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Is the Banking Ombudsman a broken system of grievance redress?
The latest report of the banking ombudsman’s office seems to confirm what many of us have suspected for over a year—that banking ombudsmen are closing cases and rejecting complaints every time there is even a whiff of another regulator involved. Consequently, bank customers, who have been hard-sold third-party products by wealth managers and relationship managers of banks, by exploiting a fiduciary relationship, are left high and dry.
Of the 75,183 complaints received in 2012-13, only half were found maintainable. Even of these, 49% were rejected for various reasons such as the amount involved or not having followed the process of approaching the bank first. Significantly, in just 1% of the cases—312 to be precise—was an order passed. There is something really wrong with this number at a time when consumer organisations like Moneylife Foundation have argued for exemplary damages as the fastest way to make banks more customer-focused.
Interestingly, a quarter of the complaints related to credit and debit card issues, which clearly remain a stress point for consumers and that mischief, like issue of unsolicited cards, skimming of cards, wrong debits, charging fees on free cards and using credit card to deduct mis-sold insurance, continues unabated. A hefty 26% were about the bank’s failure to adhere to its fair banking practices code. The fact that this becomes a matter of complaint to the banking ombudsman suggests that the statutory service committees of banks are probably not doing their job and are unconcerned about the BCSBI code, knowing that there is no consequence to ignoring it. The Reserve Bank attributes it to lack of awareness among bank staff about the fair practices codes. With over 72% of complaints coming from urban areas, it is clear that lack of awareness about redress mechanisms is also a huge problem.