The Banking Ombudsman is not in favour of banks appealing against its decisions; threatens to convert one-off cases into all-encompassing class action suits
Despite not being a quasi-judicial body, but a scheme for grievance redressal, the Banking Ombudsman (BO) derives enormous power from its ability to extend a verdict into a full-blown class action suit. The BO, which is an expeditious forum to bank customers for resolution of their complaints, is known to take a tough stand against gross violations of customers’ rights.
Now, the BO has frowned upon banks that consider an appeal against its verdicts. During an interactive session on banking services organised by Moneylife Foundation on Saturday, Kaza Sudhakar, chief general manager, customer services department of the Reserve Bank of India (RBI) vehemently discouraged banks from appealing against a decision given in favour of the customer. If a bank were to do so, the BO would consider extending the particular complaint verdict into a class action suit, applicable to the entire banking fraternity.
Mr Sudhakar said, “We are absolutely not in favour of any appeal by bankers against decisions taken by the BO. It is simply not expected. If the bank appeals, it is a case for a class action suit—as simple as that. If the appeal is not upheld, you are done.”
He cited the example of a particular complaint against State Bank of India (SBI), where repeated complaints from one customer about delay in pension payments forced the RBI to take a tough stand on the matter. The outcome was that the central bank issued a circular across the banking system, directing banks to make good the payments immediately, along with penal interest to the customers. “It was only that one person who persistently knocked on the RBI’s doors. Because the bank appealed against our decision, we had to scale the issue across all banks.” This resulted in benefits to nearly 65 lakh customers in the country. Moneylife was the only media house to reveal the action taken by RBI against banks delaying pension payments. (see here and here).
While the BO has the power to award exemplary damages in extreme cases, it is not a frequent occurrence. Mr Sudhakar pointed out that almost 50% of the complaints with the BO are non-maintainable due to a variety of reasons. Out of the remaining, almost 70% are resolved within one-two months.
Mr Sudhakar also criticised banks for the increasing number of cases where housing loan documents of customers were getting misplaced at the banks’ end. He said, “We are completely sympathetic towards the customer in these cases. This is simply not tolerable, and we will be harsh on such banks. Loss of housing loan documents is like a permanent defect in title of the customer.”
OP Agarwal, BO for the States of Maharashtra and Goa, was also present during the workshop. He also put in some words of caution for the banks. “We strongly urge banks not to keep the complaints pending beyond an acceptable time limit. Around 70% of the complaints with the BO get resolved within one or two months. In some rare cases, redressal takes more than three months.”
Mr Agarwal also pointed out that banks are required to disclose in their annual report details regarding complaints filed against them. This should include the nature of complaint, award against complaints, time taken for reverting back to the customer, etc.
The recent proposal of the State government to charge 1% for all under-construction properties will be passed on to the consumers, but will the beneficiaries get the money or will it be used for frivolous purposes?
The Maharashtra Cabinet cleared a proposal last Wednesday to charge 1% tax on all private under-construction property, ostensibly for the welfare of more than 20 lakh construction workers. This new tax has to be paid by developers, which means it will be eventually passed on to consumers.
Real estate research and rating firm Liases Foras had calculated that the amount raised under the new tax would be about Rs1,037 crore from the Mumbai Metropolitan Region (MMR) alone, taking into account 17 crore sq ft of under-construction property currently (for the fourth quarter which ended in March 2010) assuming a weighted average price of Rs6,100 per sq ft. There are a number of unsold properties in Mumbai; this new tax will again increase the unsold inventories in the city. The tax is proposed to be levied on both residential and commercial areas.
“Over time, developers may pass on the pressure of the 1% tax on to the consumers and property prices will also rise due to the new tax,” said Sunil Mantri, president, Maharashtra Chamber of Housing Industry (MCHI).
“The tax will be passed on to consumers. The proposed 1% tax on construction cost is not a big amount, but the construction cost is never revealed to consumers. It remains to be seen how the cost will be calculated, collected and used. The administrative work involved would be huge,” said Pranay Vakil, chairman, Knight Frank (India) Pvt Ltd.
The tax collected under this scheme will be used for workers’ welfare like insurance, training and scholarships for children. The Maharashtra Cabinet has set up a high-powered committee for this purpose; it has recommended creating a separate Board to initiate various welfare measures for them.
“Real-estate prices are already unaffordable in Mumbai and another 1% tax will add to the burden of the consumers as they are the ones who have to pay the tax at the end of the day,” said Pankaj Kapoor, founder, Liases Foras.
Last year, the country's rice production had slumped to a five-year-low, at 87.5 million tonnes, because of a poor monsoon
Ahead of the planting of the kharif rice crop from next month, the US Department of Agriculture (USDA) has pegged India's rice output up by 13% at 99 million tonnes in 2010-11, on higher prices and a normal monsoon, reports PTI.
Last year, the country's rice production had slumped to a five-year-low, at 87.5 million tonnes, because of a poor monsoon, the USDA said in its latest report.
About 85% of the country's total rice output is grown during the kharif season (between June and September), while the balance 15% is cultivated during the rabi season (between November and February).
"The major factors shaping the 2010-11 crop outlook are both market and weather-related. Rice production is projected to increase to 99 million tonnes (milled), up 13% from 2009-10," the report said.
The official forecast of a normal monsoon, which was announced recently, and the higher minimum support price (MSP) for rice are expected to boost farmers' planting intentions in the upcoming kharif season.
Farmers expect procurement prices to either improve or remain firm in 2010-11, it noted.
Last year, the government increased the minimum support price (MSP) of rice to Rs1,000 per quintal for the common variety, and Rs1,030 per quintal for the Grade A variety.
The USDA further said, "If the current weather forecast holds, it will be in contrast to last year’s unfavourable monsoon season."
While the monsoon is critical for the rain-dependent kharif crop, it also plays an important role in replenishing irrigation reservoirs vital for rabi (winter) crop irrigation.
The area under cultivation is expected to increase by 10% to 45 million hectares from last year, while yields are expected to rise by 3% to 3.3 tonnes per hectare.
Punjab, Haryana and Uttar Pradesh produce the most rice during the kharif season.