Banking Ombudsman Scheme 2006 Structure Functioning 31 st

Banking Ombudsman Scheme 2006 - Structure & Functioning 31 st January 2009

Road map w A historical perspective w Legal basis and scope of the Banking Ombudsman Scheme w Vision & Goals w Structure and processes w Sharing of experiences w The way ahead

Backdrop w Growing Public Policy concern w Customer dissatisfaction - a topic of discussion in various fora including the floor of Parliament w Growing customer expectations with increasing Awareness of rights. w The satisfaction levels of customers is the touch stone on which the quality of service is toned. w Market discipline issues and need for policy intervention

Customer Service – Policy Evolution w Formulated the Banking Ombudsman Scheme 1995 and revised in 2002 to enhance the scope of complaint redressal. w Set up the Committee on Procedures and Performance Audit of Public Services in 2003 to look into the issues relating to banking services rendered to the common man. w Banks were advised in December 2003 to constitute an Adhoc Committee to undertake Procedures and Performance Audit on public services rendered by them.

Customer Service – Policy evolution …contd. . w Banks were advised in August 2004 to constitute Customers' Service Committee of the Board to bring about ongoing improvement in the quality of customer service rendered. w Banks were asked in April 2005 to convert the Adhoc Committees into Standing Committee on Customer Service to serve as a focal point for customer service in banks with powers to evaluate the functioning in various departments of the banks.

Customer Service – Policy Evolution: contd. . w RBI facilitated the formulation of Fair Practices Code for Lenders and Codes of Conduct in respect of credit card operations, direct sales agencies and calculation of dues and repossession of security. w RBI prescribed proper disclosures by banks relating to aspects such as maintenance of minimum balances in accounts, issue of cheque books, entry in pass books, statement of accounts, formulation of transparent cheque collection policy by banks, etc.

Customer Service Policy Evolution: contd w RBI introduced in June 2005 simplified procedures to facilitate expeditious and hassle free settlement of claims of deceased depositors. w RBI issued in November 2005, comprehensive guidelines on credit card operations to protect the interest of credit card holders. w A clean note policy was formulated and implemented to improve quality of currency in circulation and ensure sufficient availability of fresh currency and coins.

Customer Service - Policy Evolution: contd w Banks were also advised to formulate a transparent and comprehensive deposit policy setting out the rights of the depositors in general and small depositors in particular. w RBI has facilitated the setting up of the Banking Code and Standards Board of India. w For the first time, RBI in its report on Trend and Progress of Banking in India 2004 -05 listed the complaints received against Scheduled Commercial Banks under the caption "Customer Services in Commercial Banks" to highlight the issue of customer service in banks.

Customer Service - Policy Evolution: contd w RBI advised banks, in April 2005 to place all the awards passed by the Banking Ombudsman before the Customer Service Committee to enable them to address issues of systemic deficiencies existing in banks, if any, brought out by the awards. w RBI also advised banks to place all the awards remaining unimplemented for more than three months with the reasons therefore before the Customer Service Committee to enable the Committee to report to the Board such delays in implementation without valid reasons and for initiating necessary remedial action

Customer Service - Policy Evolution: contd w In December 2005, the Banking Ombudsman Scheme was revised (termed as the Banking Ombudsman Scheme, 2006) to widen its scope and improve its effectiveness and accessibility to the public.

GENERAL PARTICULARS OF THE SCHEME w Legal Basis: Notified in terms of Sec 35 A of Banking Regulation Act 1949 w Purpose of the Scheme: Expeditious and inexpensive redressal of customer complaints. w Areas covered: v. Deficiency in banking services vdeficiency in sanctioning of loans and advances v. Other specified matters

Banking Ombudsman Scheme 1995 2002 2006 Institutions covered Commercial banks Scheduled primary cooperative banks RRBs Stages of Redressal Settlement Recommendation Award Agreement Award Review Agreement Award Appeal Staffing BO -By a Selection Committee- Retired personnel Secretary- RBI Deputy Secretary & Staff- SLBC Bank Serving Chief General Manager/ General Manager Secretary- RBI Deputy Secretary & Staff- RBI

Banking Ombudsman Scheme 1995 2002 2006 Funding Participating Banks RBI Procedure Complaint Receipt Prescribed application in writing Online/email/by post Prescribed application not insisted www. bankingombuds man. rbi. org. in Nature of Complaints Not specified Specifically prescribed clause 12 Specifically prescribed clause 8 Cases of fraud cannot be handled Cases of fraud can be handled Focus on resolution of grievances

VISION To provide an inexpensive, transparent and credible mechanism ensuring fair treatment of the common person utilizing Banking services

Goals w To ensure customer facilitation and protection through redressal of grievances of users of banking services in an inexpensive, expeditious, fair, reasonable and hassle free manner that will provide impetus for improved customer service on a continuous basis w Provide feedback for framing appropriate and timely guidelines w Enhance awareness of the scheme itself

Enhancements provided by the 2006 Scheme : w Wider Scope w Simpler procedures w Better focus w Greater involvement of RBI

Organizational Chart Deputy Governor (Appellate Authority Executive Director Customer Services Department Office of the Banking Ombudsman

Redressal Process Receipt of complaint Review by BO Reject Non Maintainable

Maintainable Complaints Referred to Bank Resolved by mutual settlement (Clause 11)

Unresolved Complaints Reject (Clause 13) Award (Clause 12) Complainant to accept & Bank to implement Complainant’s right to Appeal Bank & Complainant can File an Appeal

Appellate Authority Banking Ombudsman Legal Department CSD, CO Regulatory Departments Bank to Implement Customer Set aside the award Remand the matter to BO Modify the award Pass any other order

Procedure for lodging complaints w Essential – grievance to be taken up with bank first; w Aggrieved persons not satisfied by a bank’s service and its resolution of complaint can apply to the Banking Ombudsman within one year; w Complaint in prescribed format or in any other but incorporating all the required information. w Complaints can be submitted online/ email/in hard copy w Complaints from individuals/ their representatives( except advocates)/GOI/RBI

Complaints Redressal Procedure Maintainability of Complaint Prescribed time –rejection of complaint/non receipt of reply within one month of his representation / non satisfaction of reply not later than one year after the cause of action not time barred as per the Indian Limitation Act 1963 Not a subject matter on which BO decision has already been taken Not a subject matter which is before court/ tribunal/ arbitrator/ other forum

Grounds of complaint. . . Banking Services w non-payment or inordinate delay in payment or collection of – – cheques, drafts, bills etc. ; inward remittances w non-acceptance of – small denomination notes – coins or charging commission for acceptance

Grounds of complaint. . . Banking Services w failure to issue or delay in issue, of drafts, pay orders or bankers’ cheques; w non-adherence to prescribed working hours; w failure to honour guarantee or letter of credit commitments ; w failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its direct selling agents;

Grounds of complaint. . . Banking Services w delays, non-credit of proceeds to parties' accounts, non-payment of deposit or nonobservance of the Reserve Bank directives, if any, applicable to rate of interest on deposits in any savings, current or other account maintained with a bank ; w delays in receipt of export proceeds, handling of export bills, collection of bills etc. , for exporters provided the said complaints pertain to the bank's operations in India;

Grounds of complaint. . . Banking Services w complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank-related matters; w refusal to open deposit accounts without any valid reason for refusal; w levying of charges without adequate prior notice to the customer; w non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/Debit card operations or credit card operations;

Grounds of complaint. . . Banking Services w non-disbursement or delay in disbursement of pension (to the extent the grievance can be attributed to the action on the part of the bank concerned), but not with regard to its employees; w refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government; w refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of Government securities;

Grounds of complaint. . . Banking Services w forced closure of deposit accounts without due notice or without sufficient reason; w refusal to close or delay in closing the accounts; w non-adherence to the fair practices code as adopted by the bank; and w any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other services.

Complaints - Loans and Advances w w non-observance of RBI directives on interest rates; delays in sanction, disbursement or nonobservance of prescribed time schedule for disposal of loan applications; non-acceptance of application for loans without furnishing valid reasons to the applicant and non-observance of any other directions or instructions of the RBI from time to time.

Excluded w Complaints arising out of frauds and forgery and subjudice cases (Supreme Court’s observation that it would not be appropriate for BOs to give a finding on forgery or to form an opinion on cases already referred to courts)

Charges for application. . . There are no charges to be paid by the applicant to the Banking Ombudsman

Processes w Proceedings are summary in nature w Procedure discretionary as the Banking Ombudsman may consider just and proper w Not bound by any rules of evidence w Each case is dealt on a stand alone basis and cannot be cited as precedent w Disposals take into account evidence, the principles of Banking Law & Practice, instructions, guidelines and directions of RBI w Right of the complainant to approach any court or forum at any time during or after the proceedings is not affected

Stages of settlement w The Banking Ombudsman – first endeavours to promote a settlement between the parties through mediation/ conciliation, or else – proceeds to make an Award on merits of the case.

Compliance with the Award q. Customer to give acceptance within 30 days q. Within one month of receipt of complainant’s confirmation

Appeal against the Award q. Both the bank and the complainant can appeal q. Time limit: 30 days

Appellation Process w Banks to get the sanction of the Chairman/ CEO w Appellate Authority can; Dismiss the appeal Allow the appeal and set aside the award Remand the matter for fresh disposal Modify the award Pass any other order as it may deem fit

Dealings with the bank q. Nodal Officers appointed by banks at Zonal/Regional Office levels q. BO to deal through the Nodal Officers. q. All bank branches to display the name of the Banking Ombudsman and contact particulars

Banking Ombudsmen Complaint Monitoring Application on RBI’s Secured Internet Website Ø Finance Ministry instructions vide letter dated August 11, 2005 for computerization and online complaint monitoring system for Banking Ombudsman Scheme by September 30, 2005. Ø Complaint Monitoring Application was successfully tested and hosted on the RBI’s Secured Internet Website. It is in operation since September 30, 2005 .

Features of the Monitoring Mechanism Ø It is common to all Banking Ombudsmen offices. Ø Each Banking Ombudsmen office will feed in the complaint details on the application. Ø The application generates a unique complaint id, which can be used by Banking Ombudsmen, RBI and Finance ministry to monitor/track the status of a particular complaint. Ø Automatic acknowledgement generated on tracking of complaints Ø RBI and Finance Ministry can monitor the overall status of complaints at all the Banking Ombudsmen offices.

Right to Information Act and Banking Ombudsman Scheme The following are in the public domain: w The BO Scheme w FAQs w Complaint Application form w BO addresses & email ids w Annual Review of the Scheme

Right to Information Act and Banking Ombudsman Scheme w The Complainant can get the status of his complaint till disposal w At disposal the Award gives reasons for decision taken w Each decision of the Appellate Authority is a speaking order

BENEFITS OF THE BO SCHEME w Prompt and impartial resolution of complaints w No cost to the customer w Assessment based on overall fairness, good business practices, accepted banking law and practice

Road Ahead w Focus on customer education and financial literacy w Customer Awareness and Empowerment w Understanding rights and responsibilities w Percolation of the spirit of the Banking Code and Standards as adopted by the bank down the rank and file to the level of the service delivery interface

Thank You

Average cost per complaint Year Amount (Rs) 2003 -04 7413 2004 -05 6315 2005 -06 3045 2006 -07 2538 2007 -08 2611