IMPACT OF BANKING OMBUDSMAN SCHEME, 2006 ON BANKING SECTOR: MOLLSHREE PAREEK

INTRODUCTION:

“An ombudsman has an obligation when it spots trouble, when it spots patterns, basically to speak truth to power.”[1]

-Neal   Milner

Individuals availing services can have different grievances and complaints with respect to the services provided to them. It goes without saying, that these resentments are to be properly addressed for the plain sailing functioning of the organization providing services. Different organizations can have varied methods for redressing the complaints. One such method is the appointment of an ombudsman. Ombudsman is an official who addresses the complaints with respect to deficiency in services.Since, banking sector is indispensable for individuals, it is imperative to have a proper grievance redressal mechanism in this sector. For the same was introduced the Banking Ombudsman Scheme, 2006. This scheme has had a whacking impact on the banking sector and this manuscript deals with the same.

Banking Ombudsman Scheme, 2006- A Brief Introduction:

The Banking Ombudsman Scheme, 2006 derives its roots from Section 35 A, Banking Regulation Act, 1949.[2]This Section empowers the Reserve Bank of India (RBI)  issue directions and the scheme of 2006 has been introduced by RBI with respect to Section 35 A, Banking Regulation Act, 1949. This scheme is an expeditious and cost-effective forum, where the customers of a bank can put-forth their complaints and get the same addressed.

Defining the term Ombudsman:

Lokpal; a regional term can be used to define ombudsman in the first instance. Lokpal in its literal terms means, one who takes care of the people. Following the similar lines, an Ombudsman is an official appointed by the government to address the complaints and grievances of people.

Banking Ombudsman:

Banking ombudsman is an official appointed by the Reserve Bank of India. The primary task of an ombudsman is to address the complaints put forth by customers. The complaints are to be brought forward owing to deficiency in services of banks, based on the grounds covered under Clause 8, Banking Ombudsman Scheme 2006 (amended till July 1, 2017)[3].

Banks which are covered under the scheme, 2006:

1)     All scheduled commercial banks.

2)     Regional Rural banks.

3)     Scheduled Primary Co-operatives

Grounds on which complaints can be made:

One can file a complaint before the banking ombudsman,

if, no reply has been received from the concerned bank, within a period of one month after that bank has received the complaint,

or the bank has rejected the complaint,

or complainant is dissatisfied with the reply provided.

Grounds:

1)     Delay in the payment/ collection of negotiable instruments.

2)     Non-acceptance of small denomination notes without any reasonable cause.

3)     Non-payment of inward remittances.

4)     Failure to issue drafts, pay orders.

5)     Non-adherence to working hours.

6)     Levying of charges without prior notice.

7)     Non-adherence by the bank or its subsidiaries of the instructions given by RBI.

8)     Delay/ non-payment of pension.

9)     Refusal/delay/failure in servicing/redemption of government securities.

10 Forced closure of accounts without sufficient notice.

11Delay/ refusal to close accounts.

IMPACT OF BANKING OMBUDSMAN SCHEME 2006, ON BANKING SECTOR:

Impact of the scheme, 2006 on banking sector can be summarily explained. Also, some statistics and data analysis has been provided below.

1)     Increase in the accountability:

One of the most important impacts is increase in the accountability of banks. Since, complaints can be filed against banks for any deficiency in services, the entire banking sector has become more accountable and cautious.

2)     Increase in the number of complaints[4]:

The data provided below depicts that there is an increase in the number of complaints via an ombudsman, since, it is an easier and less-complicated procedure.

3)     Highlighted the need for awareness[5]:

Through the report of this scheme, it became clear as to which areas (zones) require more awareness w.r.t. complaining and recognition of rights of a customer. The following table depicts the same:

4)     Decrease in the cost to handle complaints:[6]

There is a decrease in the cost to handle complaints owing to this scheme. As the number of persons required to handle complaints has reduced and the complaints have increased.

5)     Increase in the rate of disposal of complaint:

Owing to the introduction of this scheme, the rate of disposal of complaints has increased. As the rate of disposal has improved, customers are more satisfied. This in turn leads to less complications and smooth functioning of the banking sector.

6)     Creating Awareness:

Several Banking Ombudsman offices have begun with the task of launching outreach activities. Those activities are organization of awareness campaigns, partaking in exhibitions, giving adequate response to reader’s queries (newspaper). These activities have in-turn helped in making consumers more aware and cautious of their rights.

 

CONCLUSION AND SUGGESTIONS:

The scheme of 2006 has witnessed a tremendous response from bank customers. It works as a mechanism to empower customers. As can be seen from the data provided, the number of complaints have increased after the introduction of this scheme. This depicts that customers have faith in this system of grievance redressal. This system is less complicated and hence can be easily undertaken by the layman.

As per the data provided there are more complaints against the public and private sector banks as compared to the foreign banks. This means that such banks should concentrate more on consumer satisfaction. Also there is a need to codify this scheme, so that any enquiry w.r.t. concerned documents can be done properly. Ombudsman should be duly awarded from time to time, this will lead to proper and smooth functioning.

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[1]Neal Milner, Quote, (Aug. 13, 2020),http://www.quotehd.com.html

[2]Banking Regulation Act, (1949).

[3] Banking Ombudsman Scheme 2006, (Aug. 13, 2020),http://www.m.rbi.org.in.html

 

[4]Rajdeep Singh, Performance of Banking Ombudsman Scheme, 2006, (Aug. 13, 2020), http://www.granthaalayah.com.html

 

[5]I bid.

[6]Pacha Malyadri, Success of Banking ombudsmen Scheme,(Aug. 13, 2020),http://www.researchgate.net.html