Banking Ombudsman Continues To Resolve Majority Complaints by Mutual Settlement; Award Given in Only 0.04% Cases
The office of the Banking Ombudsman (BO) has disposed almost 72.34% of the complaints through mutual settlement or agreement and issued awards in only 68 cases, that is 0.04% of the total 173,958 maintainable cases during 2019-20, reveals a report from the Reserve Bank of India (RBI). The annual report is for 12 months till 30 June 2020.
Maintainable complaints are those that are made to the BO, relating to the grounds of a complaint specified in Clause 8 of the Banking Ombudsman Scheme (BOS) 2006 and are in line with the requirements laid down in the Scheme. BOS envisages settlement of complaints by agreement through conciliation or mediation. If the parties fail to arrive at an acceptable agreement, the BO gives a decision, which includes passing an award against the bank. There has been a marked increase in the number of complaints resolved by agreement in the past two years, the report shows.
The share of maintainable complaints disposed by way of mutual settlement and agreement has gone up to 72.34% during 2019-20 compared with 69.88% during 2018-19 and 65.83% during 2017-18, indicating the increasing share of complaints being resolved through mediation.
The number of complaints received by the 22 offices of Banking Ombudsman (OBOs) during 2019-20 rose by 57.54%, and the OBOs handled 58.69% more complaints compared to the previous year. Complaints relating to digital modes of transactions were the highest, constituting 44.66% of the total complaints received, surpassing violation of non-observance of fair practice code (FPC) as the top category of complaints received at OBOs.
The majority (72.35%) of the maintainable complaints were resolved through mediation. During the year, 68 awards were issued by BOs. Sixty-three appeals were received against the decisions of the BOs. Of these, 29 appeals were against awards passed by the BOs and 34 were appeals made by customers against the rejection of their complaints, the report shows.
BOS promotes settlement of complaints by agreement through conciliation and/or mediation by BOs. If the parties fail to arrive at an acceptable agreement, the BO gives a decision or passes an award.
The number of maintainable complaints rejected has increased in absolute number to 47,873 in 2019-20 from 26,905 in 2018-19. The maximum number of rejections were on the ground that the complaint was ‘not on the grounds of complaint (Clause 8)’ or ‘not filed in accordance with required provisions of Clause 9 (3)’, accounting for 98.30% of the rejected maintainable complaints in 2018-19 and 98.64% in 2019-20.
According to the report, though the rejection rate related to recovery agents was the highest at 60.60%, the number of complaints received against the said category was nominal at 703 maintainable complaints during the year, of which 426 were rejected. High rejection rates were observed in complaints related to loans and advances (40.01%), fair practices code (36.6%) and mobile and electronic banking (36.1%). The lowest rejection rate was observed in complaints related to failure on commitments (11.84%), followed by pension related complaints (16.35%). The rejection rate in credit card related complaints stood at 34.56%.
On further analysis of the reasons for rejection of maintainable complaints category-wise, it is observed that around 96% of the total maintainable complaints rejected under each category were rejected under Clause 13(a) of the scheme, i.e., ‘not on the grounds of complaints referred to in Clause 8 of the Scheme’.
Maintainable complaints rejected under Clause 13(b) of the scheme, i.e., ‘otherwise not in accordance with Sub Clause (3) of clause 9’ out of total maintainable complaints rejected was slightly higher for complaints related to notes and coins (4.4%), ATM and debit cards (3.74%) and remittance (3.4%).
"It is likely that complainants approach the BO platform on grounds that are not covered under the scheme. To address the concern of possible ambiguity for complainants on which are grounds covered or not covered under BOS, the expansion of grounds of complaints is under consideration," RBI says in the report.
Often, bank customers directly approach the Banking Ombudsman instead of raising their grievance with the bank manager, then escalating to the nodal officer level and finally going to BO. When such first resort complaints or FRCs are filed directly with the ombudsman, the complainants are advised to follow the laid down procedure with a copy to the concerned bank for suitable redressal.
During the year, 68 awards were issued by BOs of which 38 were implemented. Highest number of awards issued (24) and implemented (16) are from the BO in New Delhi I. This is followed by Thiruvananthapuram, where 10 awards were issued, of which six were implemented. Surprisingly, there are eight BO offices, where not a single award was issued. This includes two BO offices in Mumbai, and one each from Patna, New Delhi III, Jammu, Jaipur, Hyderabad, and Ahmedabad.
While the BO allows mutual settlements, in case of an award issued, both the parties have been given a right to appeal. Under BOS, the deputy governor in charge of consumer education and protection department (CEPD) of the RBI, is the appellate authority (AA).
During the year, 63 appeals were received at the AA level compared with 78 appeals during the previous year. Of these, 34 appeals were received from complainants, who were aggrieved by the decision of the respective BOs while 29 were filed by the banks against the awards. With 72 appeals pending from the previous year, the AA handled 135 appeals and disposed 88 appeals during the year.
Out of the 88 appeals disposed by the AA, maximum 38 were remanded back to the BO. As many as 29 appeals were disposed in favour of the complainant, while 21 were ruled in favour of the banks, the report shows.
In February 2018, RBI introduced BOS for non-banking financial companies (NBFC-O Scheme). The Scheme is applicable to NBFCs which are authorised to accept deposits; or have customer interface, with asset size of Rs100 crore or above (effective from 26 April 2019), as on the date of the audited balance sheet of the previous financial year, or with any such asset size prescribed by the central bank.
During 2019-20, the four offices of NBFC-O received 19,432 complaints, almost five times compared with 3,991 complaints from the previous year. The NBFC ombudsman office at Mumbai accounted for the maximum (41.28%) number of complaints received, followed by New Delhi (35.43%), Chennai (16.98%) and Kolkata (6.31%). Mumbai also witnessed the highest increase in the inflow of complaints (706.13%) as compared to the previous year.
Complaints relating to non-adherence of FPC were the highest and constituted 36.29% of the total complaints received. The majority (71.12%) of maintainable complaints were resolved through mediation. No award was passed by the NBFCOs. During the year, one appeal was received against the decision of the NBFCO, the report shows.
Most of the complaints handled during the year were disposed under Clause 11(4)(a) of the OSNBFC, which states that the grievances raised by the complainant have been resolved by the NBFC with the intervention of the ombudsman. Further, 28.85% of the complaints were rejected; and no awards were issued during the year.
The non-maintainable complaints formed a sizeable portion of the complaints received during 2019-20. The grounds under which the complaints were disposed as non-maintainable are given in the chart below. It may be observed that complaints were disposed of as non-maintainable largely due to being outside the territorial jurisdiction, being FRCs, or not being represented properly.
The number of complaints received by the 22 Ombudsman Scheme for Digital Transactions (OSDTs) during 2019-20 rose by 119.95% (annualised) compared with the previous year. Most of the complaints (2,239 – 99.4%) were lodged through the electronic mode.
Fund transfers or unified payments interface (UPI), Bharat bill payment system (BBPS) and Bharat quick response (QR) code constituted the main areas of complaint at 43.89%. The majority (56.12%) of maintainable complaints were resolved through mediation. No award was passed by Ombudsmen for Digital Transactions (ODTs).
Individual customers constituted the largest segment (77.23%) of complainants during the year 2019-20. Senior citizens accounted for 1.01% of the total complaints.
The report observes that complaints were considered non-maintainable by the ombudsman for digital transaction largely due to not being represented properly, FRCs and complaints outside the territorial jurisdiction of the ombudsman.
FRCs are those complaints which were entered in the CMS portal without the complainant approaching the concerned entity first. Such FRC complaints were forwarded to the respective system participant for disposal at their end. Complainants are, however, advised through closure letters that they may approach the ODT again in case they are not satisfied with the decision of the concerned entity, the report says.
During 2019-20 under the Reserve Bank’s medium-term strategy called ‘Utkarsh 2022’ was to ‘formulate policy to strengthen the system based on the root cause analysis (RCA) of major areas of complaints’, and thereby strengthen the consumer protection framework.
The objective of RCA is to identify persisting issues at the systemic level, their causes, and the remedial measures required to address them. Actions based on the issues identified shall be initiated to address the root cause of the concerns and thereby reduce the grievances of customers. Further, efforts are also being invigorated to strengthen the redressal machinery for consumers of REs in case of grievances.
The RCA for 2020 (RCA-2020) on the complaints received at RBI was conducted by the offices of the ombudsmen and the Consumer Education and Protection Cell (CEPCs). RCA-2020 delved into 15 main issues, main concerns, their root causes and recommendations for remedial measures.
Many consumers have raised issues related with ATM or debit card related transactions such as non-dispensation or short dispensation of cash and fraudulent ATM transactions due to surface skimming by fraudsters. The root cause noted was lack of awareness amongst consumers regarding safe ATM banking, delay in auto-reversal of funds and non-availability of CCTV footages. As remedial measures, the RCA-2020 advised the banks and the RBI to increase efforts for creating awareness on safe banking, reiterate adherence to extant regulations on auto reversal and ATM transactions and considering better coordination between banks and the National Payment Corp of India (NPCI).