Hemant Mishra/Mint
Hemant Mishra/Mint

Banks widen complaint redressal system

Internal ombudsman at the bank level gives customers another forum, but efficacy remains to be seen

In May 2015, the central bank had advised banks to appoint internal ombudsmen to boost the quality of customer service. This year, on 23 May, S.S. Mundra, deputy governor and appellate authority, Reserve Bank of India (RBI), said at a banking conference that “all banks have since appointed internal ombudsman".

Besides all public sector banks, some private and foreign banks were also asked on the basis of their asset size, business mix and other aspects to appoint internal ombudsmen. These banks included ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank Ltd, IndusInd Bank Ltd, Standard Chartered Bank, Citi Bank N.A. and HSBC Ltd.

But how does having an ombudsman help you? Read on to find out.

What is it?

The Banking Ombudsman Scheme (BOS) was introduced by RBI in 1995. It covers complaints relating to deficiency in banking services provided by commercial banks, regional rural banks and also scheduled primary co-operative banks.

One of the main reasons to have internal banking ombudsmen at banks, apart from upgrading the customer service quality, was the increasing number of complaints. According to RBI’s annual report released in November 2015, during financial year (FY) 2014-15, a total of 85,131 complaints were received by the various banking ombudsmen. This is an increase of 11.17% over the previous year.

Considering the increase in banking activities, it was thought that banks should have internal ombudsmen apart from their already existing complaint redressal mechanism and the RBI appointed banking ombudsmen. Complaints escalated to the banking ombudsmen are a fraction of the complaints received by banks. For instance, as per a complaint analysis report of ICICI Bank, it received 2,01,676 complaints during 2014-15.

“In the present scenario, the internal redressal mechanism available with banks often fails to understand the nature of complaints filed and thus is not able to address issues to consumers’ satisfaction, resulting in an increase in the number of cases filed before the ombudsman and consumer fora," said S. Saroja, an activist with the Consumer and Civic Action Group, Chennai.

A bank’s internal ombudsman is a forum that is available to customers before they feel the need to go to a higher level. The RBI report stated: “the appointment of CCSO (Chief Customer Service Officer) as internal ombudsman in the long run will ensure that only a minimum number of complaints are escalated to banking ombudsman and the role of banking ombudsman would be extended to provide valuable inputs for policy formulation."

The internal ombudsman operates similar to the banking ombudsman, but it can also deal with complaints that are outside the purview of BOS provided these have been examined by the bank’s internal grievance redressal mechanism and left unresolved to the satisfaction of the complainant.

“Internal ombudsman is like another bank employee for us. The person is a retired GM (general manager of a nationalised bank). He has been with us for the past two years. The overall objective of the internal ombudsman is to look at grievances independently, and vet the complaints," said S.K.V. Srinivasan, executive director, IDBI Bank. “Internal ombudsman reduces the traffic to RBI and creates infrastructure within the bank so that the bank itself can cope with the complaints dispassionately," he added.

If a customer is not satisfied with the bank’s resolution (at the complaint redressal level and then the internal ombudsman level), she can approach the banking ombudsman, and thereafter the appellate tribunal, for resolution.

When to approach it?

A customer can lodge complaints on grounds specified under the scheme, which cover deficiencies in almost any banking service, including debit and credit cards, Internet banking, disputes regarding receipt and payment of funds, interest charged or credited, penalty or fees, or any other banking related matter.

You can also file a complaint if you feel the bank has not adhered to the fair practice code or the code of commitment to customers that all banks need to adhere to. In fact, about 29% of the complaints—the biggest category—received in FY15 were about banks’ non-observance of these codes.

One of the cases cited in the RBI report is regarding violation of a Code. Twelve employees of a college complained that a bank was charging excess interest on loans they had taken. They alleged that the bank had charged undue arrears of interest even though the loans were against deduction of monthly salary with principal’s guarantee. The bank said this was due to change in interest rates, though the employees said they were told the rate would be fixed. The banking ombudsman observed that the bank had not adhered to regulatory instructions and the Banking Codes and Standards Board of India, by not informing the complainants about the change in interest rates via letter, email or SMS in addition to display on its website or notice board.

The RBI report said a large number of complaints in this category indicated the lack of awareness about these codes among bank staff as also customers, and that banks need to devote special attention to this aspect and provide appropriate training to their front level staff regarding these codes.

How to file a complaint?

If you had approached the bank but not received a satisfactory answer within a month, you can approach the internal banking ombudsman. Many banks have the address and contact details on their website, but with some banks, Mint was unable to find the information.

You can file the complaint through an email or through fax, courier, post or by hand. If the complaint is not resolved at this level as well within 30 days, you can approach the banking ombudsman. You can file your grievance online at www.bankingombudsman.rbi.org.in, or offline. There are 15 banking ombudsman offices (http://bit.ly/1U9LKh4). Find out the office under whose jurisdiction your bank branch falls and file the complaint there.

For complaints related to credit cards and other types of services with centralised operations, contact the banking ombudsman within whose territorial jurisdiction your billing address is located.

Contact details are also available at bank branched and on the RBI website, www.rbi.org.in.

If the complaint is maintainable—i.e., it is under the purview of the ombudsman—the internal ombudsman will attempt to reach a settlement between you and the bank. If that doesn’t happen within one month, the ombudsman will pass an award after giving both sides a chance to state its case. If one is not satisfied with the decision at this level, she can escalate the matter to the banking ombudsman. If not satisfied here, too, she can approach the appellate authority. In FY15, of the 87 decisions passed by banking ombudsmen, the appellate authority received 73 appeals against these awards or decisions. The appellate authority is vested with a RBI deputy governor.

Does it help?

While having an additional platform where complaints can be resolved is a good move, not everyone is convinced that an internal ombudsman will fulfil its purpose.

“Since this is a bank’s internal body, what’s the difference between this and the bank’s complaint or grievance cell?" said Arun Saxena, president, International Consumer Rights Protection Council.

If the redressal is time bound, only then the exercise will help, said Saroja, adding that regular third-party audits should be carried out to study the effectiveness of such entities.

According to data available, escalation of complaints is common. As per the RBI report, 49% of the total 84,660 complaints disposed during FY15 were non-maintainable, i.e., these were not under the purview of the banking ombudsman. Plus, of the 43,035 maintainable complaints, about 60% were rejected by the banking ombudsman on various grounds. The remaining (39%) were resolved by mutual settlement. Awards were passed in less than 1% of the cases.

The average cost of handling complaints has increased—from 3,858 in 2011-12 to 4,541 in 2014-15 per complaint, as per the RBI report.

While the efficacy of various levels of ombudsmen and redressal mechanisms in the banking sector may be debatable, these remain avenues that retail customers can use to get their problems resolved.

So, if you are not satisfied with any bank service, contact the grievance redressal forum. If the issue is not satisfactorily resolved, approach the internal ombudsman after 30 days of raising the issue. Escalate it to the banking ombudsman after a month. The next level would be the appellate authority, and then the consumer court.

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