[Economy] Banking Ombudsman: Meaning, functions, appointment, reforms explained

Economy85 Comments

India Yearbook
  1. What is Banking Ombudsman (BO)?
  2. Appointment & Tenure
  3. Jurisdiction
  4. Procedure for getting justice?
    1. How does BO settle complaint?
    2. Punishment
    3. Appellate authority for Banking Ombudsman
  5. Reforms and Issues
    1. #1: Netbanking frauds
    2. #2: Need more BOs
  6. Location of Offices
  7. Mock questions

From UPSC point of view, you don’t need to memorize all minute details given in this article (they’re provided for IBPS/SBI PO exam).
What is Banking Ombudsman (BO)?

  • He hears customers’ complaints against banks.
  • BO was first setup in UK.
  • In India, RBI started this scheme in 1995.

Appointment & Tenure

  • Earlier RBI used to appoint reputed persons from banking, finance, management, legal etc. sectors as Banking Ombudsmen (BO).
  • But now RBI has reserved this BO post for its own Chief General Managers and General Managers.
  • Tenure: 3 years at a time.
  • Reappointment: yes possible.

Jurisdiction of Banking Ombudsman?

  • Banking Ombudsman (BO) Scheme applies to whole of India (including Jammu and Kashmir).

Banking Ombdusmen have jurisdiction over

  1. All commercial banks (scheduled and non scheduled, public and private)
  2. Regional rural banks
  3. scheduled primary co-operative banks
  4. NBFCs (BO’s Jurisdiction limited to “loan” part.)
  • Banking Ombudsman is not a replacement of Consumer forum/courts. He merely supplements them.
  • Banking Ombudsman deals with matters less than or equal to Rs.10 lakhs.
  • Here are some examples situation where BO can help you:

Regular banking

  1. Demand draft, cheques, pay orders etc. not issued on time. (or not paid on time)
  2. Credit card related complaints (e.g. bank putting hidden charges. Your credit card was stolen but bank did not disable it even after you called them.)
  3. You asked the bank to close your account / credit card but they are not doing it.
  4. Bank refuses to open your account without giving valid reasons.
  5. Bank closes down your account without valid reasons.
  6. Government / your company deposited salary / pension in your account but the bank is not releasing it on time.
  7. Bank is taking out money from your account in pretext of some flimsy charges.
  8. Branch office notice board says “10.30 to 5” but staff refuses to provide you service after 3.30PM.
  9. NRIs having bank account in India and facing problems about remittances etc. (e.g. he deposited money from America, but his parents are not given money on time.)

Loans

  1. Your loan application is not processed in time.
  2. Your loan application is rejected without valid reasons.
  3. You loan application is accepted but money is not released in time. (and still bank is  charging interest on it!)
  4. Bank doesn’t follow RBI guidelines regarding loan-recovery agents (e.g. bank hires some criminals to bully and harass you.)
  5. Bank doesn’t follow RBI guidelines regarding loan interest rates.

Procedure for getting justice?

  • You’re unhappy with the bank for xyz reason.  But you cannot directly approach BO.
  • First you’ve to give written complaint to the concerned bank that “I’ve so and so problem.”
  • and IF the bank doesn’t deal with your complaint within one month, then you can approach BO.
  • On the other hand, you cannot approach BO if the matter is older than 1 year.
  • You don’t need lawyer to approach BO.
  • You don’t need to pay any fees/ stamp papers for approaching BO.

You can’t approach BO in following situations

  1. Matter is higher than Rs.10 lakh.
  2. If the matter is pending before any other court, tribunal, forum then you cannot approach BO.
  3. If any other court, tribunal, forum has already passed an order on the same matter.
  4. You cannot approach BO for frivolous or vexatious complaints (e.g. AC or water cooler was off when I went to the branch. Someone jumped the queue but security guard did nothing….)

How does BO settle complaint?

  • Upon receiving your complaint, first Banking Ombudsman will try to solve the matter via settlement /arbitration (=try to achieve a compromise, conciliation or amicable solution between bank and its customer.)
  • This has to be done within one month after receiving complaint.
  • But if either party (customer/bank) is not accept this (compromise/negotiation/settlement) then after 1 month, Banking Ombudsman will have to pass “order”.
  • Now, he’ll ask both parties to present their case/documents etc. And he’ll pass the order accordingly.
  • Two things can happen
  1. He rejects your complaint (=bank is not guilty).  OR
  2. He finds the bank guilty and orders punishment.

Punishment

  • Banking Ombudsman (BO) can order the Bank to compensate the actual money loss OR Rs.10 lakh (whichever is lower).
  • In case of Credit card related cases, BO can order the bank to pay additional fines (upto Rs.1 lakh) for the mental harassment caused to the customer.

Appellate authority for Banking Ombudsman

  • If either party (Bank / Customer) is unhappy with Ombudsman’s order, then they can approach the Appellate authority (=Deputy Governor of RBI.)
  1. If you’re the customer, you can directly approach him.
  2. But if you’re the “Bank”, then you can approach him only after getting permission from your Chairman/CMD/MD or CEO. (This ensures Bank’s lower staff doesn’t automatically go for frivolous appeals against every order).

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:
Banking Ombudsman: Before and after reforms:
originallyAfter reforms
Reputed persons from law, finance, banking,  Management, administration etc. can become BO.Only RBI’s own officers can become BO. (=outsiders not allowed for this post.)
Banks provided Money+Staff for Ombudsman’s office in their area.RBI itself gives the money and staff to Ombudsman.
He only accepted paper complaints.Accepts Paper + online complaints.
Regional Rural Banks put under jurisdiction of Ombudsman.
Ombudsman can look into internet-banking related complaints.
Banks are required to display salient features of the scheme for common knowledge of public. (e.g. posters in the branch office.)

#1: Netbanking frauds

  • According to RBI’s scheme, Ombudsman can also look into internet banking related matters.
  • But Ombudsmen across the country often wash away their hands and ask the victim to wait for police investigation to finish.
  • And on the other hand, Banks donot take responsibility saying “net banking frauds as most of them happen due to customers’ negligence and cyber-crime.”
  • So ultimately customer has to depend on the police to get justice.

#2: Need more BOs

  • A Committee formed by RBI has recommended that instead of having  only 15 Banking ombudsman across country, have one BO appointed for every bank.
  • The upper limit (of Rs.10 lakh) should be increased.

Location of Offices

  • Banking Ombudsman has total 15 offices throughout India
  • Those who’re preparing for IBPS/SBI PO should prepare this table for MCQs, others need not worry much.
Regional Offices of Banking Ombudsman
  1. A’bad
Gujarat + UT of Diu, Daman, Haveli
  1. Banglore
Karnataka.
  1. Bhopal
MP+Chattisgarh
  1. Bhuvneshwar
Odisha
  1. Chandigarh
HP+Punjab+part of Haryana
  1. Chennai
TN+Andaman, Nico
  1. Guwahati
All north Eastern states minus Sikkim
  1. Hyd.
AP
  1. Jaipur
Raj
  1. Kanpur
UP (some areas excluded though)
  1. Kolkata
WB+Sikkim
  1. Mumbai
Mah+Goa
  1. Delhi
Delhi+J&K+part of UP+Part of Haryana
  1. Patna
Bihar+Jharkhand
  1. Thiruvanthapuram
Kerala+Lakshdweep+Puducherry

Mock questions

Q1. Which of the following falls under the jurisdiction of Banking Ombudsman

  1. Regional Rural Banks
  2. Scheduled commercial banks
  3. Non Scheduled primary co-operative banks

Answer choice

  1. Only 1 and 3
  2. Only 2 and 3
  3. Only 1 and 2
  4. All of them.

Q2. Find correct statements

  1. BO is selected and appointed by Finance ministry.
  2. BO’s staff and office expenditure are charged on the consolidated fund of India.
  1. Only 1
  2. Only 2
  3. Both
  4. None

Q3. Find incorrect statement

  1. If the promises made by a sales agent, are not kept by the bank, you cannot approach BO.
  2. If the matter involves loss of more than Rs.10 lakhs, you cannot approach BO.
  3. The appellate authority for BO is High court of the concerned State.
  4. There is one separate BO for Union Territories of India.

Answer choices

  1. Only 2
  2. 2 and 4
  3. 1,3 and 4
  4. All of them.

Q4. Which of the following are included in the purview of BO?

  1. Net banking
  2. Credit cards
  3. ATM cards
  4. Harassment by Loan recovery agents

Answer choices

  1. Only 2 and 3
  2. Only 1, 2 and 3
  3. Only 2,3 and 4
  4. All of them.

Mrunal recommends

  1. (free) NCERT, NIOS, TN-Books
  2. Environment by ShankarIAS
  3. Indian Polity M.Laxmikanth (Hindi | English)
  4. Art & Culture by Nitin Singhania (Hindi | English)
  5. Spectrum: Modern History (Hindi | English)
  6. Bipin Chandra: Post Independence
  7. Fast-track to Arithmetic Rajesh Verma
  8. MK Pandey’s Analytical Reasoning
  9. Disha’s Topicwise Paperset (Hindi | English)
  10. School Atlas
  11. Mains: Language papers
  1. (free) NCERT, NIOS, TN-Books 4 History,Geo,Sci
  2. Indian Polity M.Laxmikanth (Hindi | English)
  3. Spectrum: Modern History (Hindi | English)
  4. Maths: Quantam CAT Sarvesh Kumar
  5. Objective General English SP Bakshi
  6. Word Power made Easy -Norman Lowe
  7. Topic wise Solved Paperset by Disha


So far 85 Comments posted

  1. Radhika.V

    Q1.= D
    Q2.= B
    Q3.= A
    Q4.= D

    1. sree

      1st question answer is 3 because jurisdiction include
      6. Which banks are covered under the Banking Ombudsman Scheme, 2006?

      All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme. as per rbi website

  2. shansmandy

    sir,plz suggest me the topics to cover for the coming ibps po 3 interviews.also plz tell any tips for the interview.
    *you are doing a fyn job.keep it up.*

    warm regards
    shans

  3. shaan

    SIR, KINDLY POST SOME INTERVIEW EXPERIENCES OF IBPS SPECIALIST OFFICER(LAW) CANDIDATES.

  4. Tarachand Jain

    1701, Prathmesh Tower,Opp. Don Bosco School
    L.T.Road,Borivli (W)
    Even after submitting Form 15G or 15 H,if the bank deducts TDS from the intrest earned without justification then in that case could the complaint be made to Ombudesman?

  5. stephen tpny

    Hi sir my name is stephen ,this is regarding my study loan form sbi bangalore ,i have taken the loan in 2008 of 3,15,000 ,i have been paying 8000rs every month and i am working in bpo i am not working in my field audio engineering which i studied ,now the bank is demanding to pay out standing of 3,12,000 where they have put extra fees.i am very disturbed because of this i need some help please .

  6. Sunny

    1.C
    2.d
    3.d.
    4.d

  7. Subhadip Das

    Q.1 – ( C )

  8. Rajat

    Right Answers :

    1. C
    2. D
    3. C
    4. D

  9. fultossAspirant

    1. c. according to rbi, All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

    2. d
    3. c. Appellate Authority is vested with a Deputy Governor of the RBI.
    4. d

  10. sree

    Please give the functions and powers

  11. ankur

    I want the email id of BO so that I can lodge a complaint by that

  12. Ipsita

    Can we charge the order in the civil court in case of banking ombudsman….plz explain…

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