Investor Interest   Exclusive
Mis-selling: How savers are misled

Goldman Sachs whistleblower’s tale should also draw attention to Indian practices which are no different

On 12th March, Greg Smith made a dramatic exit from Goldman Sachs, the world’s most powerful, profitable and reviled investment bank. His letter explaining why he was quitting after 12 years was published as a column by The New York Times (NYT) and quickly went viral on the Internet...

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  • Investor Interest   Exclusive
    Making the banking ombudsman more responsive to customers

     Though the banking ombudsman functions well as a grievance redressal mechanism, the large of number of rejection of complaints call for a need to revamp the scheme to make it more pro-active, transparent, helpful and  responsive to meet customer needs

    The annual report on the performance of the banking ombudsman scheme for the year 2010-11 released by Reserve Bank of India (RBI) last month gives a mixed picture of customer service in banks. The total complaints received by all the ombudsmen in the country have come down by 10% compared to the previous year, which may give rise to a feeling that customer service in banks appear to have improved though marginally . Because of this, the general feeling is that the ombudsman scheme started by RBI in 1995 has been one of the better managed grievance redressal mechanisms presently operating in our country. But if you analyze the report carefully, you are in for a major surprise. Out of 71,274 complaints received by the ombudsmen during the year 2010-11, 50,474 complaints (i.e. 71%) were rejected by the ombudsmen for various reasons. Out of these, 36,522 complaints i.e.72% of the rejected complaints were non-maintainable, meaning thereby that they were outright rejected without even accepting them for consideration. This large number of rejections for whatever reasons indicate that either the banks’ customers are not aware of the rules of ombudsman scheme or the office of the ombudsman is not rising up to the aspirations of the bank customers.

    The report further states that the number of complaints rejected on various grounds is showing a rising trend. While 62% of the total complaints disposed off in 2009-10 were on account of rejection, the same accounted for 71% of the complaints disposed during 2010-11. This gives rise to a feeling that the office of the ombudsmen must be spending more time in rejecting rather than in accepting the complaints. This is because the percentage of rejection far outstrips the number of accepted complaints for the last three years. The following analysis of the rejected complaints clearly brings out the need to completely overhaul the scheme to suit the changing profile of bank customers, as more and more people from the rural background join the mainstream of banking due to financial inclusion programmes pursued by the government. 

    1. First reason for rejection: First resort complaints: During last year 16,755 complaints constituting 33% of the complaints rejected falls into the category of first resort complaints. The complaints referred to the ombudsman without first approaching the bank concerned are termed as first resort complaints. This happens because full details of the ombudsman scheme are neither available at the banks’ branches, nor are they properly communicated to the customers. It is practically difficult for every customer to look for the details of the scheme on the website of ombudsman and then prepare the complaint on the lines of the scheme. This is because a very limited people have access to and/or knowledge about Internet in our country, though it is growing fast. Besides the website itself is very formal and needs to be made more user-friendly so that ordinary citizens could easily understand the scheme. When the RBI has permitted the customer to submit a complaint even on a plain paper, a workable solution should be found out, rather than outright reject the complaint received without first referring to the bank concerned.  

    The report further states that the high percentage of first resort complaints indicates greater faith of the complainants in the banking ombudsman rather than their banks concerned in getting their problems solved. If that be the case, there is all the more reason to ensure that a practical solution should be found to totally eliminate such rejections. The best course in such cases is for the ombudsman to accept the complaint and handle it in the normal course, advising the complainant at the same time the correct procedure to be followed for his future guidance. But no complaint should be rejected for this reason, as full details of the scheme are hardly publicised and no branch of a bank is able to provide even a two-page leaflet containing important aspect of the scheme to its customers. It is, therefore, necessary to revisit the ombudsman scheme and drastically modify the terms of the scheme to allow the customers to submit complaints even before writing to the main office of the bank concerned.  

    2. Second reason for rejection: Complaints outside the scheme: Complaints received but are outside the scheme constitute the second highest percentage of rejections. 8,583 complaints (17% of the total rejection) were rejected because the complaints relate to areas which do not come under the purview of the scheme. This again is due to lack of communication of the details of the scheme to bank customers. But this also raises the question as to whether there is any scope to expand the areas to be covered by the ombudsman. It is worthwhile for the RBI to review the areas not covered by the scheme and explore the possibility of adding on more and more areas to meet customer expectations with out in any way intruding into the operational freedom of banking institutions. 

    3. Third reason for rejection: Complaints without sufficient cause: These constitute 11% of the total complaints rejected and appear large enough to go deep into the complaints to find out what makes the customer write to the ombudsman, if there is no sufficient cause to complain. As many as 5,447 complaints fall into this category and it is possible that the complainant may not have been able to put across his grievance in a manner understood by the ombudsman’s office. The best course in such cases is, before rejecting the complaint outright, the ombudsman’s office can contact the complainant at least on the telephone and have a chat with him or her to understand the reasons better and assess whether there is any merit in the complaint. This will not only create a lot of goodwill for the ombudsman, but will also help in eliminating such complaints by educating the customers.

    4. Fourth reason for rejection: Complicated complaints requiring elaborate evidence: 4,441 complaints constituting 9% of the complaints rejected fall into this category. It is rather strange that the ombudsman who is there to solve the problems faced by the customer should reject a complaint for the reason that it is too complicated requiring elaborate evidence. The ombudsman scheme provides for arbitration and there is no reason why these complicated complaints cannot be solved through arbitration if acceptable to the parties. If the ombudsman requires any assistance of specialists to solve these complicated cases, the RBI could think of appointing an advisory panel for every ombudsman, consisting of two persons, one an expert in banking and another a chartered account who has had experience in bank audits and these advisors could be consulted by the ombudsman wherever necessary, so that complicated complaints too get resolved to the satisfaction of the banks’ customers.   

    5. Fifth reason for rejection: Bank branches outside the jurisdiction of the ombudsman:  2,838 complaints (constituting 5% of the rejected complaints) were rejected simply because they fell outside the jurisdiction of the ombudsman, who received the complaint. Yes, the customer would have made the mistake of addressing the complaint to the wrong office of the ombudsman for want of information about the correct jurisdiction. This might have happened because the RBI is yet to arrange for an ombudsman in every state, and several states are clubbed together, which might have caused this mistake. But instead of rejecting them, these complaints could have been easily forwarded to the correct ombudsman, under whose jurisdiction they fall, under advice to the complainant, so that these complaints too get attended to by the right ombudsman. 

    Apart from the above changes suggested, there is a need to make the ombudsman more helpful, pro-active, transparent and responsive to meet the expectations of the customers and bring down the rejections considerably.  Every ombudsman’s office should have a toll-free number to enable the customers to seek any clarification, if necessary, before submitting their complaint. This toll-free number must be prominently displayed in every branch of a bank and also in ATM booths located in their jurisdiction. The complaint forms, too, must be made available through the branches of banks and this should be closely monitored through the internal inspection of every bank. 

    It may appear strange for us in India, but in United Kingdom there is a provision to evaluate even the level of service rendered to the complainants by the financial ombudsman, which speaks volumes about their transparency. Some of the most useful ways in which the UK ombudsman helps the banking public can be observed from the following information culled out from their very informative and illustrative website .

    “We answer over a million enquiries a year and deal with more than 200,000 disputes.” “We will be happy to phone you back, if you’re worried about the cost of calling us”

    “If you ask us to look into your complaint, we will explain any particular rules and restrictions that may apply in your own individual case—and we will always give you the chance to query anything you don’t understand. If you’re not sure if your complaint is one we can help with, just ask us.”

    “We can provide information about our service in different formats and languages. And we can adapt the way we communicate with you—depending on your needs. For example, we can use Braille, large print or audiotape and we can make and receive calls using Text Relay. Please let us know what your particular needs are, and we will do our best to help.”

    “If you are not happy with the way we have dealt with your case—or with the level of service we have provided—please let us know. We have a special procedure to handle complaints about our service—for example, if you think we have:

    • treated you rudely or unfairly;
    • failed to explain things properly; or
    • caused unnecessary delays (but please bear in mind our usual time-frame for resolving disputes, as explained above).

    “This procedure involves the independent assessor, who can carry out a final review of the way we have handled a complaint. The independent assessor is appointed by our board and has official terms of reference.” 

    The sky is the limit for anybody to improve their services, and UK ombudsman is a classic example of showing its desire to serve the public with great concern and total commitment, which could be achieved with a little more imagination and foresight. By raising the bar for the ombudsman to excel in customer service, banks too will get a clear message that there cannot be any compromise in so far as quality of customer service is concerned. 

    Can our ombudsmen, too, reach that level of perfection and provide that level of comfort to the public at large, and be a torch bearer of the customers’ rights to the extent of becoming a model for others to emulate? If people sitting in the RBI make up their mind, it is certainly possible to excel in this field also, as they have proved their mettle many times in the past in the matter of managing the banks of our country so admirably during the recent international turmoil in the financial world. 


    (The author is a banking and financial analyst. He writes for Moneylife under a pen-name ‘Gurpur’)

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    Tira T

    9 years ago

    There is no question of making the Ombudsmen "more"responsive when they hardly care for the grievances of the account holders and the Leftists-controlled Bank Unions (even highly paid/pampered Officers'unions) are totally anti-public. In West Bengal, for instance, SBI officers and staff are known for their misbehaviour and threats to any customer venting their problems. Not one single branch of SBI ever sends any TDS certificate to the customers/pemsion account holders and, if asked for, the latter are insulted. Ombudsman's post is a post-retirement posting given to the chosen few who do a lot of networking and render personal/private service to the bosses and their menians/families. Mamny officers with no particular track record are given these prizes and the awardees are not required to work at all. In every departmernt, Ombudsman is merely a showpiece with neither any powers/teeth nor any voice and even status vis-a-vis the serving officers. So, nobody needs to take them seriously and the incumbents also couldn't care less!

    Vaibhav Dhoka

    9 years ago

    The reason for this vast rejection is governments ill thought directive for Go-Green campaign making all authorities and regulators to adress web based i.e use of INTERNET without actually collecting data about NET savvy public.This has become boon to these authorites/regulators to throw away complaints.Take example of SEBI it has evolved it is failure at present.


    9 years ago

    I too headed customer grievances cell as a chief officer in a nationalised banks mumbai regional office and have found that over 90% of the customers complaints are relevant and dealt with it in a fair manner with satisfactory solutions within 24 hours generally by telephone to the branches to rectify. THE LEVEL OF REJECTION BY OMBUDSMAN speaks of lack of knowledge of nitty gritty at lower level matters or lack of staff provided to him making him reject most of the complaints.

    IN the fitness of things it is ideal to have an independent deputy ombudsman for each bank having over 300 branches so that justice is done to the complaints. Wrong references of jurisdiction should be redirected to right ones without fail under intimation to customers.

    With so many private bankers harassing the smaller customers one way or the other the number of complaints should show a rise every year instead of decline.

    Another frequently heard complaint is that any complaint against SBI is useless bec of its clout and not caring for RBI leave aside ombudsman

    I hope RBI will take due steps


    9 years ago

    In my experience, ombudsman doesn't work...cites bureaucratese clauses and sections and defends the guilty bank. There is no point in going to an ombudsman...

    Investor Interest   Exclusive
    SEBI targeting Veritas?

    Are vested interests in SEBI behind the proposed regulations to clamp down on firms like Veritas who bring out the truth in public interest?

    Securities Exchange Board of India (SEBI) has just announced its decision to clamp down on ‘independent research analysts’. We wonder who is SEBI after.

    According to the report, SEBI has come across certain instances where bear cartels have used the negative issues raised in these reports to beat down the share prices. On the other hand, positive reports have been used to push the prices higher as well. A SEBI official has been quoted as saying that new rules could also prescribe mechanisms to ensure that the research analysts’ trading activities or financial interests do not prejudice their reports.

    SEBI has not mentioned what has any “independent” research firm done to warrant this alarm. One place where such firms showcase their work is the National Stock Exchange website The Stock Exchange, Mumbai. On the NSE site, you will notice a section on ‘NSE-IPFT Sponsored Company Reports’, where you will find much of the so called ‘independent research’. It is actually done by a well known rating firm—CRISIL, controlled by Standard & Poor’s. Similarly, on the BSE website, there are reports which were done by rating agencies—CARE, ICRA, Fitch and Brickwork. Besides, there are reports from Dun & Bradstreet and Lotus Knowlwealth (LKW) which has done all the IPO research. Since the firms seem to be supplying all the research, is SEBI really targeting rating firms? That surely can’t be. Who is SEBI target then?

    The access to independent research is largely available to the public domain through the above mentioned exchanges. Unlike America where independent research is found in abundance, it is still at a nascent stage in India and is yet to grow and become more publicly accessible. Since there’s not much information on publicly available independent research, who is SEBI targeting exactly? It is Veritas.

    The best example of an independent research firm is Veritas, a Canadian-based firm, which has done some of the most remarkable and insightful research on Indian firms. It famously exposed Reliance Communications  and, most recently, Kingfisher Airlines and DLF . Are vested interests in SEBI behind the proposed regulations to clamp down on firms like Veritas who bring out the truth in interest of the public? Indeed, while he refused to name any particular research firm, the SEBI official was quoted as saying that reports from "one particular overseas research firm" has raised serious concerns about a few Indian groups in the recent months. Clearly, Sebi officials are in the grip of those who would prefer misgovernance of Indian companies remain hidden than exposed by firms like Veritas. 

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    dayananda kamath k

    9 years ago

    it is natural that sebi has top be worried because these issues will bringout inadeqacies of sebi as regulator. they are only doing giving acknowledgement numbers for investor complaints and not following it up as to how the company is dealing with investor complaints. if you give complaint against listed banking company they will forward it to reservebank of india even though issue is not of banking but of governance and misleading the invesotrs. so they will see to it that vested interests are protected. and their image is protected.

    K B Patil

    9 years ago

    As it is, the small investor is deserting the market since it is heavily rodent infested. Earlier, while there was some semblance of hope, he used to invest in IPOs. Now, that the companies that come out with IPOs do it with ulterior motives and with heavily cooked figures. So, even an average company is looked upon with suspicion. SEBI cannot just act as a sub registrar. It has to make life miserable for the crooks. This latest step is going to make it easier for them to continue with their 'loot and scoot' tactics.

    Nagesh Kini FCA

    9 years ago

    If SEBI or any authority seeks to clamp down on independent reports any high irregularity, malfeasance and misgoverance in Indian corporate world it is in deed a dark day for Good Corporate Practices in India. Bad for democracy and as right thinking Indian we need to stand up and oppose it tooth and nail.
    ML should bring out their reports on Kingfisher and others, who have been milking the small investors dry.

    R Balakrishnan

    9 years ago

    I fully believe that SEBI works only for big business and for corrupt politicians who have a large vested interest in the capital markets. And it is easier for them to pick up on "independent" firms like rating agencies, who will not dare oppose the regulator. SEBI will perhaps even 'persuade' the exchanges to stop carrying this research.
    And in any case, this independent research by rating agencies is only published on those companies that pay the rating agencies a fee. So, why should SEBI bother? It is only those companies that are not covered by influential brokers and think that their share price needs to go higher, will go to a rating agency to get 'indpendent' research done.
    So, in reality, other than the IPO research mentioned in the column, I suspect all the rest are actually 'paid' research, like 'paid' news.


    Vikas Gupta

    In Reply to R Balakrishnan 9 years ago

    I totally agree with u.

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