Banking Ombudsman Scheme: Safeguarding Consumer Rights

by Yuvi K - December 16, 2023

Banking Ombudsman Scheme: Safeguarding Consumer Rights

Banking ombudsman scheme in India was introduced by RBI in 1995 to protect the interests of customers of banking services and to redress customer complaints in a speedy and cost-effective manner. The government has established an independent and autonomous of Banking Ombudsman headed by the Governor of Reserve Bank of India to safeguard consumer rights and protect their interests.

What is Banking Ombudsman Scheme?

The Banking Ombudsman Scheme was launched in the year 1995 by Reserve Bank of India (RBI), in order to protect the interests of customers of banking services and to redress customer complaints in a speedy and cost-effective manner. The scheme provides an independent and autonomous mechanism for solving customer grievances and to ensure that customers are not denied their legitimate rights by banks.

Objectives of Banking Ombudsman Scheme

The main objective of Banking Ombudsman Scheme is to encourage banks to provide timely and efficient services to their customers. The aim is to protect the interests of customers of banking services by providing them with a speedy and cost-effective grievance redressal mechanism.

What are the Benefits of Banking Ombudsman Scheme?

1. Faster Resolution of Disputes: The Banking Ombudsman Scheme provides an independent and autonomous mechanism for resolving customer disputes in a timely manner. This ensures that customers are not denied their legitimate rights by banks.

2. Cost-Effective Redressal: The Banking Ombudsman Scheme is cost effective for both the bank and the customer. The bank is not required to bear the legal costs of litigation and the customer doesn’t have to bear the costs of having to take legal action against the bank.

3. Improved Customer Service: The Banking Ombudsman Scheme forces banks to improve their customer service by resolving complaints in a timely manner and by providing better customer service. This in turn will help build customer confidence in the banking system.

Who is Eligible for the Banking Ombudsman Scheme?

The Banking Ombudsman scheme is applicable to all scheduled commercial banks which are authorised to conduct business in India. This includes public sector banks, private sector banks, foreign banks, local area banks, urban cooperative banks, state cooperative banks and all other scheduled commercial banks.

What are the Complaints Covered by the Banking Ombudsman Scheme?

The Banking Ombudsman Scheme covers a wide range of grievances and disputes related to banking services such as:

• Non-payment or delay in payment/non-acceptance of deposit/delayed return of deposits.
• Loss or non-payment of cheques, drafts, payment orders, etc.
• Dishonour or delay in honouring payment orders and/or cheques.
• Non-adherence to the Reserve Bank of India guidelines on ATM/Debit cards.
• Unsatisfactory services rendered by banking personnel.
• Non-adherence to the Reserve Bank of India guidelines relating to NEFT, RTGS and other electronic fund transfer.
• Improper levy of charges/penalty.
• Non-payment of interest on deposits.
• Non-payment of proceeds of term deposits.

How to File a Complaint for Banking Ombudsman Scheme?

The customer can file a complaint with the Banking Ombudsman with at least one-month prior to filing the complaint to the bank.

1. The customer should first approach their bank in writing to raise their complaint.
2. If the customer is unsatisfied with the progress on the bank’s part or if the bank does not respond within a reasonable period of time, then the customer can approach the Banking Ombudsman.
3. The Banking Ombudsman requires the customers to submit a complaint in writing, regarding their grievance, along with any relevant documents or proof.
4. The Banking Ombudsman may also call for additional documents as needed to resolve the case.
5. After the Banking Ombudsman receives the complaint, he will inquire into the matter and give his recommendations within a period of one month.

Conclusion

The Banking Ombudsman scheme is a critical part of the Indian banking regulatory landscape. It provides a speedy and cost-effective mechanism for resolving customer disputes and helps protect the interests of customers of banking services. The scheme is an important tool for safeguarding consumer against exploitative banking practices and ensuring that customers are not denied their legitimate rights by banks.