Home >Money >Calculators >Mis-selling is an offence, accepts RBI

If you have been to a bank branch to open a bank locker, nine out of 10 times at least one bank employee would have asked you to either open a fixed deposit with the bank or take an insurance policy. If you make a physical visit to the bank to deposit money into your Public Provident Fund (PPF) account, it is probable that a pushy bank official has tried to wean you away to an insurance product, claiming the latter to be better than PPF. Over the years, many bank customers have fallen victim to such tactics and have ended up buying unnecessary and inappropriate financial products from their banks.

For long, the banking regulator, Reserve Bank of India (RBI), did not agree that complaints related to mis-selling of third-party products by banks was a problem that it needed to address. This was a problem for other regulators. What this meant was that bank customers had nowhere to go to complain since the sector-specific regulators did not have effective jurisdiction over banks’ staff. However, on 23 June 2017, the central bank took the onus of bank mis-selling on itself. According to the amended banking ombudsman scheme (, which will come into effect on 1 July this year, complaints relating to mis-selling, as well as mobile and electronic banking will be included in RBI’s banking ombudsman scheme. Here is a look at what has changed for you.

Insurance and mutual funds: So far, the banking ombudsman only accepted complaints about banking products and services. Third-party products sold by banks, such as insurance and mutual fund products, were kept out of its ambit. However, with the amendment, from 1 July 2017, the banking ombudsman scheme will include sale of insurance, mutual funds and other third-party investment products by banks.

Under the amended scheme, any person can file a complaint with the banking ombudsman against a bank for non-adherence to the central bank’s guidelines on para-banking activities such as sale of insurance, mutual fund and other third-party investment products by banks in case of improper, unsuitable sale of such products; non-transparency or lack of adequate transparency in sale; non-disclosure of grievance redressal mechanism available; delay or refusal to facilitate after-sales service by banks and any other matter relating to the violation of the directives issued by the central bank in relation to banking or other services.

Electronic and mobile banking: Post-demonetization, the government, the banking regulator and the banks have been increasingly focusing on electronic and mobile payments and transactions. With more and more banking customers going digital, an integrated platform to address any related grievance was becoming necessary.

Keeping this in mind, the RBI has included in its amended scheme that in case of any grievance, you can lodge a complaint against the bank for its non-adherence to RBI’s instructions on mobile banking and electronic banking services in India.

The banking ombudsman will now look into complaints related to delay or failure of online payments or fund transfers and unauthorized electronic payments or fund transfers. However, do remember that banks get a certain minimum time to resolve customers’ complaints in case transactions fail to take place. For instance, banks are mandated to resolve customer complaints regarding failed ATM transactions by re-crediting the customer’s account within 7 working days from the date of complaint. Hence, these existing timelines will also be considered by the banking ombudsman.

Change in compensation amount: The apex bank has also amended the compensation limit. It has now been increased from Rs10 lakh to Rs20 lakh. The compensation excludes the amount involved in the dispute. For instance, if you have a complaint about a transaction amount of, say, Rs15 lakh. The compensation will be over and above this amount. The banking ombudsman will also give up to Rs1 lakh to the complainant considering her loss of time, expenses incurred, and the harassment and mental agony suffered. However, in the past, the number of individuals who received such compensation has been low.

Jehangir Gai, a Mumbai-based consumer activist, draws attention to the central bank’s 2015-16 annual report. The report shows that a total of 102,894 complaints were received by 15 offices of the banking ombudsman in 2015-16. Out of these, just 18 were awarded compensation by the ombudsmen. Out of 50,187 complaints which were maintainable, 31,946 were rejected; 18,031 complaints were amicably settled through mutual consent; and 192 complaints were withdrawn.

“While the amendment to the scheme and its extension to various other facets of banking is to be appreciated, what matters more is the effective implementation of the scheme in a cost-effective manner, which is lacking," said Gai.

The RBI has been looking to address consumer problems and this is one step in that direction. As a customer, you can lodge complaints on the grounds specified under the scheme, including mobile and electronic banking, third-party products sold at a bank branch, debit and credit cards, Internet banking, interest charged or credited, penalty or fees, or any other banking related matter. When you file a complaint, make sure that you have all the documents required in place (see more about the process of filing a complaint with the banking ombudsman in the neighbouring box item).

In case you don’t want to go through the banking ombudsman, you also have the option to directly go to the consumer court. Don’t hesitate to use these services.


What is it?

The banking ombudsman scheme first came into effect on 1 January 2006, to resolve customers’ complaints regarding certain banking services. Under this scheme, the Reserve Bank of India (RBI) appoints a banking ombudsman to address the complaints. As of now, there are 20 banking ombudsman centres in India ( All commercial banks, regional rural banks and co-operative banks are covered under the scheme. The ombudsman will also look into complaints of NRI.

How to complain?

The first point of contact for all complaints should be the bank. If it does not reply within a month, rejects your complaint or if you are not satisfied with the reply; you can file a complaint with the banking ombudsman. You need to make a written complaint to the bank and you should reach out to the ombudsman within a year of the action. The complaint to the ombudsman can be in on paper or online and should contain all the relevant information. The service is free of charge. If you are not satisfied with the ombudsman’s decision, you have 45 days to appeal before the appellate authority, which in this case in an RBI deputy governor.

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