RBI Amends Banking Ombudsman Scheme

News

The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995.

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services

Facts

The Reserve Bank of India has widened the scope of its Banking Ombudsman Scheme 2006, to include, inter alia, deficiencies arising out of sale of insurance/ mutual fund/ other third party investment products by banks. Under the amended Scheme, a customer would also be able to lodge a complaint against the bank for its non-adherence to RBI instructions with regard to Mobile Banking/ Electronic Banking services in India.

The pecuniary jurisdiction of the Banking Ombudsman to pass an Award has been increased from existing rupees one million to rupees two million. Compensation not exceeding rupees hundred thousand can also be awarded by the Banking Ombudsman to the complainant for loss of time, expenses incurred as also, harassment and mental anguish suffered by the complainant.

The procedure for complaints settled by agreement under the Scheme has also been revised. Appeal has now been allowed for the complaints closed under Clause 13 (c) of the existing Scheme relating to rejection which was not available earlier.

The Reserve Bank has released a Notification dated June 16, 2017 amending the Banking Ombudsman Scheme 2006.

Reforms and Issues

Banking ombudsman scheme was originally started in 1995, but in subsequent years ,RBI made many reforms in it, some of them are:

Originally,

  • Reputed persons from law, finance, banking ,management, administration etc. can become BO.
  • Banks provided money and staff for ombudsman’s office in their area.
  • The bank only accepted paper complaints.

After reforms:

  • Outsiders are not allowed for this post. Only RBI’s own officers can become BO.
  • RBI itself gives the money and staff to Ombudsman.
  • Accepts paper as well as online complaints.
  • Regional Rural Banks can be put under jurisdiction of Ombudsman.
  • Ombudsman can look into internet banking related complaints too.
  • In this scheme banks are required to display salient features of the scheme for common knowledge of public as posters in the branch offices.

Result

Ombudsmen across the country often used to wash their hands away and ask the victim to wait for police investigation to finish. According to RBI’s scheme ,ombudsman can also look into internet banking related matters. On the other hand, banks do not take responsibility saying ”net banking frauds s most of them happen due to customers ‘ negligence and cyber crime.” So ultimately customer has to depend on the police to get justice.

Hearing

The amended Scheme shall come into force from July 1, 2017. The amended Scheme is available on the Reserve Bank’s website at

https://www.rbi.org.in/commonman/English/Scripts/AgainstBank.aspx

By Sweta Subudhi

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