When Banking Ombudsman cites 'service gesture' from bank to dismiss customer complaint
In another example of callous handling of customer complaints, the Banking Ombudsman (BO) at Chennai dismissed a complaint from a borrower who did not get the benefit of a reduction in a ‘floating’ rate loan for over two years, while the rate had dropped from 15.60% to 9.65%. When the rate was eventually reduced on 1 April 2018, the lender, Citibank, called it a 'service gesture’ and the Banking Ombudsman agreed that this is good enough and dismissed the complaint. This means that the customer gets no respite or adjustment after having paid higher interest rates for two years after the marginal cost of funds based lending rate (MCLR) was introduced. The customer has been paying an interest rate of 15.60% in a scenario where rates are falling. The Bank has offered to reduce it to 9.65% from April 2018.  
 
In its communication on 3 May 2018, the BO says, "The Bank vide its letter dated 21 March 2018 confirmed that as a service gesture, they had taken a decision to revise the rate of interest from 15.60% to 9.65% from 1 April 2018 and the same was notified to you. In view of this, no further action against the bank is necessary and your complaint has been treated as dealt with and closed under Clause 11(3) of the BO Scheme."
 
 
The Ombudsman, which is highest forum in banking to provide justice or grievance redressal to a customer, then dismissed the complaint without taking any action against Citibank for extracting higher interest rates over the years.
 
 
This clearly shows that the higher rate of interest the Bank was charging for almost two years or 24 months even after introduction of MCLR and had offered to reduce it substantially (5.95%) only after complaint by the customer. Unfortunately, this also means the customer will end up paying over Rs10 lakh, as outstanding shown by bank despite its failure to reduce interest rates on his loans. 
 
Chennai-based Kumar Srinivas (name changed) had obtained two loans of Rs19.95 lakh from CITI Financial Consumer Finance India Ltd during December 2007 at a rate of 15% per annum. However, within seven month after availing the loan, the rate of interest was increased to 16.5% from 15%. The Company, without altering equated monthly instalment (EMI) amount extended loan repayment tenure to 173 months from 144 months as mentioned in the loan agreement.
 
For both the accounts, Srinivas continued to pay EMIs till November 2017. In these 10 years, he repaid Rs29,943 per month or Rs35.63 lakh for 119 EMIs. 
 
In the meantime, Citi Financial Consumer Finance, which became Citicorp Finance India Ltd, assigned Srinivas' two loan accounts to Citibank NA during in November 2015. He was told by the Bank that the internal prime lending rate of Citicorp Finance would be lined with applicable Citibank Mortgage Prime Rate (CMPR). 
 
The communication from Citibank says, "...as and when there is a change of interest, the first adjustment is made to the tenor of the loan, if the same does not fit our credit acceptance parameters, a change will be made to EMI amount."
 
This communication also claims that interest rate for the loans taken by Srinivas was reduced to 15.80% in October 2017 from 16.40% in December 2015.
 
In 2016, the Reserve Bank of India (RBI) introduced MCLR and asked all banks to inform their borrowers to change link interest rates to this new parameter without any additional cost. 
 
The Citibank communication says, "We confirm that the Bank has confirmed that for all loans booked prior to April 2016, as part of the repricing letters sent, the Bank had advised the option to convert to MCLR without any additional cost. In addition, a one-time communication was sent in November 2017 providing further details on the conversion along with an illustrative example on the effect of the conversion. However, we have not received any request from your end of conversion."
 
What has happened was after receiving communication from Citibank on outstanding amount Srinivas started communicating with them. It is where he found that the bank had never reduced interest rates on his loan despite reduction in monetary policy rates by the RBI. He says, "I have reworked my loan repayment chart applying reduction in rate of interest as announced by the RBI, keeping the margin for Bank as constant throughout. That is difference between RBI prime lending rates (PLR) prevailing on date of availment of loan to agree rate of interest at 15%, from time to time and I found that I have completed my entire loan in 112 months itself and seven EMIs of Rs29943 per month have been paid by me in excess for which I am entitled to get a refund of Rs2.10 lakh from them."
 
 
Since as per his calculation, his loan was repaid, Srinivas did not pay EMIs from December 2017 onwards, but paid Rs9230 or 30% of the EMI amount to make sure that his action does not fall under wilful default.
 
However, the Bank considers this as default. "We clarify that we are not in receipt of the EMI payment towards the loan accounts since December 2017. As on date, there is an overdue amount of Rs23,190 on loan ending 017 and Rs66,639 on loan ending 018. As on date, there is a net outstanding of Rs3.08 lakh and Rs8.92 lakh on both the loan accounts," the Bank says.
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    COMMENTS

    Satyam Savla

    1 year ago

    Wish I could post screenshots of a similar case of mine where HDFC bank ripped me and lots of other borrowers too by firstly not informing about changes in interest regimes (BPLR to Base Rate and then to MCLR) by using a clause that says it's the responsibility of the borrower to check with the bank on interest rate changes although RBI circular mentioned the word 'Reset' and ' borrowers consent' leading to 10 extra EMI's after the reduction. Also the drop off interest rate when I asked for it was termed as 'bank has demonstrated it's goodwill by reducing the rate when I asked for it'.

    REPLY

    ASHISH GOEL

    In Reply to Satyam Savla 2 months ago

    what you can do after when banking ombudsman does not provide you the benefit of change of bplr to mclr . can you go to a next step against banks policy , can you go to court againt bank for not provide the benefits of same. wht you do next against this case can you reply for this because banks also do same fraud with us and we recently know about this banking ombudsman also does not helps me, kindly can you helps me by providing the details what you do next.

    Sairam Maganty

    1 year ago

    The survival of all the banks depends on CASA -Current Account Savings Account, funds.CASA funds constitute about 45% to 50% of funds of any bank. All banks fleece savings account customers and customers of current accounts belonging to micro, small and medium enterprises customers . The illegally earned profits have been shared between top management of banks and multi billion industrialists like Vijay Malyas, Ambanis, Adanis, Birlas, Jai Shaw, and the like. The governments instead of criminally punishing top managementsof erring banks, protect them.

    Biswajit Banerjee

    1 year ago

    As is understood from the article that client in this case availed loan from a NBFC (where MCLR is not applicable.). Later the loan was assigned by NBFC to its parent company I.e. Citi Bank.
    Unfortunately, assignment does not entail the borrower to claim rights otherwise available to the bank customers. The contract in this case remained between borrower and NBFC only and thus it would be unfair to take a stand on Ombudsman based on limited facts of the instant case.
    One should be cautious before availing credit facility from NBFC.

    K S Jegannathan

    1 year ago

    I also had experience with SBI regarding PPF. These days we can pay PPF in any branch of SBI. However, when I went to a branch they refused to accept citing flimsy reasons. Ironically, past two years I was paying in the same branch. After much dithering, they accepted the payment by cheque. When I went to collect the Challan after few days, the lady staff warned me not come to the branch in future for payment of PPF and that I have to pay at the branch in which the original account was opened. I wrote an email letter to the Branch Manager with copies to the concerned officials but there was no action whatsoever. Despite, anywhere banking etc. SBI continues to hold the monopoly on PPF. When at a time RBI is contemplating bank account portability this remains strange.

    Gopalakrishnan T V

    1 year ago

    The approach that Customer is king and he is always right and he needs to be well taken care of, has been well brought out in the article and is well taken. But as far as banks are concerned there has to be a clear cut distinction between deposit customers and borrower customers. While the deposit customers who provide the life line to banks needs special attention and excellent serivce from banks , the same cannot be expected by all borrowers as most of the banks are put into losses because of bad borrowers and failure of the borrowers to comply with the terms and conditions set by the banks to avail of loans. The retail borrowers no doubt often get an illtreatmment from banks even though they are honest and prompt in the repayment of the loans and herein comes the banking Ombudsman to come to the rescue of such borrowers. But in the case cited in the article, the bank cannot be said to be fully at fault perhaps as the borrowers has availed of two sets of loans ie one from the NBFC of City Bank and one from the Bank itself. While the Ombudsman can help the borrower for all his bank loans the same cannot be expected of the loans from the NBFCs. Even the bank loans , the customer is expected to fully comply with the terms and conditions of the loan to enjoy the concessions and reliefs based on RBI directives if any on the rates of interest and other parameters. In the absence of the full details of loans and the terms and conditions set by the bank to the Customer, one cannot come to the Conclusion that the ombudsman's decision is against the customer's interest. It is for the bank and the Customer to have sorted out the issues amicably as the Customer seems to have misunderstood about the applicability of lower interest rates without fully satisfying all the terms and conditions in letter and spirit while operating the loan account. The bank also seems to have failed to guide the customer on the differences between bank loans and NBFC loans and the need to fully comply with the terms and conditions of the loans to enjoy the reliefs and concessions if any unless otheriwse specified elsewhere.

    Mahesh S Bhatt

    1 year ago

    Crap American Senseless Capital Terror Mahesh Bhatt

    RAMESH SUBRAMANIAN

    1 year ago

    In 2007 it was a NBFC loan for which MCLR is not applicable. MCLR was introduced for banks as per the article in 2016. Not know if reduced rate of interest is sought from 2007. If so can BO be held responsible?

    Vaibhav Dhoka

    1 year ago

    The fact is quasi judicial posts are created to give early and timely resolution of grievance which is cost effective but most of the times these officials fail to act and thus become burden on state exchequer.

    Sunil Prakash

    1 year ago

    In our country rules are made to be moulded as per own convenience. there is no fear as there is no-will to punish. till such time we become committed to our job, nothing will move. all will go as per convenience of the officer. All officers are hand in glove. The final issue comes to consumer whether official or un official.

    `Action against top bankers right, PNB MD should also keep away'
    The central government's action against three top bankers in the country is a welcome move, said a top leader of All India Bank Employees' Association (AIBEA) on Tuesday.
     
    He also said the Reserve Bank of India (RBI), its nominees on the board of Punjab National Bank (PNB) cannot escape responsibility for the Letters of Understanding (LoU) scam. 
     
    "The Central government's decision to keep away Ananthasubramanian, Managing Director and CEO of Allahabad Bank and the two Executive Directors in PNB from their banks is a welcome decision. It is good that the alleged wrongdoers are removed from the system," C.H. Venkatachalam, General Secretary, AIBEA told IANS on Tuesday.
     
    He said taking moral responsibility, the current Managing Director of PNB should also keep himself away from PNB till the probe into the alleged scam is over.
     
    Ananthasubramanian earlier headed the PNB.
     
    On Monday the Central Bureau of Investigation (CBI) filed its first chargesheet in the Rs 13,000 crore Nirav Modi scam in the Punjab National Bank (PNB).
     
    "Similarly, the current Managing Director of PNB Sunil Mehta should also keep away from the bank on moral grounds till the probe into the alleged scam is over," Venkatachalam added.
     
    He said the whole system at PNB has failed and the top management has to take responsibility given the magnitude of the fraud.
     
    The CBI has chargesheeted Ananthasubramanian and 21 others, including 11 bank officials in connection with the fraud in PNB allegedly masterminded by diamantire Nirav Modi and his uncle Mehul Choksi.
     
    Apart from Ananthasubramanian, the CBI has also charge sheeted two Executive Directors of PNB viz., K.V. Brahmaji Rao and Sanjiv Sharan and General Manager (International Operations) Nehal Ahad.
     
    Venkatachalam does not agree with the view that RBI was misled by PNB officials on the possible misuse of LoU.
     
    "The RBI has its nominees on the board of PNB. Further, RBI also inspects the bank branches. The RBI officials should also be brought under the net as they are culpable of serious negligence," Venkatachalam said.
     
    He said the exposure of the banking sector to the gems and jewellery sector was huge and the RBI should have taken necessary action as the sector was not a priority sector.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • User

    COMMENTS

    Ralph Rau

    1 year ago


    The Government knows that these headlines will give the impression it is serious about penalising corruption. Will the public be easily fooled?

    Has the root cause - the internal control system weakness - integrated front-end and back-end systems been fixed ?

    Will block-chain tools be deployed in Indian banks ?

    By when ?

    Ramesh Poapt

    1 year ago

    hope ML will write about record breaking performance of the bank for
    q.e. mar.18

    Sunil Prakash

    1 year ago

    After a long cry to PM some action has come forward. With Politicians, the CEOs of the banks are equally responsible as they also have share in the Kitty. Now when few will be penalised, others will improve. Yes few of the customers will have some difficulty in the beginning, but then it will be good on longterm for the general public who are wilful loan payers. The perpetual defaulters will have to mend themselves now.

    PNB scam: CBI chargesheet names Allahabad Bank CEO Usha Ananthasubramanian, 21 others
    The CBI on Monday filed a chargesheet against Allahabad Bank MD and CEO Usha Ananthasubramanian and 21 others, including 11 bank officials, in the over Rs 13,000 crore Punjab National Bank (PNB) fraud case in which diamantaire Nirav Modi and his uncle Mehul Choksi were allegedly involved.
     
    Ananthasubramanian, who was questioned by the Central Bureau of Investigation (CBI) in connection with the case, was the Managing Director (MD) and Chief Executive Officer (CEO) of PNB between August 2015 before her appointment in the Allahabad Bank in May 2017. 
     
    The agency also named PNB Executive Directors K.V. Brahmaji Rao and Sanjiv Sharan, and General Managers Nehal Ahad (who dealt in international operations) and Rajesh Jindal in its chargesheet filed in a special CBI court here.
     
    CBI officials said the chargesheet names Nirav Modi and his brother Nishal in connection with the issuance of Letters of Undertaking (LoUs) totalling Rs 6,498.20 crore during 2011-17.
     
    They said that a separate chargesheet in the second case involving Choksi will be filed later.
     
    The officials said Nirav Modi and Nishal were beneficiaries of the fraud, authorised signatories, and in the know of the whole scam. 
     
    The CBI had filed three FIRs between January and March to probe the PNB fraud. Most of the accused are common to these cases. 
     
    The chargesheet filed on Monday is based on CBI's FIR registered on January 31 against Nirav Modi, his wife Ami, brother Nishal, and uncle Choksi, among others. The second and third FIRs focus on Choksi, Gitanjali Gems and others.
     
    So far, 15 persons have been arrested while Modi and Choksi fled the country in January. 
     
    Modi's group companies -- Diamonds R US, Stellar Diamonds, and Solar Exports -- are also named in the chargesheet as borrowers. 
     
    Seven employees of Modi's group of companies -- Hemant Bhat, an authorised signatory; Vipul Ambani, President (Finance) of Firestar International; Miten Pandya, then Finance Manager of Firestar; Manish Bosamiya, former AGM of Firestar; Subhash Parab, key Executive (currently absconding); and Arjun Patil and Kavita Mankikar -- were also named in the chargesheet. 
     
    Chartered Accountant Sanjay Kumar Rambhia is also named in the chargesheet, which also mentions then PNB employees Gokul Nath Shetty (Deputy Manager), who was the first to be arrested, Manoj Kharat (Single Window Operator), Bechu B. Tiwari (Chief Manager), Yashwant Joshi (Manager), Praful Sawant (Officer) and Internal Chief Auditors Mohinder Kumar Sharma and Bishnubrata Mishra. 
     
    The chargesheet says that Nirav Modi, Nishal, and other public and private persons conspired for the issuance of fraudulent LoUs in favour of the three firms (named in the chargesheet) without any sanctioned limit, cash margin and making entries in the Core Banking Solution (CBS) system.
     
    Investigators found that the funds were siphoned off to purported overseas supplier firms that was a set-up by Nirav Modi and his firms. 
     
    "Senior officials of the PNB did not implement Reserve Bank of India (RBI) circulars on the matter and misrepresented the facts. Reconciliation of SWIFT (Society for Worldwide Inter-Bank Financial Telecommunication) messaging system CBS was not done despite repeated caution notices of the RBI," a CBI official said.
     
    CBI Spokesperson Abhishek Dayal said that the CBI has searched 42 premises, arrested 15 persons and questioned 80 witnesses in the case. 
     
    A similar fraud was detected in 2016, in which funds under the garb of LoUs were transferred in favour of a Hong-Kong-based company, purportedly issued by the Chandigarh branch of a nationalised bank to overseas branches of two other nationalised banks, including PNB. Ananthasubramanian was the CEO of the PNB at that point in time, said the CBI. 
     
    "Ananthasubramanian and her team was in the knowledge of the crime. She along with other bank officials has been named in the chargesheet as they could not give satisfactory replies in regard to the case during questioning by the agency," the CBI added.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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