They believe that most of the problems customers suffer are due to the unhelpful attitude of banking staff and that putting them in charge will not help

The recommendation by the Damodaran Committee on banking customer services to set up an internal ombudsman system for every bank could complicate the grievances redressal system and increase the time to resolve the issues, according to customers and experts.

Most of the problems that banking customers suffer is largely due to the uncooperative attitude of bank employees. Therefore, experts say, placing the overall authority for the resolution of customer grievances with the banks would hardly be beneficial. If banks were keen to provide good services there would have been no need for an ombudsman system in the first place, they say.

In its report, which was published by the Reserve Bank of India on Wednesday, the committee headed by M Damodaran, former chairman of the Securities and Exchange Board of India, said, "There is a need for the banks in developing their internal grievance redressal mechanism, to ensure only the minimum number of cases get escalated to the Banking Ombudsman (BO) and the scheme is strictly utilised only as an appellate mechanism."

The committee has recommended that every bank should appoint a chief customer service officer (CCSO), not less than the rank of a retired general manager of a scheduled commercial bank and preferably from outside the bank (under the advice of the RBI), who should also have necessary exposure in the working of the operational side of banking. The audit committee of the bank board would oversee the CCSO and the appointed officer should directly report to the bank's chairman, managing director or chief executive (CEO).

This, in other words, means that a person who wants to file a complaint about poor banking services would have to knock on the doors of the bank first, then appeal to the CCSO, and finally to the BO. At present, the customer can directly approach the BO, if he does not receive any satisfactory answer from the bank, or if the lender rejects his complaint.

The committee has recommended that "a person aggrieved with a banking service as hitherto will first complain to the bank, and if within a month does not receive a reply or is unsatisfied with the reply, will appeal to the CCSO of the bank. In view of CBS environment and latest technology available in communication, it is expected that the bank's CCSO would resolve the grievance within 30 days of the receipt of complaint, including the period required for conciliation meeting. On the failure to get a reply within a month from the CCSO, or if unsatisfied with the reply of the CCSO, the complainant can appeal to the BO of the relevant jurisdiction. The decision of the BO shall be final and no further appeal will be allowed."

Industry experts say such a move will only make the redressal mechanism time-consuming for customers. Also, there is not much guarantee that the bank will comply with the recommended rules, as most banks are known for the unhelpful behaviour of the staff towards customers.

If these recommendations are implemented, the role of the BO would be of an Appellate Authority. Those customers who are dissatisfied with the decision of the BO can approach formal institutions like consumer courts, civil courts, while the banks could seek the advice of the customer service department before approaching the courts.

The committee has also suggested amendments to the BO scheme, such as the complaint or appeal made to the BO should be within two years from the date of transaction, as against the current one year.

On the compensation issue, the committee suggested that it should be restricted to the actual loss only, as the BO not being a judicial forum, may not be able to award  compensation  for  any  mental  harassment which cannot be easily computed.

The Damodaran Committee has also recommended that the ombudsman scheme be extended to co-operative banks as well, as they are not covered yet. It also pointed out to the need to educate and make people aware of the ombudsman system through the help of the media.