the bank
named in the com#laint& An A"ard shall not be binding on a bank
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against "hich it is #assed unless the com#lainant furnishes to it, "ithin a
#eriod of 15 das from the date of recei#t of co# of the A"ard, a letter
of acce#tance of the a"ard in full and final settlement of his claim in the
matter& !f the com#lainant does not acce#t the A"ard #assed b the
Banking Ombudsman and fails to furnish his letter of acce#tance "ithin
such time "ithout making an reuest for e%tension of time to com#l
"ith such reuirements his com#laint shall be re'ected b the Banking
Ombudsman & ?ro$ided that in the e$ent of the com#lainant making a
"ritten reuest for e%tension of time, the Banking Ombudsman ma
sub'ect to his being satisfied "ith the e%#lanation as furnished b thecom#lainant about his inabilit to consider the A"ard and furnish his
letter of acce#tance, grant e%tension of time u# to further #eriod of
fifteen das for such com#liance&
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Soe e/aples o! (ases #andled $y $an%in& o$'dsan
Case 0
The com#lainant had a$ailed a housing loan of Rs 3,4),))):from
the bank at a fi%ed rate of interest of 8@ #er annum at uarterl rests on
highest monthl reducing balance& The com#lainant alleged that the bank
had subseuentl increased the rate of interest to 1(&75@ contrar to terms
of sanction of the loan& The bank submitted that the customer "as
sanctioned loan at fi%ed interest rate, but as #er their e%tant instructions and
internal circular, the interest rates are to be reset at the end of e$er t"o
ears on the basis of interest rates #re$ailing at that time& Accordingl, the
fi%ed interest rates "ere changed from 8@ to 1(&75@& ;uring the course of
the #roceedings before the Banking Ombudsman, the bank re"orked the
a##licable interest at the contracted rate of interest and refunded the e%cess
amount of Rs 17,93+:, b credit to the com#lainants account& >o"e$er, the
bank contended that going for"ard, the reset interest rate "ould be
a##licable& The com#lainant "as also gi$en an e%it o#tion, "hich "as not
acce#table to him& !f the interest rates are sub'ect to #eriodical rests, it is
onl fair and reasonable that the same is e%#licitl stated in the loan
agreement and sanction letter in an unambiguous and trans#arent manner&
<urther, in choosing to #ro$ide a fi%ed rate loan to the customer, the bank
has consciousl decided to carr the interest rate risk associated "ith the
#roduct& The loan also carried a higher interest rate com#ared to floating
rate #roduct as a #remium to"ards the interest rate risk& BO #assed an
A"ard ad$ising the bank to strictl abide b the terms and conditions of the
original arrangement and not gi$e effect to their #ro#osal to increase
interest rate on the loan, unless e%#licitl consented to b the com#lainant
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in "riting& The bank "as also ad$ised to #a an amount of Rs 1,))) to the
com#lainant to"ards the cost of #ursuing this remed to his grie$ance& The
bank has im#lemented the A"ard&
ase (
The com#lainant "as maintaining a current account and a##roached
the bank to con$ert his current account to cash credit account& <or the said
#ur#ose he had #ledged S amounting to Rs&1,(),))):& Subseuentl the
bank neither sanctioned him a cash credit limit nor returned the certificates&
!n the meantime the certificates "ere matured for #ament and he reuested
the bank to return the certificates& The bank failed to return the certificates
stating that the certificates had been mis#laced& The com#lainant
a##roached us "ith a reuest to redress his grie$ances& On taking u# the
matter "ith the bank, the bank assured to take u# the matter "ith the #ost
office for issue of du#licate Ss& On recei#t of the du#licate Ss from
the concerned #ost office, the com#lainant "as com#ensated for the loss of
the original certificates& The com#lainant submitted a letter of satisfaction to
the BO&
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ase 3
A com#laint relating to noncredit of cheue amount into the account of
the com#lainant "as recei$ed& The com#lainant had re#ortedl taken u#
the matter "ith the bank se$eral times but there "as no res#onse b the
bank to"ards credit of the cheue amount& The com#lainant a##roached
the BO for resolution of his grie$ances& On recei#t of the com#laint, BO
uestioned the bank as to "hat action had been taken on the com#laint
b them& The bank re#orted that the cheue in uestion "as lost in transit
resulting in noncredit of the cheue amount to the com#lainants
account& At the instance of BO, the bank took u# the matter "ith T!
.utual <und, ?atna b submitting letter of undertaking and death
certificate& The .utual <und issued a du#licate cheue and the amount
"as credited to the com#lainants account& The com#lainant submitted a
letter of satisfaction&
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1evie+ o! Ban%in& O$'dsan S(#ee
Data on 022345665
om#laints Recei$ed
As against +)+( com#laints recei$ed during the #eriod 199899 A#ril
.arch2, the number of com#laints recei$ed during 1999())), ())))1
and ())1)( stood at 4994, 58)3 and 59)7 res#ecti$el& As com#ared to
the com#laints recei$ed during 199899, there is a decrease of (&5@
during ())1)(& A$erage com#laints #er ear #er office decreased
marginall from 4)4 to 394 during the abo$e #eriod&
?eriod o& of Offices
of Banking
Ombudsman
o& of
com#laints
recei$ed
A$erage o&
of
com#laints199899 15 +)+( 4)4&1
1999())) 15 4994 33(&9
())))1 15 58)3 38+&9
15 59)7 393&8
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1eport 75668456629
?RO<!C/ O< O.?CA!TS
Sr& Sub'ect As on
o& 3)&)+&)7 3)&)+&)8
1 om#laints brought for"ard from the
#re$ious ear
+1(8 71)5
( om#laints recei$ed during the ear 38+38 47887
3 TOTAC 447++ 5499(
4 om#laints dis#osed during the ear 37++1 491))
5 om#laints #ending at the close of the
ear
71)5 589(
Cess than one month ((+( (71(
3(2 4+2
One to t"o months 193+ 1394
(72 (42
T"o to three months 943 8+1
132 152
.ore than 3 months 19+4 9(5
(82 152
+ A##eals recei$ed during the ear 15 18+
A##eals against A"ards 15 17
A##eals against ;ecisions D ) 1+9
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7 A##eals dis#osed of during the ear 13 154
8 A##eals #ending at the close of theear
( 3(
Cess than one month ) 17
One to t"o months ) 1)
T"o to three months ( 3
.ore than three months ) (
<igure in brackets sho" @ of #ending
D A##eals against decisions "ere allo"ed onl from .a ())7
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Table umber of com#laints recei$ed b the Banking Ombudsman
Offices
?eriod o& of
Offices of
Banking
Ombudsman
No: o!
(oplaints
re(eived
during the
ear
Rate of
increase
@ o$er
#re$ious
ear2
A$erage o&
of
com#laints
#er office
())3
)4
15 8(4+ E 55)
())4
)5
15 1)5+) (8 7)4
())5
)+
15 3173( ()) (115
())+
)7
15 38+38 (( (57+
())7
)8
15 47887 (4 319(
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Advanta&es and disadvanta&es o! $an%in& o$'dsan s(#ee
Advanta&es o! $an%in& o$'dsan)
there is man ad$antages a$ailable in banking ombudsman scheme&
i2& this mechanism #ro$ides settlement on the basis of mutual
concern&
ii2& !f there is no #ossibilit of settlement then onl ombudsman
decide to take that matter for it*s ad'udication and #ass an a"ard&
iii2& !n ombudsman #roceedings there is no fee is collected from
the com#lainant customer2&
i$2& ())+ scheme #ro$ide a##eal facilit, it gi$es more #ossible to
the customer to o#tain #ro#er remed "ithout 'udicial
inter$ention&
$2& e$en though enforcement is in the hands of com#lainant, if he
gi$e his concern to enforce the a"ard the bank has the liabilit to
do it& Because ombudsman is under the control of RB!&
$i2& o" a das man cases are handled b ombudsmann it
reduces the burden of 'udiciar&
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$ii2& .ore o$er time and cost of com#lainant and res#ondent also
sa$ed&
$iii2& Regarding a##eal against ombudsman a"ard in to the
'udiciar com#aring bank side, customer side is $er less, it means
that the scheme is a##ritiated and encouraged b customers&
Disadvanta&es o! o$'dsan s(#ee)
Fhen "e anal=e the scheme and it is #rogress there is too man
loo#holes still un#lugged b RB!& The are as follo"s
i2& the ombudsman scheme is an o#tional one but not a #ro#er
alternati$e one& Because banking ombudsman*s decisions are not
binding in nature and referring the matter to ombudsman is not a
statutor #ro$ision, it di##ons customer*s "ishes and choices&
ii2& The ;ebt Reco$er Tribunal ;RT2 is es#eciall constituted
for the #ur#oses of dealing the matters of reco$er of debts& Some
times ombudsman in$ol$e in this matter& This "as reflected in G
durga hotel caseH&
iii2& There is a #ossible the aggrie$ed #art of ana"ard #assed b
ombudsman go to "rit on high court under article ((+ of inndian
constitution& !n man cases a##eal "as made against ombudsman
a"ards&
i$2& !n man cases banks not res#onding ombudsman #roceedings
including filing the same com#laint to ;RT2 and struck do"n
ombudsman*s 'urisdiction&
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$2& the enforcement of ombudsman a"ard is not in the hands of or
banks, it is in the hands of the customer according to the scheme&
Con(l'sion and S'&&estions
Con(l'sion)
Abo$e said details gi$e a clear #icture about nature and gro"th of
banking ombudsman scheme& Fhen "e go through table "hs are
relating to filing cases is increasing, is sho"s the "illingness of the
#eo#le to settled the dis#utes relating to banking through alternati$e
rather than 'udicial ad'udication& But the success of the ombudsman
de#ends the "illing of the #arties to settle the dis#ute through Banking
ombudsman& !f one of the #arties is not "illing the scheme become
useless&
S'&&estions)
!n ())( ombudsman rules (1 and (( scheme #ro$ide arbitration
#o"ers to the ombudsman es#eciall dis#utes relating to a bank and it*s
constituencies and a bank and an other bank& >o"e$er the ())+ scheme
is silent in this matter& ! feel that the arbitration #roceedings regarding
customers grie$ances there is more #ossible to deduct the further
a##eals& RB! also need to describe the 'urisdiction es#eciall matters
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relating loans and ad$ances& RB! also search and find a suitable solution
for se#arate the ;RT 'urisdiction from ombudsman 'urisdiction& RB! also
keen to gi$e sti#ulations regarding ombudsman to all banks es#eciall
not to dilute the ombudsman*s 'urisdiction from a dis#ute& if those
changes "ill take #lace this scheme "ould be more attracti$e and effect&