(1998-99 To 2001-02)

Reserve Bank of India
Rural Planning and Credit Department
Central Office
Mumbai

The Banking Ombudsman Scheme, 1995 was notified by RBI on June 14, 1995 in terms of the powers conferred on the Bank by Section 35A of the Banking Regulation Act, 1949 (10 of 1949) to provide for a system of redressal of grievances against banks.

The Scheme seeks to establish a system of expeditious and inexpensive resolution of customer complaints. Any person whose grievance against a bank is not resolved to his satisfaction by that bank within a period of two months can approach the Banking Ombudsman if his complaint pertains to any of the matters specified in the Scheme. Banking Ombudsmen have been authorized to look into complaints concerning (a) deficiency in banking service; (b) sanction of loans and advances insofar as they relate to non-observance of the Reserve Bank directives on interest rates, delay in sanction or non-observance of prescribed time schedule for disposal of loan applications or non-observance of any other directions or instructions of the Reserve Bank as may be specified for this purpose, from time to time and (c) such other matters as may be specified by the Reserve Bank.

The Scheme envisages expeditious and satisfactory disposal of customer complaints in a time bound manner. For this purpose, the Banking Ombudsman first endeavours to promote a settlement between the parties. Where no settlement is reached, the Banking Ombudsman makes a recommendation which, when accepted by both parties, is binding on them. In case the recommendation made by the Banking Ombudsman is not accepted by either of the parties, the Banking Ombudsman proceeds to make an award.

The Scheme is applicable to all commercial banks having business in India (except Regional Rural Banks) and scheduled primary cooperative banks.

Since the Banking Ombudsman Scheme was operationalised, the Reserve Bank of India has appointed Banking Ombudsmen at 15 centres all over the country.

A review of the performance of the Scheme for the period ended March 31, 1999 to March 31, 2002 is detailed below. The report covers progress in disposal of complaints and expenditure incurred in administering the Scheme.

As against 6062 complaints received during the period 1998-99 (April-March), the number of complaints received during 1999-2000, 2000-01 and 2001-02 stood at 4994, 5803 and 5907 respectively. As compared to the complaints received during 1998-99, there is a decrease of 2.5% during 2001-02. Average complaints per year per office decreased marginally from 404 to 394 during the above period.

Analysis of complaints received
(subject-wise)

*No.of complaints includes previous year’s pending complaints as indicated in brackets.

Besides the miscellaneous complaints, the maximum number of complaints dealt with during the period under review pertained to deficiency in servicing of loans and advances followed by deposit accounts and delay in collection of cheques/bills, etc.

For the year ended March 31, 2002 the maximum number of complaints were received at Jaipur (1021). Other offices of the Banking Ombudsman, which received more than the average number of complaints of 394, were New Delhi (624), Thiruvananthapuram (545),Kolkata (506), Chandigarh (466) and Hyderabad (406). As in the past, majority of complaints during the period emanated from metropolitan and urban centers. Very few complaints were received from rural and semi-urban areas. In order to popularize the Scheme among the rural and semi-urban population, campaigns have been organized by the Offices of Banking Ombudsman apart from inserting advertisements in the local newspapers. The Banking Ombudsmen are also interacting with the Chambers of Commerce and Industry and Bank Managers’ Club, etc.

*Includes previous year’s pending complaints.

The average number of complaints disposed of per office stood at 187, 166, 209 and 234 for the years ended March 31, 1999, 2000, 2001 and 2002 respectively and showed an increasing trend.

During the period under review (i.e. 1998-99 to 2001-02), 262 awards were issued which formed 2.2% of the total 11933 maintainable complaints disposed of. Office-wise details of the awards issued are furnished hereunder :

In consonance with Clause 14(2) of the Scheme, expenditure is incurred by the Banking Ombudsman under a system of annual budget approved by the Reserve Bank of India. The details of expenditure (Capital and Revenue) incurred during the period under review are indicated below.

As provided in the Scheme, the amount spent is being recovered from participating banks in proportion to the working funds of these banks as at the end of the preceding financial year.

As per the recommendations of the Informal Group constituted by Reserve Bank to improve upon the effectiveness of the Scheme, the Banking Ombudsman Scheme, 1995 was reviewed. The revised Banking Ombudsman Scheme 2002 has been notified and came into effect on 14^th June 2002. The new Scheme will cover all the regional rural banks in addition to all commercial banks and scheduled primary co-operative banks. The B.O. Scheme 2002 additionally provides for the institution of a "Review Authority" to review the Ombudsman’s Award. A bank against whom an Award has been passed, may with the approval of the chief executive, file an application to the Deputy Governor-in-charge of Rural Planning and Credit Department of Reserve Bank of India to seek a review of the Award. The bank can request for such a review only when the Award appears to be patently in conflict with the Bank’s instructions and/or the law and practice relating to banking.

The Banking Ombudsman has also been authorised to function as an Arbitrator on references to him of disputes either between banks and their customers or between two banks. The value of the subject matter of individual disputes under arbitration will not exceed Rs. Ten lakhs.