THE BANKING OMBUDSMAN SCHEME

                  THE BANKING OMBUDSMAN SCHEME

                                                                                                                                                                                     The concept of ombudsman has gained importance in many countries as an effective means of customer grievance redressal . In India too, the RBI has introduced a similar scheme of ombudsman from June 14th, 1995 and was revised in 2002 to protect the interests of the customers as well as to redress their grievances. Banking Ombudsman Scheme-2006 has come into force from 1st January ,2006. Indeed it is a landmark event in the history of Indian banking.

             The extent and scope of the 2006 scheme is wider than the earlier scheme of 2002. Last 5 years 35,000 complaints have been dealt by the banking ombudsman .

 Objects of the scheme

      The main object of the scheme are;
(i) to resolve and settle complaints relating to the provision of banking services
(ii)to resolve disputes between a bank and its constituents as well as between one bank and another bank through the process of conciliation , mediation and arbitration
(iii) to make available an expeditious and cost effective grievance redressal mechanism to bankers themselves.

Appointment of Ombudsman
      The RBI may appoint one or more persons as Banking Ombudsman to carry out the functions entrusted to him under the scheme. The banking ombudsman must be a person of high standing in the legal , banking ,financial services and public administration . Generally, he will be appointed for a period of 3 years and he will be eligible for extension for a further period of 2 years subject to an overall age of 65 years.

 Powers and Duties of Banking Ombudsman
       The powers and duties of the banking ombudsman may be classified under two heads, namely;
   (i) General powers and duties.
   (ii) Specific powers and duties.

General
    The general powers of the banking ombudsman are;
(a) To receive complaints relating to the provision of banking services.
(b) To consider such complaints and facilitate their satisfaction or settlement by agreement or settlement by recommendation or settlement by an Award as the case be in accordance with the provisions under this scheme.
(c) The ombudsman has all powers of a court;

Specific
   To be more specific, the Banking Ombudsman can recieve all complaints regarding deficiency in banking services such as;
(i)Non-payment or delay in the payment or collection of cheques, drafts,bills, etc.
(ii)Non-acceptance of small denomination notes without assigning any reason and for charging of commission in respect thereof,.
(iii)Non-issue of drafts to customers as well as to outsiders.
(iv)Non-adherence to prescribed working hours by branches.
(v)Failure to honour guarantee or letter of credit commitments by banker.
(vi)Claim in respect of unauthorized or fraudulent withdrawals from deposit accounts.
(vii)Complaints relating to deposits such as delay in collection, non-credit of proceeds to parties accounts, non-payment of deposit or non-observance of RBIs directives relating to rate of interest on deposits,
(viii)Complaints from India exporters regarding delays in receipt of export proceeds, handling of export bills, collection of bills, etc., provided such complaints pertain to the banks operations in India,
(xi)Complaints of Non-Resident Indians relating to their remittances from abroad, deposits and other bank-related matters.
      As far the loan and advances are concerned , he can receive complaints such as:
(i) Non-observance of  prescribed time schedule for disposal of loans applications
(ii)Delay in sanction or non-observance of prescribed time scheduled for disposal of loan applications
(iii)Non-observance of any other directions of the RBI issued from time to time .

Procedure for Redressal of Grievance
         The procedure for redressal starts with the lodgement of complaint. Any person who has a grievance against a bank may make a complaint in writing to the Banking Ombudsman either by himself or through his authorized aged . The following conditions must have been fulfilled to file complaint;
(i) The complainant should state clearly his name and address.
(ii)He should also state the name and address of the branch/office of the bank against which the complaint is made.
(iii)He should state clearly the facts giving rise to the complaint and it should be preferably supported by documents,if any
(iv)He should also mention the nature and the extent of the loss caused to him and the relief sought from the Banking Ombudsman.
(v)The complaint should be made to the ombudsman only after making a representation to the bank named in the complaint and the complaint should have been rejected or no reply should have been sent within a period of 2 months of the receipt of the complaint or the complainant should not have been satisfied with the reply given by the bank.
(vi) The complaint should be made within one year from the date of rejection or final reply given by the bank concerned.
(vii)The complaint should not be in respect of the same subject-matter already settled through the office of the Banking Ombudsman in any previous proceedings.

(viii)The complaint should not be in respect of the same subject matter for which an order has already been passed by any court or tribunal or arbitration or forum or any proceedings is pending before such bodies.

Power to Call for Information

     On receipt of the complaint, the Banking Ombudsman may require the bank named in the complaint to provide any information or furnish certified copies of any document relating to the subject-matter of the complaint.

    In case the bank fails to comply with the requisition , the Banking Ombudsman may presume that the information ,if provided,would be unfavourable to the bank.                                                                 The Banking Ombudsman should maintain complete secrecy of any information or document coming into his knowledge or possession in the course of his functioning  as ombudsman and he should not disclose it to any person except with the consent of the person supplying such information. However , to render natural justice he can disclose it on reasonable grounds.

Settlement by Agreement 

   On receipt of the complaint as well as the information from the bank concerned, the Banking Ombudsman shall try to promote a settlement of the complaint by means of an agreement between the complainant and the bank through conciliation or mediation .

       For the purpose of promoting a settlement of the complaint, the ombudsman may follow any procedure , which he considers appropriate and at any cost, he shall not be bound by legal rule of evidence.

Settlement by Recommendation

 (i) If settlement by agreement is not possible within a period of one month from the date of receipt of the complaint the Banking Ombudsman may make a recommendation on the basis of "what is far in his opinion" by taking into consideration all the circumstances. 

(ii)The copies of his recommendation must be sent to the complainant and the bank concerned.

(iii)If the complainants accepts all terms of the recommendation in full including the final settlement of his complaint, he must send his acceptance in writing within two weeks from the date of receipt of the recommendation.

(iv)Then, the Banking Ombudsman must forward a copy of the letter of acceptance given by the complainant to the bank. If the recommendation is also acceptable to the bank, it must immediately settle the complaint as per the recommendation and inform it ti the Banking Ombudsman 

(v)If the recommendation is not acceptable to the bank , it must inform the Banking ombudsman within a period of two weeks.

Settlement by Awards

(i) If the complaint is not settled by agreement or recommendation within a period of two months from the due of receipt of complaint ,the Banking Ombudsman must inform the parties of his intention to pass an award. 

(ii) The complaint and the bank concerned can submit any further representations or evidence in support of their case within a period of 15 days from the date of notice for passing an Award. 

(iii) The Banking Ombudsman must pass an Award after giving sufficient opportunities to the parties to represent their case. In passing an Award, he must be guided by the evidences, the principles of banking law and practice, directions/  instructions /guidelines issued by the RBI from time to time and such other factors which he considers necessary in the interest of justice. 

(iv) The Award must be in writing and it must state the directions to the bank for a specific performance of its obligations and the amount of compensation awarded to the complaint for the loss suffered by him. The Award must be supported by the valid reasons also.

(v) The amount of compensation should not be in excess of that which is necessary to cover the loss suffered by the complainant or for an amount exceeding, Rs.10 lakhs,whichever is less.
(vi) A copy of the Award must be sent to the complaints and the bank concerned.
(vii)The Award shall be binding on the bank only when the complainant sends a letter of acceptance of the Award to the bank within a period of 1 month from the date of the award.
(viii) The bank concerned should comply with the Award within 15 days from the date of receipt of the acceptance letter from the complainant and it should inform it to the Banking Ombudsman.
(ix) Non-compliance of the Award by any bank must be duly reported to the RBI.

Rejection of the Complaint
       If , at any stage of the complaint, the Banking Ombudsman feels that the complaint is made without any sufficient cause or that it is not pursued by the complaint with reasonable diligence or there is no loss or damage or inconvenience suffered by the complainant, the complaint can be rejected immediately.

Amendment in 2002
     The above scheme was amended in 2002 and the amended scheme came into effect from June 14,2002. As per this amendment, this scheme now covers commercial banks, regional rural banks and scheduled primary co-operative banks.
     The RBI has launched this scheme from January,2006 to redress public grievances in banking transactions. A specific officer would be deputed by the RBI to serve as Ombudsman.