Internal Ombudsman in Banks

The Reserve Bank of India in May 2015 notified all public sector banks and some private sector and foreign banks to appoint an internal ombudsman. The internal ombudsman would be designated Chief Customer Service Officer (CCSO). The CCSO should not have worked in the bank in which he/she was appointed as CCSO. The Reserve Bank has taken this initiative to further boost the quality of customer service and to ensure that there is undivided attention to the resolution of customer complaints in banks.

Internal Ombudsman (IO) is an independent authority to review complaints that were partially or wholly rejected by the respective banks. The IO mechanism was set up to strengthen the internal grievance redressal system of banks and to ensure that the complaints of the customers are redressed at the level of the bank itself by an authority placed at the highest level of bank’s grievance redressal mechanism to minimize the need for the customers to approach other fora for redressal.

As a part of this customer-centric approach, to enhance the independence of the IO while simultaneously strengthening the monitoring system over the functioning of the IO mechanism, RBI has reviewed the arrangement and issued revised directions under Section 35 A of the Banking Regulation Act, 1949 in the form of ‘Internal Ombudsman Scheme, 2018’. The Scheme covers, inter-alia, appointment/tenure, roles and responsibilities, procedural guidelines, and oversight mechanisms for the IO.

The IO mechanism was set up to strengthen the internal grievance redressal system of banks and to ensure that the complaints of the customers are redressed at the level of the bank itself by an authority placed at the highest level of bank’s grievance redressal mechanism to minimize the need for the customers to approach other fora for redressal.

As a part of this customer-centric approach, to enhance the independence of the IO while simultaneously strengthening the monitoring system over the functioning of the IO mechanism, RBI has reviewed the arrangement and issued revised directions under Section 35 A of the Banking Regulation Act, 1949 in the form of ‘Internal Ombudsman Scheme, 2018’. The Scheme covers, inter-alia, appointment/tenure, roles and responsibilities, procedural guidelines, and oversight mechanisms for the IO.

All Scheduled Commercial Banks in India having more than ten banking outlets (excluding Regional Rural Banks), have to appoint IO in their banks. The IO shall, inter alia, examine customer complaints that are like a deficiency in service on the part of the bank, (including those on the grounds of complaints listed in Clause 8 of the Banking Ombudsman Scheme, 2006) that are partly or wholly rejected by the bank. As the banks shall internally escalate all complaints, that are not fully redressed to their respective IOs before conveying the final decision to the complainant, the customers of banks need not approach the IO directly. The implementation of the IO Scheme, 2018 will be monitored by the bank’s internal audit mechanism apart from regulatory oversight by RBI.

While all public sector banks will have to appoint a Chief Customer Service Officer, the private sector and foreign banks that have been asked to appoint the Chief Customer Service Officers (Internal Ombudsman) are 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. These banks have been selected based on their asset size, business mix, etc.

GROUNDS OF COMPLAINT (including those on the grounds of complaints listed in Clause 8 of the Banking Ombudsman Scheme, 2006)

(1) Any person may file a complaint with the Banking Ombudsman having jurisdiction on any one of the following grounds alleging deficiency in banking including internet banking or other services.

(a). non-payment or inordinate delay in the payment or collection of cheques, drafts, bills, etc.;

(b). non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission in respect thereof;

(c). non-acceptance, without sufficient cause, of coins tendered and for charging of commission in respect thereof;

(d). non-payment or delay in payment of inward remittances;

(e). failure to issue or delay in issue of drafts, pay orders, or bankers’ cheques

(f). non-adherence to prescribed working hours;

(g). failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its direct selling agents;

(h). delays, non-credit of proceeds to parties’ accounts, non-payment of deposit or non-observance of the Reserve Bank directives, if any, applicable to rate of interest on deposits in any savings, current or other account maintained with a bank;

(i). complaints from Non-Resident Indians having accounts in India about

their remittances from abroad, deposits, and other bank-related matters;

(j). refusal to open deposit accounts without any valid reason for refusal;

(k). levying of charges without adequate prior notice to the customer;

(k). levying of charges without adequate prior notice to the customer;

(l). non-adherence to the instructions of Reserve Bank on ATM /Debit Card and Prepaid Card operations in India by the bank or its subsidiaries on any of the  following;

1. Account debited but cash not dispensed by ATMs
2. Account debited more than once for one withdrawal in ATMs or POS transaction

iii. Less/Excess amount of cash dispensed by ATMs

1. Debit in an account without use of the card or details of the card
2. Use of stolen/cloned cards
3. Others

(m). non-adherence by the bank or its subsidiaries to the instructions of the Reserve Bank on credit card operations on any of the following:

(n). non-adherence to the instructions of the Reserve Bank about Mobile Banking / Electronic Banking services in India by the bank on any of the following:

1. delay or failure to effect online payment / Fund Transfer,
2. unauthorized electronic payment / Fund Transfer,

(o). non-disbursement or delay in disbursement of pension (to the extent the grievance can be attributed to the action on the part of the bank concerned, but not about its employees);

(p). refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government;

(q). refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of Government securities;

(r). forced closure of deposit accounts without due notice or sufficient reason;

(t). non-adherence to the fair practices code as adopted by the bank;

(u). non-adherence to the provisions of the Code of Bank’s Commitments to Customers issued by the Banking Codes and Standards Board of India and as

adopted by the bank ;

(v). non-observance of Reserve Bank guidelines on engagement of recovery agents by banks;

(w). non-adherence to Reserve Bank guidelines on para-banking activities like the sale of insurance /mutual fund /other third-party investment products by banks about the following:

1. improper, unsuitable sale of third-party financial products
2. non-transparency /lack of adequate transparency in sale

iii. non-disclosure of grievance redressal mechanism available

1. delay or refusal to facilitate after-sales service by banks

(x). any other matter relating to the violation of the directives issued by the

Reserve Bank about banking or other services.

2. Any one of the following grounds alleging deficiency in banking service in respect of loans and advances may be filed with the Banking Ombudsman having jurisdiction:

(a) non-observance of Reserve Bank Directives on interest rates;

(b) Delays in sanction, disbursement, or non-observance of prescribed schedule for disposal of loan applications;

(c) Non-acceptance of application for loans without furnishing valid reasons to the app reasons to the applicant; and

(d) non-adherence to the provisions of the fair practices code for lenders as adopted by the bank or Code of Bank’s Commitment to Customers, as the case may be;

(f) Non-observance of any other direction or instruction of the Reserve Bank as may be specified by the Reserve Bank for this purpose from time to time

(3) The Banking Ombudsman may also deal with such other matters as may be specified by the Reserve Bank from time to time on this behalf.

Non-entertainment of complaints:

The Banking Ombudsman is not entertaining any complaint unless (a) the complainant had, before making a complaint to the Banking Ombudsman, made a written representation to the bank and the bank had rejected the complaint or the complainant had not received any reply within one month after the bank received his representation or the complainant is not satisfied with the reply given to him by the bank; (b) the complaint is made not later than one year after the complainant has received the reply of the bank to his representation or, where no reply is received, not later than one year and one month after the date of the representation to the bank.

Originally posted on May 05, 2015, edited and reposted on September 2, 2024

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