Banking Ombudsman

A customer with a Rs 4,000 dispute cannot litigate. The cost of a civil suit exceeds the amount at stake, and the bank knows it. Without some cheaper forum, small grievances simply go unremedied.

The Banking Ombudsman is that forum. Appointed by the RBI, and operating under the Integrated Ombudsman Scheme, the office hears complaints about the services offered by banks — free to the complainant, and without lawyers.

Its jurisdiction reaches further than banks alone: it also hears complaints related to credit cards issued by banks and by non-banking finance companies.

The bank comes first. Every bank has a customer redressal department, and typically a three-tier internal system — Branch Manager, Zonal Manager, and GM-Customer Service. The complainant must go there first. Only if no satisfactory resolution is received within one month may the Ombudsman be approached.

What falls within scope. The Integrated Ombudsman Scheme is the redressal forum for complaints against the services of a bank for the receipt and payment of funds to and from the holder's account. Also referable are disputes about:

• interest charged or credited;
• penalty or fees charged;
• ATM cards, debit cards and credit cards;
• refusing a loan without valid reasons.

How to file. Online, by email to the Integrated Ombudsman, or physically at the office. The name and address of the Ombudsman concerned is available at every bank branch.

What happens then. If the complaint is valid, the Ombudsman attempts a settlement with the bank. If a settlement does not happen within one month, the Ombudsman passes an award, after giving both sides a chance to state their case.

The wider machinery. Most banks are members of the BCSBI and have voluntarily adopted its Code as their fair practice code. Grievances received by a department online or by post are processed and forwarded through CPGRAMS — the Centralized Public Grievance Redress and Monitoring System — to the concerned organisations for resolution, and are monitored and periodically reviewed. The portal is at www.pgportal.gov.in.

A retired client is debited Rs 48,000 in four unauthorised transactions on a credit card issued by her bank. She raises it at the branch on 5 March.

Cost to her: nil. The forum is free, and she needs no lawyer.

Now vary two facts, and watch the forum change.

The rupee amount is identical in every row. The forum is decided by who the service provider is and which regulator supervises them, and that is precisely what the paper tests.

Where the adviser adds value. Had she gone straight to the Ombudsman on 5 March, the complaint would have been premature — the bank's one month had not run. The single most common reason a grievance stalls is that the internal stage was skipped.

Chapter 20 (Grievance Redress Mechanism), section 20.6.2 on the Integrated Ombudsman Scheme and 20.6.3 on escalation, with grievance redress in insurance at 20.7 and the SEBI machinery earlier in the chapter. This chapter is worth a meaningful share of the paper and the questions are about routing: who appoints the Ombudsman, what falls within scope, and how long the complainant must wait before escalating.

• The RBI appoints the Banking Ombudsman. The Insurance Ombudsman is appointed by the Government of India under the Redressal scheme, and SEBI runs SCORES for the securities market. Three forums, three appointing authorities.
• Go to the bank first, and wait one month. A complaint made before the internal mechanism has had its month is premature.
• There are two separate one-month periods — one for the bank to resolve, one for the Ombudsman to settle before passing an award. Questions merge them.
• Credit cards issued by NBFCs are within scope, even though an NBFC is not a bank. This is a favourite distractor.
• Refusing a loan without valid reasons is referable. Refusing a loan with valid reasons is a commercial decision and is not.
• An award follows a failed settlement; it is not the first step. The Ombudsman attempts mediation before adjudicating.
• CPGRAMS is a routing and monitoring portal, not an ombudsman. It forwards grievances to the concerned organisations and tracks them.
• Match the forum to the regulator, not to the product you bought at the bank branch. An insurance policy sold in a bank branch is an insurance grievance.