Chapter 11 Consumer Protection – CS Professional Banking Law and Practice Notes is designed strictly as per the latest syllabus and exam pattern.
Consumer Protection – CS Professional Banking Law and Practice Study Material
Question 1.
On what grounds, a customer can lodge a complaint with the Office of Banking Ombudsman for deficiency in service with respect to loans and advances? What is the cost involved in filing complaint with Banking Ombudsman? (June 2016, 5 marks)
Answer:
A customer can also lodge a complaint on the following grounds of deficiency in the service with respect to loan and advances:
- non-observance of Reserve Bank Directives on interest rates;
- delays in sanction, disbursement or non-observance of prescribed time schedule for disposal of loan applications;
- non- acceptance of application for loans without furnishing valid reasons to the applicant;
- non-adherence to the provisions of the fair practices code for lenders as adopted by the bank or Code of Bank’s Commitment to Customers, as the case may be;
- non-observance of any other direction or instruction of the Reserve Bank as may be specified by the Reserve Bank for this purpose from time to time.
There is no cost involved in filing complaints with Banking Ombudsman. The Banking Ombudsman does not charge any fee for filing and resolving customers’ complaints.
Question 2.
Discuss salient features of the ‘Banking Ombudsman Scheme’. On what grounds can a customer lodge a complaint of deficiency in service with respect to loans and advances to the Office of Banking Ombudsman? (Dec 2016, 5 marks)
Answer:
- The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks.
- This service is available for complaints against a bank’s deficiency of service.
- A bank’s customer can submit complaint against the deficiency in the service of the bank’s branch and the bank as applicable and if he does not receive a satisfactory response from the bank, he can approach Banking Ombudsman for further action.
- Banking Ombudsman is appointed by RBI under Banking Ombudsman Scheme, 2006. RBI as per Section 35A of the Banking Regulation Act, 1949 introduced the Banking Ombudsman Scheme with effect from 1995.
- All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.
As regards loans and advances, a customer can also lodge a complaint on the following grounds of deficiency in service with respect to loans and advances:
- Non-observance of Reserve Bank Directives on interest rates; delays in sanction, disbursement or non-observance of prescribed time schedule for disposal of loan applications;
- Non-acceptance of application for loans without furnishing valid reasons to the applicant; non-adherence to the provisions of the fair practices code for lenders as adopted by the bank or Code of Bank’s Commitment to Customers, as the case may be.
Example: Mr. X deposited a bank draft in his account but it was not credited to his account. After several reminder and communication to bank authorities at different level the problem was not sorted out. He decided to take shelter of judiciary but a bank manager advised him to contact the Ombudsman of banking. He did so with all documents. Within 10 days a decision was taken and he was paid the principal with 3 months interest.
Question 3.
Explain the guidelines of “Internal Ombudsman Scheme, 2018 for Scheduled Commercial Banks” issued by Reserve Bank of India. (Dec 2019, 6 marks)
Answer:
Reserve Bank of India (RBI) had, in May 2015, advised ail public-sector and select private and foreign banks to appoint Internal Ombudsman (IO) as an independent authority to review complaints that were partially or wholly rejected by the respective banks.
The IO mechanism was set up with a view to strengthen the internal grievance redressal system of banks and to ensure that the complaints of the customers are redressed at the level of the bank itself by an authority placed at the highest level of bank’s grievance redressal mechanism so as to minimize the need for the customers to approach other for a for redressal.
As a part of this customer-centric approach, to enhance the independence of the IO while simultaneously strengthening the monitoring system over functioning of the IO mechanism, RBI has reviewed the arrangement and issued revised directions under Section 35A of the Banking Regulation Act, 1949 in the form of ‘Internal Ombudsman Scheme, 2018’.
The Scheme covers, inter-alia, appointment / tenure, roles and responsibilities, procedural guidelines and over mechanism for the IO.
All Scheduled Commercial Banks in India having more than ten banking outlets (excluding Regional Rural Banks), are required to appoint IO in their banks. The IO shall, inter alia, examine customer complaints which are in the nature of deficiency in service on the part of the bank, (including those on the grounds of complaints listed in Clause 8 of the Banking Ombudsman Scheme, 2006) that are partly or wholly rejected by the Bank.
As the banks shall internally escalate all complaints, which are not fully redressed to their respective lOs before conveying the final decision to the complainant, the customers of the banks need not approach the IO directly. The implementation of IO Scheme 2018 will be monitored by the Bank’s internal audit mechanism apart from regulatory oversight by RBI.
Question 4.
In its ‘Statement on Developmental and Regulatory Policies’ issued in December 2018, RBI said : “With the digital mode for financial transactions gaining traction in the country, there is an emerging need for a dedicated, cost-free and expeditious grievance redressal mechanism for strengthening consumer confidence in this channel. It has therefore been decided to implement an ‘Ombudsman Scheme for Digital Transactions’ covering services provided by entities falling under Reserve Bank’s regulatory jurisdiction”. Explain in brief how the Ombudsman will deal the Customer Complaints and also explain the process for filing the complaints related to Digital Transactions raised by Bank Customers. (Dec 2021, 6 marks)
Answer:
The Ombudsman will deal the customer complaints as follows:
Ombudsman Scheme for Digital Transactions, 2019, launched under Section 18 of the Payment and Settlement Systems Act, 2007, to will provide a cost-free and expeditious complaint-redressal mechanism relating to deficiency in customer services in digital transactions conducted through non-bank entities regulated by Reserve Bank of India (RBI).
The offices of Ombudsman for Digital Transactions function from the existing 21 offices of the Banking Ombudsman and handle complaints of customers from their respective territorial jurisdiction.
The scheme provides for an appellate mechanism under which the complainant/system participant has the option to appeal against the decision of the Ombudsman before the appellate authority.
The Process for filing the Complaints is as follows:
- Any person who has a grievance on any one or more of the grounds mentioned herein may herself/ himself or through her/his authorized representative (other than an advocate) make a complaint against the branch or office of the system participant with the Ombudsman in the applicable jurisdiction.
- As for a complaint arising out of services with centralized operations, the jurisdiction would be the declared address of the complainant.
- The complaint is made within one year after the complainant has received the reply from the system participant to her / his representation, or if no reply has been received, not later than 1 year and 1 month after the date of representation to the system participant.
- The complaint shall be in writing duly signed and shall be in the complaint form furnishing full details.
- The complaint shall be accompanied by copies of documents to be relied upon.
- E-complaints are accepted.
- Complaints received by RBI/Go I can also be taken up by the Ombudsman.
Question 5.
Answer briefly the following question:
Which three schemes are integrated into Reserve Bank Integrated Ombudsman Scheme, 2021 ? (June 2022, 2 marks)