ISSN 2277-5846

The International Journal Of Management ISSN 2277 5846I THE INTERNATIONAL JOURNAL OF MANAGEMENT

ISSN 2277 - 5846 2277 - 5846

Banking And Bank-Ombudsman; Requirement, Changes Complaint Analysis And The Way Forward
Dr. Lalat K Pani Former Reader, Dept. Of Commerce, Bhadrak Autonomous College, Bhadrak, India Sukhamaya Swain Circle Business Banking Head, Orissa Circle, Axis Bank, Mallick Commercial Complex Kharavela Nagar, Bhubaneswar, Odisha, India

Abstract: Banking in India has come a long way from traditional banking; it has criss-crossed nationalization, seen entry of private & foreign banks and is now all poised to set new frontiers by addition of new services and aspects harnessing technology and best global practices. With the advent of competition, the customer has become demanding and his demands have become challenging. Technology has made the customer dependent on third-party interfaces that are at equal distance from the bank-employees too. RBIs efforts of penetrating to the rural and unbanked areas have brought banks to the doorstep of many who would have otherwise read about banks only in newspapers. The diversity in the population of the bank customers in terms of education, financial soundness and knowledge of financial products is increasing with each passing day; RBI is monitoring the inclusion initiatives of each bank. Against this backdrop, we have the monitoring role of RBI becoming very important. It is with this motive that we have Banking Ombudsman whose role is statutory and with punitive powers. In this paper, we discuss about this authority, the genesis, the complaint analysis and the complicacies involved over time. Key words: banking performance; banking ombudsman; customer relations; consumer or customer; complaints; grievances 1.Genesis Of Banking Ombudsman In India In the banking sector, so far consumer or customer are concerned, their grievances are many and varied. Reserve Bank of India (RBI) has been flooded with complaints. They received complaint and forwarded the complaint to concerned bank and banks were required to submit their comments. Banking sector was constantly under criticism by press, public and estimate committees. Various committees, commissions and working group were formed to go into the issue since 1972. Banking Commission was headed by Sri R. G. Saraiya followed by Sri. R. K. Talwar and lastly report of the Goiporia Committee was a step further as to the sustained anxiety of RBI towards improvement of customer services in banks. The Narasimhan Committee on Banking and Financial Sector Reforms examined this complaint redressal aspect in full detail and recommended introduction of the Banking Ombudsman Scheme 1995 as a part of Financial Sector Policy and Systems Reforms 1991 -92 to 1995-96. In this background RBI accepted the recommendation and as a part of banking policy, Dr. C. Rangarajan; Governor, announced the The Banking Ombudsman Scheme on June 14, 1995. The scheme was issued under the provision of Banking Regulation Act, 1949, covering all Scheduled Commercial Banks and the Scheduled Primary Co-operative Banks having business in India. The Scheme became operative from June 1995. Initially Ombudsman was appointed on full time basis in three centers i.e. Mumbai, New Delhi, and Bhopal but subsequently more centres were added. The aim and objective mechanism of ombudsman is to deliver quick and inexpensive facility to resolve grievances of customers arising out of deficient services rendered by the banks. Hence, banking ombudsman is in place to cater to public complaints against deficiency in banking services concerning operation of deposit accounts and loans and advances. Paradigm Shift of Banking Ombudsman Scheme 1995 to Banking Ombudsman Scheme of 2006; the attempt over years has been to extend the scope and jurisdiction of the Banking ombudsman to hitherto uncovered areas. Over time, RBI has expanded the scope of the banking ombudsman to include customer complaints relating to credit cards, deficiencies on the part of sales agents of banks to provide promised services, levying service charges without prior notice to the

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customer and non-adherence to the fair practices code as adopted by individual banks. In order to make the scheme more effective, the RBI has decided to take the onus of recruitment and funding of the scheme. It has also allowed complainants to file their complaints online and appeal to it against the judgments given by the banking ombudsman. 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 sought to establish a system of expeditious and inexpensive resolution of customer complaints. The Scheme which is in operation since 1995 has been revised during the year 2002 and 2006. The Scheme is being executed and administered by Banking Ombudsmen appointed by RBI at 15 centers covering the entire country. 2.Areas of handling Complaints The important areas are Non-payment or inordinate delay in the payment or collection of cheques, drafts, bills, etc.; Non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission for this service; Non-acceptance, without sufficient cause, of coins tendered and for charging of commission for this service; Non-payment or delay in payment of inward remittances; Failure to issue or delay in issue, of drafts, pay orders or bankers cheques; Non-adherence to prescribed working hours; Failure to honour guarantee or letter of credit commitments; 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; Delays, non-credit of proceeds to parties' accounts, non-payment of deposit or non-observance 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 ; 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; Refusal to open deposit accounts without any valid reason for refusal; Levying of charges without adequate prior notice to the customer; Non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on ATM/debit card operations or credit card operations; 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); Refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government; Refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of Government securities; Forced closure of deposit accounts without due notice or without sufficient reason; Refusal to close or delay in closing the accounts; Non-adherence to the fair practices code as adopted by the bank; and Any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other services. 3.Analysis Of Customer Complaints Received By Banking Ombudsman In India 3.1.Profile Of Customer Complaints Handled By The Obos Over The Years The analysis has been done in Table 1. One would observe that RBI is very serious with regards to meticulous observation of each and every complaint. It is mad it mandatory for all scheduled commercial banks to maintain records of each and every complaint and do the reporting in the annual reports. The point of segregating each complaint on a vintage basis probably indicates the graveness of some complaints; RBI understands that certain complaints might entail substantial time by the member banks to solve or come up with a reason or logic. In the recent years, 2009-10 saw the largest number of complaints being filed along with the largest number of disposals also. 3.2.OBO-Wise Receipt Of Complaints The 15 OBOs handle the complaints on deficiency of banking services received from the bank customers within their jurisdiction. The details for the last 4 Financial Years are mentioned in Table 2 (i). Bhubaneswar saw the highest % wise increase in number of complaints i.e. 62% between 2010-11 to 2011-12. The number of complaints was low for Bhubaneswar, Trivandrum, Guwahati & Patna had low number of complaints but they saw the highest % wise increase. Chennai, New Delhi and Ahmedabad saw decrease in the number of complaints substantially. Bhopal, Guwahati and Kanpur are seeing increase in their complaints every year. 3.3.Average No. Of Complaints Received There has been no specific trend in the last four years. However the increment of 2009-10 vs that of 2008-09 has been the highest. The figure is arrived at by taking into account the total number of complaints and the number of OBOs across the country. The numbers of offices have not changed over the past 4 years. May be with the increase in number of complaints, RBI might think of increasing. Table 3 reflects the exact figures.

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3.4.Population Group-Wise Distribution Of Complaints Received There has been continuous increase in complaints from Semi-Urban and Urban areas over the years. The only areas from where there has been depletion recently are in the Metro areas. A point to be noted out here is that the classification of an area may vary any year. Since the classification is based on population, any increase in population in an area might attract change in classification. Infact banks do have specific offerings across different categories and thus some complaints might emanate due to change in charge structure and facilities. RBI issues a notification when such changes happen through its respective ZAOs. 3.5.Mode-Wise Complaints Received Even with the advent of technology and internet connectivity, the complaints are being handled through the old modes i.e. physical letters and fax. It seems individuals or corporates typically prefer to send it through the physical mode to keep a written record and also expecting that the reply would come in the same mode which can be easily recorded for the present or for any future references. Table 5 (i) clearly shows the trend across each of the modes over the years. 3.6.Complainant Group-Wise Classification Any individual or corporate who has a grievance against any of his / its bank may pursue the complaint with the Ombudsman. There is no such trend across any of the segments like individuals, proprietorship firms, limited company, trust, association or govt. entities. There is however a sharp decline in complaints filed by Proprietorship firms over the past 3 years. It is good to see that govt. departments and PSU organisations also are conscious about their banking transactions and probably they have been filing complaints against any service or charges related issue. The data provided by RBI however does not classify the PSUs as state or Central govt.s. Individual complaints are the highest across every year for the past 4 years. 3.7.Bank Group-Wise Classification One thing clearly comes out as per Table 7 is that there is a regular and substantial increase of complaints over the past 4 years in nationalised banks; similar is the case of RRBs/UCBs for the past 3 years. For private sector banks, the number is however declining continuously for the past 4 years and it declined 3 years for Foreign Banks. Despite having large branch networks, the number of complaints for SBI & its associates and the nationalised banks is much lower in comparison to private sector banks. A particular reason may be affixed for this trend namely; customers of private sector banks are more educated and conscious about their rights as customers. Foreign banks however would score very high in number of complaints per branch as the numbers are very high but the number of branches is very low. 3.8.Complaints Per Branch As mentioned previously, the number of complaints per branch is highest for foreign banks followed by new generation private sector banks. This can surely be attributed to low number of branches and large number of complaints. It is the lowest for the old generation private sector banks. Table 8 has all the details for the past 4 years. 3.9.Nature Of Complaints Handled There was a sudden surge of complaints in the deposit accounts category in 2011-12. There has been continuous decline in complaints related to remittances for the past 3 years. Charges levy without information cases seem to be declining as this category has a declining trend for the past 4 years. Probably banks are going the extra mile to inform the customers; with the increasing modes of communications like smses, emails, display on websites and letters, the decline is predictably going to continue further. Card related complaints have been reducing for the past 3 years at a stretch. Table 9 provides all the details. 3.10.Comparative Position Of Disposal Of Complaints By OBOs The number of cases being carried forward every year has been reducing for the past 3 years. The percentage of cases being disposed off every year is surprisingly fixed at 94% for the past 3 years. It speaks strongly about the efforts being taken by the officers in the various OBOs in solving the cases. A substantial number of cases however continue to be carried forward to next year. Table 10 has all the details. 3.11.Mode Of Disposal Of Maintainable Complaints The governing principle of the OBOs is promoting settlement by mutual agreement between the customer and his bank. Only in cases where both the parties do not come to an agreement on mutually acceptable terms, BO proceeds to pass an Award or give a decision. Table 11 has all the break-ups of the cases settled. 3.12.Reasons For Rejection Of Complaints The Banking Ombudsman Act 2006 empowers the BO to reject the complaint at any stage of the proceedings if it appears to him that the complaint made to him satisfies any of the conditions as laid down in the designated clause i.e. Clause 13. As per details enlisted in Table 12, a substantial number of complaints made are incomplete and probably have been made without a serious motive of arriving at a result, award or punitive action. Until and unless the OBOs are furnished with sufficient evidence of breach of contract between the parties (read the ban and its customer), the said complaint can be is rejected.

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4.Limitation of the data provided and the interpretations Done 4.1.Lack Of Clarity On Cases In todays context, the complaints of customers are getting complex. Earlier for a simple savings account, the customer could have a financial complaint relating to his interest, its calculation or may be any charge levied in his account but now a financial complaint could also relate to mobile banking charges, debit card charges, bancassurance premium being debited without consent, phishing attack happening in his account et al. It becomes difficult to segregate beyond a particular limit (categories of complaints cannot be infinite). 4.2.Correlation Between Various Aspects Of Complaints Any of the statistics mentioned above cannot be used for making any strong inferences until clubbed with some other factor. For eg: average complaints per branch are not complete until one segregates the banks branches into rural, semi -urban or urban categories. 5.Important Changes In The Provisions Of Banking Ombudsman Scheme 2006 Reserve Bank of India in 2007 modified the Banking Ombudsman Scheme allowing bank customers to appeal against an ombudsman's decision to reject a complaint. It allowed bank customers to appeal against the decision of the Banking Ombudsman where he had rejected the customer's complaint relating to matters falling within the grounds of complaints specified under the scheme. The appellate authority under the scheme has been fixed as the designated deputy governor of RBI. Earlier, bank customers were allowed to appeal against the order or award given by the Banking Ombudsman but they were not allowed if the application was rejected. 6.Conclusion The total number of banking transactions is growing because of inclusion, new modes of payments & settlements coming up and banks increasingly bringing in newer products, offerings & services. This leaves a high scope for increasing complaints. The resolution and more important the pace of resolution becomes very important because if the complaints rise and lie unsettled, the customers would just move from banks to banks thus churning business from one bank to another. More licenses are in the anvil; this will further aggravate the situation of maintaining the pace of complaint resolution. The number of OBOs has not increased over the years; with the increasing complaints, RBI should give a thought towards increasing the number of Ombudsmen. One thing is for sure, exciting times are ahead of the office of the OBOs.

2008-09 Complaints brought forward from the previous year Complaints received at the OBOs during the year Total No. of complaints handled by the OBOs during the year Complaints disposed during the year Complaints pending at the close of the year at the OBOs Complaints pending for less than 1 month Complaints pending for one to 2 months Complaints pending for two to 3 months Complaints pending for more than 3 months Appeals brought forward from the previous year Appeals received by the Appellate Authority during the year Total No. of Appeals handled during the year by the Appellate Authority Appeals disposed of by the Appellate Authority Appeals pending at the close of the year 5892 69117 75009 65576 9433 5041 2751 956 685 32 269 301 180 121

2009-10 9433 79266 88699 83335 5364 2787 1526 808 242 121 308 429 395 34

2010-11 5364 71274 76638 72020 4618 2888 1397 297 35 34 133 167 167 0

2011-12 4618 72889 77507 72885 4622 2681 1655 277 9 0 351 351 338 13

Table 1: Profile Of Customer Complaints Handled By The Obos Over The Years Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

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OBO No. of complaints received during 2008-09 2009-10 2010-11 2011-12 % change in 2011-12 over 2010-11 % to total complaints (2011-12)

Ahmedabad Bangalore Bhopal Bhubaneswar Chandigarh Chennai Guwahati Hyderabad Jaipur Kanpur Kolkata Mumbai New Delhi Patna Trivandrum TOTAL

3732 3255 3375 1159 2634 10381 455 3961 3688 7776 3671 9631 10473 2110 2816 69117

4149 3854 3873 1219 3234 12727 528 5622 4560 7832 5326 10058 12045 1707 2532 79266

5190 3470 5210 1124 3559 7668 584 5012 3512 8319 5192 7566 10508 2283 2077 71274

4590 3486 5953 1826 3521 6614 708 5167 4209 9633 4838 7905 9180 2718 2541 72889

-11 1 14 62 -1 -13 21 3 20 16 -7 4 -13 19 22 2

6 5 8 3 5 9 1 7 6 13 7 11 13 4 3 100

Table 2: OBO-Wise Receipt Of Complaints Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

Figure 1: OBO-Wise Receipt Of Complaints Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

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No. of complaints received

80000 70000 60000 No. of complaints received

No. of complaints received Figure 2: Average No. Of Complaints Received Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

2008-09 No. of OBOs No. of complaints received Avg.no. of complaints per OBO 15 69117 4608

2009-10 15 79266 5284

2010-11 15 71274 4752

2011-12 15 72889 4859

Table 3: Average No. Of Complaints Received Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

Population Group Rural Semi-Urban Urban Metro TOTAL

No. of complaints received 2008-09 13915 9817 15723 29662 69117 2009-10 25055 10741 16423 27047 79266 2010-11 7816 10816 21218 31424 71274 2011-12 8190 11982 24565 28152 72889

% Increase 5 11 16 -10

Table 4: Population Group-Wise Complaints Received Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

35000 30000 25000 20000 Rural Semi-Urban Urban Metro 2008-09 2009-10 2010-11 2011-12

15000 10000 5000 0

No. of complaints received

Figure 3: Schematic Representation Of The Above Data Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

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Mode e-mail Online Post/Fax TOTAL 2008-09 15927 9352 43838 69117

No. of complaints received 2009-10 9221 11400 58645 79266 2010-11 9736 9265 52273 71274 2011-12 9499 10026 53364 72889

Table 5: Mode-Wise Bifurcation Of Complaints. Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

70000 60000 50000 40000 30000 20000 10000 0 2008-09 2009-10 2010-11 2011-12 No. of complaints received Figure 4: Graphical Representation Of Mode-Wise Bifurcation Of Complaints. Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI e-mail Online Post/Fax

Complainant Group 2008-09 Individual Individual-Business Proprietorship / Partnership Limited Company Trust Association Govt. Departments PSU Others TOTAL 62327 1446 329 930 87 222 262 429 3085 69117

No. of complaints received 2009-10 71341 2742 367 1099 191 519 477 115 2415 79266 2010-11 63064 2739 306 901 224 667 523 120 2730 71274 2011-12 66279 2635 253 690 150 461 521 80 1820 72889

Table 6: Group-Wise Bifurcation Of Complaints Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

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Bank Group 2008-09 Nationalised Banks SBI & Associates Private Sector Banks Foreign Banks RRBs/Scheduled Primary Urban Coop. Banks Others TOTAL 14974 18167 21982 11700 1148 1146 69117 No. of complaints received 2009-10 19092 22832 22553 11450 968 2371 79266 2010-11 20417 22307 17122 7081 1130 3217 71274 2011-12 22326 25854 15084 5068 1439 3118 72889

Table 7: Bank-Wise Bifurcation Of Complaints Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

Bank Group Nationalised Banks SBI & Associates Old Private Sector Banks New Private Sector Banks Foreign banks

Complaints per branch 2009-10 0.46 1.33 0.28 4.17 37.79 2010-11 0.45 1.25 0.25 2.35 22.34 2011-12 0.44 1.33 0.28 1.72 18.43

Table 8: Bankwise Complaints Per Branch Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

Ground of Complaint concerning Deposit Accounts Remittances Card Related (ATM / Debit / Credit) Loans & Advances Levy of charges without prior notice Pension Payments Failure to meet commitments / BCSBI Codes / Non observance of fair practices of code DSAs and recovery Notes & Coins Others Out of subject TOTAL

No. of Complaints 2008-09 6706 5335 17648 8174 4794 2916 11824 2009-10 3681 5708 18810 6612 4764 4831 11569 2010-11 1727 4216 17116 4564 4149 5927 16302 2011-12 8713 3928 14492 6016 3806 5944 18365

3018 113 8589 0 69117

1609 158 18840 2684 79266

1722 146 7201 8204 71274

459 165 7327 3674 72889

Table 9: Types Of Complaints Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

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No. of complaints Received during the year Brought forward from previous year Handled during the year Disposed of during the year Rate of disposal (%) Carried forward to next year

2008-09 69117 5892 75009 65576 87% 9433

2009-10 79266 9433 88699 83335 94% 5364

2010-11 71274 5364 76638 72020 94% 4618

2011-12 72889 4618 77507 72885 94% 4622

Table 10: Break-Up Of The Disposal Of Cases Over The Years Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI Disposable of Maintainable Complaints By mutual settlement Disposal of Award Maintainable Complaints rejected Total Maintainable complaints disposed 2008-09 22315 73 6000 28388 2009-10 31278 211 15066 46555 2010-11 21269 278 13952 35499 2011-12 20092 327 17036 37455

Table 11: Segregation Of Disposition Of Maintainable Complains Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI Reasons Not on the grounds of complaint referred to the concerned clauses of the Act Requiring consideration of elaborate documentary and oral evidence and the proceedings before Ombudsman are not appropriate for adjudication of such complaint Beyond the pecuniary jurisdiction of the OBO Without sufficient cause Not pursued by the complainant with reasonable diligence In the opinion of the OBO, there is no loss or damage to the complainant TOTAL 2009-10 10920 2499 2010-11 9525 2867 2011-12 12216 4323

243 278 622 504 15066

335 751 219 255 13952

317 76 62 42 17036

Table 12: Reasons Of Rejection Source: Annual Reports On Banking Ombudsman Scheme 2010-11 & 2011-12, RBI

7. References 1. Annual Report on Banking Ombudsman Scheme, 2011-12, source Reserve Bank of India. 2. Annual Report on Banking Ombudsman Scheme, 2010-11, source Reserve Bank of India. 3. Action through Banking Ombudsman from International Consumer Rights Protection Council. 4. Banking Ombudsman Scheme, 2006, source Reserve Bank of India. 5. Banking Ombudsman-A pragmatic step in the banking sector by Anoop Kumar. 6. Success of banking ombudsmen scheme: Myth or reality by Malyadri, Pacha and Sirisha, S; International Journal of Research Studies in Management 2012 April, Volume 1 Number 1, 17-24 7. Customer complaints in banks: Nature, extent and strategies to mitigation by R K Uppal. 8. A Comprehensive Guide to approaching Banking Ombudsman in India by 9. Banking Ombudsman: Redressal for customer complaints against banks; a Financial Literacy Agenda for Mass Empowerment (FLAME) initiative of IIFL. 10. Customer complaints rise in 2011-12, led by public sector banks Live Mint on Thu, Nov 08 2012. 11. Wanna appeal against Ombudsmans decision? Economic Times dated 24 May 2007.

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