Professional Documents
Culture Documents
Banking Ombudsman: Mr. Indranil Banerjee (Faculty of Banking Law)
Banking Ombudsman: Mr. Indranil Banerjee (Faculty of Banking Law)
SUBMITTED TO
SUBMITTED BY
AMIT GROVER
BBA LLB(H)
SECTION B
A3221515130
CONTENTS
PREFACE
INTRODUCTION.
BANKING OMBUDSMAN.
CONCLUSION.
BIBLIOGRAPHY.
INTRODUCTION.
In India, the institution of Banking Ombudsman was introduced in 1995, though the
Banking Ombudsman Scheme 1995. The scheme was introduced by the Reserve Bank of
India to provide expeditious and inexpensive forum to bank customers for resolution of
their complaints relating to deficiency in banking services. The Scheme has been brought
into force by way of direction issued by the Reserve Bank in terms of Section 35A of the
Banking Regulation Act, 1949. Section 35A of the said statue lays down as follows:
35A. Power of the Reserve Bank to give directions. —(1) Where the Reserve Bank issatisfied
that—
(a) in the public interest; or
(aa) in the interest of banking policy; or
(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the
interests of the depositors or in a manner prejudicial to the interests of the banking company; or
(c) to secure the proper management of any banking company generally, it is necessary to issue
directions to banking companies generally or to any banking company in particular, it may, from
time to time, issue such directions as it deems fit, and the banking companies or the banking
company, as the case may be, shall be bound to comply with such directions.
(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any
direction issued under sub-section (1), and in so modifying or cancelling any direction may impose
such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.
It was a mechanism to look into the banking customer grievances. After the review of the
scheme, a new scheme came into picture in 2002 and further in 2006. Over the past five
years, around 36,000 complaints have been dealt by the Banking Ombudsmen.
The Scheme lays down the whole areas of the banking ombudsman institution. The
issues of appointment, dismissal, authorities, functions, etc., have been dealt with in the
scheme.
The Scheme was revised in 2002 mainly to cover Regional Rural Banks and to
permit review of the Banking Ombudsmens’ awards against banks by the Reserve Bank.
At the time of introduction of the Scheme of 2002, there were 15 Offices of Banking
Ombudsman across the entire country. The 2002 scheme was introduced with a view to
widen the scope and extent of the Banking Ombudsman. The 1995 scheme has been revised
in the years 2002 and 2006 to make several changes in the old scheme and to extend the
scope of the same.
BANKING OMBUDSMAN.
1
http://en.wikipedia.org/wiki/Banking_Ombudsman_Scheme
in the efficient services of the banks, the RBI brought a scheme for the prompt, efficient
and courteous services and also to protect the rights of the customers.
2
Clause (4) of the Banking Ombudsman Scheme, 2006.
BANKING OMBUDSMAN SCHEME, 2006.
Scope of the Scheme. In 2006, the Reserve Bank of India announced the revised Banking
Ombudsman Scheme with enlarged scope that included customer complaints on certain
new areas, such as, credit card complaints, deficiencies in providing the promised services
even by banks' sales agents, levying service charges without prior notice to the customer
and non adherence to the fair practices code as adopted by individual banks.
Application of the Scheme. The scheme is applicable to all commercial banks, regional
rural banks and scheduled primary cooperative banks having business in India.
Funding. Unlike the old scheme, the revised Banking Ombudsman Scheme is fully staffed
and funded by the Reserve Bank instead of the banks.
Filing complaints. Under the revised Banking Ombudsman Scheme, the complainants can
file their complaints in any form, including online.
Appeal. The bank customers would also be able to appeal to the Reserve Bank against the
awards given by the Banking Ombudsmen.
Forum for the complaints. The 2006 scheme provides a forum to bank customers to seek
redressal of their most common complaints against banks, including those relating to credit
cards, service charges, promises given by the sales agents of banks, but not kept by banks,
as also, delays in delivery of bank services.
New areas of Complaint. The bank customers can complain about non-payment or any
inordinate delay in payments or collection of cheques towards bills or remittances by
banks, as also non-acceptance of small denomination notes and coins or charging of
commission for acceptance of small denomination notes and coins by banks.
Provisions of the Scheme. The Banking Ombudsman Scheme 2006 provides a wide scope
and extent to the schemes of 1995 and 2002. Many new changes have been made in the old
scheme. The most essential provisions of the scheme are as follows:
1. Appointment and tenure. The Section 4 of the scheme provides for the
appointment of one or more of the officers of the Reserve Bank of India in the rank
of Chief General Manager or General Manager to be known as Banking
Ombudsmen to carry out the functions entrusted to them by or under the Scheme.
Their tenure would be not more than a period of five years.
2. Location of the office. Generally, the office of the banking ombudsman is located
at the place specified by the Reserve Bank of India. For the expedite disposal of the
complaints, a banking ombudsman may hold office at such places, under his
jurisdiction which he deems fit for the disposal of the complaints3.
3. Powers and Jurisdictions. The scheme lays down the following provisions4
dealing with powers and functions of the Banking Ombudsman:
Authority of each Banking Ombudsman extends to the territorial limits entailed by
the Reserve Bank of India.
The Banking Ombudsman has power to receive and consider complaints relating to
the deficiencies in banking or other services filed on the grounds of complaints5.
He has to facilitate their satisfaction or settlement by agreement or through
conciliation and mediation between the bank concerned and the aggrieved parties
or by passing an Award in accordance with the Scheme.
The Banking Ombudsman exercises general powers of superintendence and control
over his Office and is responsible for the conduct of business thereat.
The Office of the Banking Ombudsman draws up an annual budget for itself in
consultation with Reserve Bank and exercises the powers of expenditure within the
approved budget on the lines of Reserve Bank of India Expenditure Rules, 2005.
The Banking Ombudsman has to send to the Governor, Reserve Bank, a report, as
on 30th June every year, containing a general review of the activities of his Office
3
Clause 5 of the Banking Ombudsman Scheme, 2006.
4
Clause 7 of the Banking Ombudsman Scheme, 2006.
5
Clause 8 of the Banking Ombudsman Scheme, 2006.
during the preceding financial year. He has to furnish such other information as the
Reserve Bank may direct and the Reserve Bank may, if it considers necessary in
the public interest so to do, publish the report and the information received from
the Banking Ombudsman in such consolidated form or otherwise as it deems fit.
4. Grounds of complaints. Clause 8 of the scheme lays down the following grounds
on which a banking customer may seek the redressal from the banking ombudsman:
1. Any person who has a grievance against a bank on any one or more of the grounds
mentioned in the Scheme may, himself or through his authorized representative (other than
an advocate), make a complaint to the Banking Ombudsman within whose jurisdiction the
branch or office of the bank complained against is located. But the complaint arising out
of the operations of credit cards, has to be filed before the Banking Ombudsman within
whose territorial jurisdiction the billing address of the card holder is located and not the
place where the bank concerned or the credit card processing unit is located.
2. The complaint in writing has to be duly signed by the complainant or his authorized
representative. The complainant has to show the copies of the documents, which he
proposes to rely upon and a declaration under Clause 9(3) of the scheme. He has to mention
the following things in the complaint:
the name and the address of the complainant,
the name and address of the branch or office of the bank against which the
complaint is made,
the facts giving rise to the complaint,
the nature and extent of the loss caused to the complainant, and
The relief sought for.
A complaint can also be made through electronic means. The Banking Ombudsman also
entertains complaints covered by this Scheme received by Central Government or Reserve
Bank and forwarded to him for disposal.
6
Clause 14 of the Banking Ombudsman Scheme, 2006.
7
2003 (2) CPR 53.
8
2000(3) CPR 423 SCDRC (Pond).
confirmation and could have given correct reply within a reasonable time. It was held that
failure of the bank to confirm remittance received from outside country within a reasonable
period amounts to deficiency in service.
Vettivel Pillai V/s Senior Manager Canara Bank9. The appellant was having open cash
credit facility from 1994 with respondent bank and had issued two cheques of which one
was encashed and the other was dishonored. Respondent bank averred that appellant had
overdrawn account. It was held that when there was credit in favour of the complainant,
dishonour of the cheque issued by the complainant could not be said to be bonafide.
Respondent bank was held guilty of deficiency of service and appellant was held entitled
for compensation.
Corporation Bank & Anr V/s Navin J. Shah10. Respondent, who is an exporter under
discounting agreement entrusted documents relating to export and bills of exchange with
appellant bank to negotiate the same through a foreign bank. Respondent’s allegation is
that the bank had failed to collect money in foreign currency indicated in documents but
instead collected in local currency, hence there was deficiency in service on the part of the
appellant bank and hence a claim for damages was made. In appeal, the Commission held
that there was no deficiency of service on the part of the bank as the appellant bank, acting
for an on behalf of the respondent, had negotiated the documents as provided under
agreement. However the conversion of local currency in U.S. $ became difficult on account
of policy of Sudan Government. It was observed that all that was required to be done under
terms of the agreement and under contract had been done by the two banks. Anthony C.
Vaz V/s M/s Himachal Futuristic Communication Ltd & Anr11. Dividend warrants were
issued by respondent No.1 and were sought to be encashed by respondent No.2, Banker at
Panaji. The appellant filed a complaint before the District Forum as the warrants were
returned unpaid with the remarks ‘No advice’ despite a letter dispatched to them by
Industrial Financial Branch of SBI, Chandigarh. Respondent No.2 took the defense that
they cannot honour dividend warrants unless they received intimation from local Head
9
2000(2) CPR 261 SCDRC (Ker).
10
2000(2) CPR 13 (SC).
11
2000(2) CPR 83 SCDRC (Goa).
Office at Mumbai. The State Commission however held that refusal to clear the dividend
warrant was deficiency in service as question of respondent No.2 having no authority to
honour the warrants could not arise in view of the letter from Industrial Financial Branch
of SBI, Chandigarh. Respondent No. 2 and Respondent No. 1 were held to be jointly liable.
Brijesh Kumar & A.R.Lakshmanan Vs. Canara Bank & anr12. The Bank charging,
unilaterally without prior information or consent of the Bank Customer, for providing their
services by supply of MICR Cheque. Consumer Forum and State Commission held it as
deficiency of service but National Commission held that it was related to pricing and not
in jurisdiction of the Consumer Fora to decide. The Supreme Court held that the charges
by bank for issuance of MICR cheques is not against the directives of the Reserve Bank of
India. The question of it being unilateral or with the consent of each customer do not arise.
India Export Corporation & ors Vs. Chairman-cum-MD, Syndicate Bank & ors13. The
complainant withdrew overdraft facility sanctioned to him by the bank only after availing
facility to the extent of Rs.1,20,000/-. The facility was availed by the complainant for
business purpose. It was held that where complaint alleging banking service deficiency was
found connected with commercial purpose, the consumer complaint would not be
maintainable.
Col. D.S.Sachar Vs. Zonal Manager, Punjab & Sind Bank, Cahndigarh & anr14. Cash
was snatched from the hands of the complainant/appellant at the gate of the respondent
bank. The appellant alleges that the absence of security on the gate and the non-provision
of steps like siren/alarm system etc. amounts to deficiency in service on the part of the
respondent bank. The State Commission held that the non-provision of security on the gate
of the bank on the date of occurrence viz. snatching of cash in bank premises cannot be
held to be amounting to deficiency in service hired by complainant.
12
2003 (1) CPR 296 (SC).
13
2003 (3) CPR 106 (NC).
14
2003 (3) CPR 203 SCDRC (Chandigarh).
Ratanchand Morarkar Vs. Bank of Maharashtra15. The complainant had deposited
amount for issue of pay order in favour of a particular firm. However, the said pay order
was cancelled by the bank and was issued in favour of another party. It was held that when
the bank has acted in good faith in cancellation of bank pay order and issuance of fresh pay
order in favour of another party on the request made by Manager of the complainant firm,
there would be no deficiency in service.
Manohar Singh Chouhan & Ors Vs. Central Bank of India16. The complainants have
purchased a tractor after taking loan from the respondent bank. The respondent bank did
not remit the premium amount to the insurance company with which the complainants have
insured their tractor as a result of which the loss suffered when the tractor met with an
accident could not be recovered from the Insurance company. The issue for consideration
is whether non-payment of premium amount by the bank amounted to deficiency in service.
It was held that when hire purchase agreement between the bank and buyer of vehicle with
the help of bank loan did not contain a condition creating obligation on the part of the bank
to remit premium for insurance policy, complainant buyer of vehicle could not hold bank
guilty of deficiency in service.
CONCLUSION.
Though the Banking Ombudsman Scheme was introduced in the year 1995, with a view to
do away with the banking customer complaints, the scheme was amended in subsequent
15
2004 (1) CPR 66 (NC).
16
2004 (1) CPR 285 SCDRC(MP).
years of 2002 and 2006. But the banks do not seem to have adopted the norms for their
efficient functioning, that is the reason behind the increasing consumer cases against the
banks, which are governed under the scheme.
BIBLIOGRAPHY.
Text.
1. Tannan, M L, Tannan's Banking Law and Practice in India, 21st edn., 2007,
Wadhwa and Wadhwa, Nagpur.
2. The Banking Ombudsman Scheme, 2006, (available at
http://www.icicibank.com/pfsuser/customer/Banking_Ombudsman_Scheme.pdf)
URLs.
1. http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=159
2. http://en.wikipedia.org/wiki/Banking_Ombudsman_Scheme
3. http://pnbindia.com/BANK%20REGULATION%20ACT.pdf