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

Support StaffEconomy87 Comments

Mrunal's Win22 Series for Economy Updates for UPSC Prelims & Mains 2022
  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.)


  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.


  • 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:
originally After 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
  1. Bhopal
  1. Bhuvneshwar
  1. Chandigarh
HP+Punjab+part of Haryana
  1. Chennai
TN+Andaman, Nico
  1. Guwahati
All north Eastern states minus Sikkim
  1. Hyd.
  1. Jaipur
  1. Kanpur
UP (some areas excluded though)
  1. Kolkata
  1. Mumbai
  1. Delhi
Delhi+J&K+part of UP+Part of Haryana
  1. Patna
  1. Thiruvanthapuram

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.
Indian History Freedom Struggle Pratik Nayak

87 Comments on “[Economy] Banking Ombudsman: Meaning, functions, appointment, reforms explained”

  1. Please write on following topics.
    1. Withdrawal of military forces from afghanistan in 2014, post effects and essential measures to be taken by all the major powers, role to be played by India.
    2. Track II process (Diplomacy): Roles played by non-state actors. How it is proving itself helpful in Indian context.

    It is not that we don not have material, but the way you produce, help grasp and retain easily and write answers efficiently.

  2. time is running so fast,even a chai wala says ‘FOrm bharde kya bhayia upsc ka….!!! so sir could you guide that till now how many on a average made this exam finally in current years ,earlier was history..?
    it will help to new comers with a positive approach to this holy cow game.
    my query is not about taunting type ,i am just asking how can a average student mark his presence in this exam ,i mean whta could be a right way which should followed by us so there would be no loss of time and career .AS i felt ,lot of person prepares just cause of this service i mean they like these all holy name ias ,ips as you have written in your earlier article but finally all these high thinking leads to depression in them but till then time has gone and nobody to save them….
    so how far chances of average student to crack this exam ,what prevention should follow by them ,..?
    as you are peer educator and mentor which shows a right path to all your friends so hope you would explain all these things in seprate article even which would inspire lot of fellows
    3rd year student

      1. hi sir,thre was a news in the hindu(11-02-13)on editorial page-maharashtra state banking ombudsman refused 2 intervene in a case of net banking fraud,that left a customer poorer by nearly 10 lacs…my questn is-is net banking fraud nt coming under banking ombudsman act???plz help……….

  3. sir im new to this site but i found it very useful not only for upsc but also for state exams…im thankful to you if u please suggest me books for geography and history…thanku sir

  4. plz mrunal….write on gas pricing policy nd rangrajan committee recommendations….its too confusing….todays editorial on pg.9 oped.

  5. Hi,
    In one case of home loan of about 20 lakhs, consumer forum directed us to write to higher authorities of SBI then to BO of RBI. And If not satisfied with BO directive, we may have to go to the court.

  6. What are Scheduled and Non-scheduled banks? What is that in Second Schedule of Banking Regulation act 1965 which differentiates them?

  7. Heyday Mrunal Ji…

    Dated 7/2/2013- Debate on the Oil/LNG pricing in india.

    Could you please explain how it is charged and bit on the under recoveries and on the Rangarajan panel report/advice on the “Administered pricing / Market pricing ” ???


  8. sir…where we can get this article in pdf format…

    ur articel is best..but sir try to put govt schemes to support ur answer bcoz in mains answer if we put govt related shemes it will be good impression..

  9. Sir, I wants to practice for MCQ’s for Prelim so could you please tell me where I can get the topicwse MCQ’s(like History,Geography,Economics etc.) online for free? That would be helpful.

  10. sir how important is India Year Book 2013 for CSE . What are your recommendations to have it?

  11. It’s clearly given in jurisdiction that schedued primary co-operative banks fall under BO …but I see answers full of answer d for 1 question ..this shows the level of aspirants and education in india

    1. Then what’s your problem with “D”? As it falls under its jurisdiction, its included in the option!
      What do you think is the answer then?

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