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CHAPTER – I
INTRODUCTION
Banks are the businesses that deal in money. Bank customers can deposit their
money in bank accounts. Customers can also borrow money from banks. This
borrowed money is called a bank loan. When customers use the services of a bank,
they are doing their banking. Banks provide these services for many different
customers, including children, adults, and business.
Banks use the money that customers deposit in bank accounts to make more
money. They lend some of the money to other customer’s interest for using this
money. Banks pay some of the interest to the customers who made deposits. They
make a profit by keeping the rest.
Banks also invest some of their customer’s money to make more money. They
invest in other businesses, both local and overseas. Banking industry plays a major in
the Indian financial system and provides a wide range of services. It is a financial
institution dealing with deposits, advances and the other related service activities.
1) Receiving deposits:
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Any sum of money can be withdrawn from this type of account any time
without any prior notice or such. No interest is allowed on this type of account.
This type of account is maintained for the purpose of liquidity instantly by the
individuals. This type of account carries low interest rate.
This type of account is different from the above two types of accounts and is
maintained for a fixed period barring high interest rate which can be withdrawn either
on maturity date or before the date of maturity as per norms of banks.
2) Advancing loans:
This is the important function of the Commercial banks. Credit is given to the
people in different ways.
These loans are advanced for the period of 6 months to 1 year. Higher rate of
interest is charged.
Loans advanced for a period of 1 year to 5 years are called medium term loans.
Loans which are advanced for a period of more than 10 years are called long
term loans.
3) Bank Overdraft:
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Banks allows their trustful customers to draw more than the deposit they have
in the banks. A higher rate of interest is charged on Overdraft.
4) Cash Credit:
Banks also advances credit against immovable properties and charge interest on
credit advanced.
5) Discounting of bills:
TYPES OF BANKS
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
A bank which is entrusted with the functions of guiding and regulating the
banking system of a country is known as its Central bank. Such a bank does not deal
with the general public. It acts essentially as Government’s banker; maintain deposit
accounts of all other banks and advances money to other banks, when needed. The
Central Bank provides guidance to other banks whenever they face any problem. It is
therefore known as the banker’s bank. It advises the Government on monetary and
credit policies and decides on the interest rates for bank deposits and bank loans.
Another important function of the Central Bank is the issuance of currency notes,
regulating their circulation in the country by different methods. No other bank than the
Central Bank can issue currency.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Commercial Banks are banking institutions that accept deposits and grant
short- term loans and advances to their customers. In addition to giving short-term
loans, commercial banks also give medium-term and long-term loan to business
enterprises. Commercial banks are of three types:
Examples of Private Sector Banks are: Jammu and Kashmir Bank Ltd., Bank of
Rajasthan Ltd., Development Credit Bank Ltd., Bharat Overseas Bank Ltd., Oriental
Bank of Commerce, Vysya Bank, Axis Bank., etc.
These banks are registered and have their headquarters in a foreign country but
operate their branches in our country. Some of the foreign banks operating in our
country are Hong Kong and Shanghai Banking Corporation (HSBC), Citibank,
American Express Bank, Standard & Chartered Bank, Grindlay’s Bank, etc. The
number of foreign banks operating in our country has increased since the financial
sector reforms of 1991.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Finance Corporation of India (IFCI) and State Financial Corporation’s (SFCs) are
examples of development banks in India.
People who come together to jointly serve their common interest often form a
co- operative society under the Co-operative Societies Act. When a co-operative
society engages itself in banking business it is called a Co-operative Bank. The society
has to obtain a license from the Reserve Bank of India before starting banking
business. Any co-operative bank as a society is to function under the overall
supervision of the Registrar, Co-operative Societies of the State. As regards banking
business, the society must follow the guidelines set and issued by the Reserve Bank of
India. There are three types of co-operative banks operating in our country:
There are some banks, which cater to the requirements and provide overall
support for setting up business in specific areas of activity. EXIM Bank, SIDBI and
NABARD are examples of such banks. They engage themselves in some specific area
or activity and thus, are called specialized banks.
The present study covers the aspect of bankig services in India with special
reference to Ombudsman mechanism. It also deals precicsly the orign of banking in
India. The failure of the Banking Ombudsman can be known after the detailed and
careful examination of the aspects related on the performance as mentioned above.The
policies and procedures of Banking Ombudsman are governed by Reserve Bank of
India. It is regarding the registering of complaints from the prospective customers and
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providing a solution according to the purview of the board without any favoritism
neither to the bank nor the customer. The performance of the Banking Ombudsman
can be analyzed on the aspects such as:
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
3. It shows upto what extent the policies and procedures of Banking Ombudsman
Scheme are reaching to the outright customer(s).
4. It explains how all the banks in the country are bound to abide by the policies
and procedures framed by RBI.
5. It explains the functioning of all types of banks in accordance to the rules and
regulations of Central Bank Of India.
6. It aids to know whether the services of bank(s) are satisfying the targeted
customer(s) or not.
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CHAPTER – II
MODERN TRENDS IN
BANKING INDUSTRY
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2.1) INTRODUCTION
In India, the banks are being segregated in different groups. Each group has its
own benefits and limitations in operating in India and its own dedicated target market.
Only few of them work in the rural and urban sectors. Some of these banks are of
Indian origin and some are foreign players.
With years, banks are also adding services to their customers. The Indian
banking industry is passing through a phase of customers market. The customers have
more choices in choosing their banks. A competition has been established within the
banks operating in India. With stiff competition and advancement of technology, the
services provided by banks have become more easy and convenient. The past days are
witness to an hour wait before withdrawing cash from accounts or a cheque from the
north of the country being cleared in one month in the south.
Today, we are having a fairly well developed banking system with different
classes of banks – public sector banks, foreign banks, private sector banks – both old
and new generation, regional rural banks and co-operative banks with the Reserve
Bank of India as the fountain Head of the system.
right technology to supply timely information will see productivity increase and
thereby gain a competitive edge.
Following are the innovative services offered by the industry in the recent
past:
Real Time Gross Settlement system, introduced in India since March 2004, is a
system through which electronics instructions can be given by banks to transfer funds
from their account to the account of another bank. The RTGS system is maintained
and operated by the RBI and provides a means of efficient and faster funds transfer
among banks facilitating their financial operations. As the name suggests, funds
transfer between banks takes place on a ‘Real Time' basis. Therefore, money can
reach the beneficiary instantaneously and the beneficiary's bank has the responsibility
to credit the beneficiary's account within two hours.
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requesting for such transfers so that the amount reaches the beneficiaries' account
correctly and faster. RBI is the service provider of EFT.
Automatic Teller Machine is the most popular devise in India, which enables
the customers to withdraw their money 24 hours a day 7 days a week. It is a devise
that allows customer who has an ATM card to perform routine banking transactions
without interacting with a human teller. In addition to cash withdrawal, ATMs can be
used for payment of utility bills, funds transfer between accounts, deposit of cheques
and cash into accounts, balance enquiry etc.
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The banks were quickly responded to the changes in the industry; especially the
new generation banks. The continuance of the trend has re-defined and re-engineered
the banking operations as whole with more customization through leveraging
technology. As technology makes banking convenient, customers can access banking
services and do banking transactions any time and from any ware. The importance of
physical branches is going down.
It has not been a smooth sailing for banks keen to jump onto the IT bandwagon.
There have been impediments in the path like the obduracy once shown by trade
unions who felt that IT could turn out to be a threat to secure employment. Further, the
expansion of banks into remote nooks and corners of the country, where logistics
continues to be a handicap, proved to be another stumbling stock. Another challenge
the banks have had to face concerns the inability of banks to retain the trained and
talented personnel, especially those with a good knowledge of IT.
Some are investing in it to drive the business growth, while others are having
no option but to invest, to stay in business. The choice of right channel, justification of
IT investment on ROI, e-governance, customer relationship management, security
concerns, technological obsolescence, mergers and acquisitions, penetration of IT in
rural areas, and outsourcing of IT operations are the major challenges and issues in the
use of IT in banking operations. The main challenge, however, remains to motivate
the customers to increasingly make use of IT while transacting with banks. For small
banks, heavy investment requirement is the compressing need in addition to their
capital requirements. The coming years will see even more investment in banking
technology, but reaping ROI will call for more strategic thinking.
In the days to come, banks are expected to play a very useful role in the
economic development and the emerging market will provide ample business
opportunities to harness. Human Resources Management is assuming to be of greater
importance. As banking in India will become more and more knowledge supported,
human capital will emerge as the finest assets of the banking system. Ultimately
banking is people and not just figures.
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Banking landscape is changing very fast. Many new players with different
muscle powers will enter the market. The Reserve Bank in its bid to move towards the
best international banking practices will further sharpen the prudential norms and
strengthen its supervisor mechanism. There will be more transparency and disclosures.
Everyone today is convinced that the technology is going to hold the key to
future of banking. The achievements in the banking today would not have make
possible without IT revolution. Therefore, the key point is while changing to the
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current environment the banks has to understand properly the trigger for change and
accordingly find out the suitable departure point for the change.
2.6. CONCLUSION
The banking today is re-defined and re-engineered with the use of Information
Technology and it is sure that the future of banking will offer more sophisticated
services to the customers with the continuous product and process innovations. Thus,
there is a paradigm shift from the seller's market to buyer's market in the industry and
finally it affected at the bankers level to change their approach from "conventional
banking to convenience banking" and "mass banking to class banking". The shift has
also increased the degree of accessibility of a common man to bank for his variety of
needs and requirements.
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While public sector banks are in the process of restructuring, private sector
banks are busy consolidating through mergers and acquisitions (the sector has been
recently opened up for foreign investments). PSB’s need to improve in the services
like ATM’s, Credit and Debit cards. They lack behind in providing facilities like loans
and other accounts. These branches are not interlinked with each other and working
hours are less.
In case of Private sector banks customers are not aware of the facts and hidden
costs in view, as there are various products and facilities provided by the banks. The
charges that are been taken are also too high. Challenges and Opportunities exist for
both the public sector as well as the private sector banks, their nature however differs.
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CHAPTER – III
OMBUDSMAN MECHANISM
3.1) INTRODUCTION
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The word ‘Ombudsman’ (‘ahm’ ‘bedz’ ‘man’), in general, means a public official
who is appointed to investigate the citizen’s complaints against the Administration. He
is to intervene for the ordinary citizens in his dealings with the complex machinery of
the establishment.
The Banking Ombudsman Scheme, 1995 was notified by RBI on June 14, 1995
in terms of the powers conferred on the Bank by Section 35A of the Banking
Regulation Act, 1949 to provide for a system of redressal of grievances against banks.
The Scheme sought to establish a system of expeditious and inexpensive resolution of
customer complaints. The Scheme is in operation since 1995 and has been revised
during the years 2002 and 2006. The Scheme is being executed by Banking
Ombudsmen appointed by Reserve Bank at 15 centers covering the entire country. As
mandated by the Banking Ombudsman Scheme, the Banking Ombudsmen submit an
Annual Report on the functioning of their offices every year. Based on such reports,
an Annual Report for the Banking Ombudsman Scheme in a whole is prepared at
Reserve Bank of India, Central Office. As is being the practice, the Annual Report
covers the last five-year period with focus on the current year. Further, as a result of
computerization of the functioning of Banking Ombudsman Offices through the
Complaint Tracking Software, detailed analysis was possible on the information
pertaining to year 2006-07. With the decision to merge the Banking Ombudsman
Offices with that of RBI offices, the accounting period for the Banking Ombudsman
Offices was changed from April 1-March 31 to July 1-June 30 to be in congruent with
that of RBI offices. Accordingly, the information analysed for the year 2006-07
pertains to the period July 1, 2006 to June 30, 2007.
Ombudsman if his complaint pertains to any of the matters specified in the Scheme.
Banking Ombudsmen have been authorized to look into complaints concerning
deficiency in banking service , sanction of loans and advances in so far as they relate
to non-observance of the Reserve Bank directives on interest rates, delay in sanction
or non-observance of prescribed time schedule for disposal of loan applications or
nonobservance of any other directions or instructions of the Reserve Bank as may be
specified for this purpose, from time to time, and such other matters as may be
specified by the Reserve Bank. The Scheme envisages expeditious and satisfactory
disposal of customer complaints in a time bound manner.
The Banking Ombudsman Scheme, 2002 covered all the Regional Rural Banks
in addition to all Commercial Banks and Scheduled Primary Co-operative Banks,
which were already covered by earlier Banking Ombudsman Scheme, 1995. There is
no change in this regard in the Banking Ombudsman Scheme, 2006.
notice to the customer and non adherence to the fair practices code as adopted by
individual banks. The important new grounds of complaints added include credit card
issues, failure in providing the promised facilities, non-adherence to fair practices
code, levying of excessive charges without prior notice and issues pertaining to
accepting payment towards taxes and issuing/servicing of Government securities. The
grounds of complaints have been enumerated in Clause 8 of the Banking Ombudsman
Scheme, 2006.
3.4) OPERATIONALISATION
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The Bank’s policy on grievance redressal follows the under noted principles:
4) Bank will treat all complaints efficiently and fairly as they can damage the
bank’s reputation and business if handled otherwise. The Bank employees must work
in good faith and without prejudice to the interests of the customer.
The customer is having full right to register his complaint if he is not satisfied
with the services provided by the bank. Customer can give his complaint in writing,
orally or over telephone. If customer’s complaint is not resolved within given time or
if he is not satisfied with the solution provided by the bank, he can approach Banking
Ombudsman with his complaint or other legal avenues available for grievance
redressal.
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KINDS OF OMBUDSMAN
BANKING OMBUDSMAN
INSURANCE OMBUDSMAN
TELECOM OMBUDSMAN
ELECTRICITY OMBUDSMAN
S.E.B.I OMBUDSMAN
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The Securities Exchange Board of India (SEBI) under section 30 read with sub-
section (1) of section 11 of the SEBI Act, 1992, has framed the SEBI (Ombudsman)
Regulations, 2003, which were notified on 21stAugust 2003. The Regulations
provided for the establishment of the office of Ombudsman to redress the Grievance
of investors in securities and connected matters. The listed companies and registered
stock intermediaries have to disclose the name address and other particulars of
ombudsman in their for the benefit of the investors.
The Electricity Regulatory Commission, under section 181 read with sub-section
(5) of section 42 of the Electricity Act, 2003, issues guidelines for establishment of
forum and Ombudsman for redressal of grievances of Electricity consumers. The
Delhi Regulatory Commission (DERC) vide its Notification dated 11thMarch, 2006
has issued DERC (Guidelines for establishment of Forum of redressal of grievance of
the consumer and Ombudsman) Regulations, 2003. It may be noted that the
Ombudsman is the Appellate Authority under the Electricity Act 2003, and the DERC
Regulations, 2003 and therefore an electricity consumer has to first approach the
Consumer Grievance Redressal Forum established under the DERC Regulations,
2003.
The Telecom Regulatory Authority of India Act, 1997, empowers the Telecom
Regulatory Authority of India Act 1997, empowers the Telecom Regulatory Authority
of India (TRAI) to make the recommendations on laying down the standards of
quality of services to be provided by the services providers and conduct the interest of
the periodical surveys of Telecom services so as to protect the interest of the
consumers. The telecoms operators frequently threaten to disconnects the phones and
with draw the numbers given t o subscribers if the deadline for payment is missed by a
day or there is miscalculation of the tiniest amount. The TRAI is, however, neither
empowered to look into the grievances of individual customers nor take action against
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the operators who do not meet quality of standards As there is no specialized body to
redress the grievance of telecom customers, they have to approach consumer forum
setup under THE Consumer Protection Act, 1986, or civil courts for Resolutions
adjudication of disputes.
Insurance Division under section 114 (1) of Insurance Act, 1938, has framed the
“Redressal of Public Grievance Rules, 1998”, for appointment of Insurance
Ombudsman, which comes into force with effect from 11thNovember 1998. The
Insurance Ombudsman has started functioning from 1999, to provide for efficient,
cost effective and impartial settlement of claims and grievance of any person against a
Life or General Insurance in Public and private sector. The meaning of expression
‘any other person’ is wider than ‘consumer’ and therefore, even third party having
grievance with respect to an Insurance contract can approach the Ombudsman.
The Reserve Bank of India (RBI) first introduced the Banking Ombudsman
Scheme In1995 in terms of Section 35(A) of Banking Regulation Act 1949 and it was
revised in 2002 and 2006 to provide a system of quick and inexpensive redress of
customer grievances against banks.
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Now let us discuss in detail about Banking Ombudsman and its mechanism as a
grievances redressal agency in next chapter.
This Scheme may be called the Banking Ombudsman Scheme, 2006 and shall
extend to the whole of India to the business in India of a bank as defined under the
Scheme. The Reserve Bank, if it is satisfied that it is expedient so to do, may by order
suspend for such period as may be specified in the order, the operation of all or any of
the provisions of the Scheme, either generally or in relation to any specified bank.
(1) This Scheme may be called the Banking Ombudsman Scheme, 2006.
(2) It shall come into force on such date as the Reserve Bank may specify.
(4) The Scheme shall apply to the business in India of a bank as defined under
the Scheme.
(2) The Reserve Bank may, by order, extend from time to time, the period of any
suspension ordered as aforesaid by such period, as it thinks fit
The Reserve Bank may appoint one or more of its officers in the rank of Chief
General Manager or General Manager to be known as Banking Ombudsman to carry
out the functions entrusted to them by or under the Scheme.
(1) The Reserve Bank shall specify the territorial limits to which the authority
of each Banking Ombudsman appointed under Clause 4 of the Scheme shall
extend.
(2) The Banking Ombudsman shall receive and consider complaints relating to
conciliation and mediation between the bank concerned and the aggrieved
parties or by passing an Award in accordance with the Scheme.
and control over his Office and shall be responsible for the conduct of business
thereat.
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(4) The Office of the Banking Ombudsman shall draw up an annual budget for
itself in consultation with Reserve Bank and shall exercise the powers of
expenditure within the approved budget on the lines of Reserve Bank of India
(5) The Banking Ombudsman shall send to the Governor, Reserve Bank, a
report, as on 30th June every year, containing a general review of the activities
of his Office during the preceding financial year and shall furnish such other
information as the Reserve Bank may direct and the Reserve Bank may, if it
considers necessary in the public interest so to do, publish the report and the
information received from the Banking Ombudsman in such consolidated form
or otherwise as it deems fit.
1) The Ombudsman shall enquire into and investigate in accordance with the
Provisions of the Act, and take action or steps as may be prescribed by the
Act and concerning:
a) That the provisions of any law or under the authority of the State or by
any person in its employment, or that any practice is so followed, in a
manner which is not in the public interest.
b) That the powers, duties or functions which vest in the State or, body or
institution, or any person in its employment are exercised or performed
in an irregular manner.
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3) That moneys forming part of the funds of the State or body or institution, or
received or held by or on behalf of the State or body or institution are being
or have been dealt with an irregular manner.
The provisions shall not apply in respect of any decision taken in or in connection
with any civil or criminal case by a court of law.
The type and scope of the complaints which may be considered by a Banking
Ombudsman is very comprehensive, and it has been empowered to receive and
consider complaints pertaining to the following :
8) Failure to provide or delay in providing a banking facility (other than loans and
advances) promised in writing by a bank or its direct selling agents;
11)Refusal to open deposit accounts without any valid reason for refusal;
20)Any other matter relating to the violation of the directives issued by the
Reserve Bank in relation to banking or other services.
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6) The Banking Ombudsman may also deal with such other matter as may be
specified by the Reserve Bank from time to time.
a) One has not approached his bank for redressal of his grievance first.
b) One has not made the complaint within one year from the date one has received the
reply of the bank or if no reply is received if it is more than one year and one month
from the date of representation to the bank.
c) The subject matter of the complaint is pending for disposal / has already been deal
with at any other forum like court of law, consumer court etc.
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d) Frivolous or vexatious.
f) The subject matter of the complaint is not within the ambit of the Banking
Ombudsman.
g) If the complaint is for the same subject matter that was settled through the office of
the Banking Ombudsman in any previous proceedings.
1) Any person who has a grievance against a bank on any one or more of the
grounds mentioned in Clause 8 of the Scheme may, himself or through his
authorized representative (other than an advocate), make a complaint to the
Banking Ombudsman within whose jurisdiction the branch or office of the
bank complained against is located.
2) Complaints arising out of the operations of credit cards, shall be filed before
the Banking Ombudsman within whose territorial jurisdiction the billing
address of the card holder is located and not the place where the bank
concerned or the credit card processing unit is located.
3) The complaint shall be made in writing duly signed by the complainant or his
authorized representative and shall as far as possible be in the form and shall
contain such particulars as specified in the Scheme.
4) The complainant shall file along with the complaint, copies of the documents,
if any, which he proposes to rely upon and also a declaration that the
complaint is maintainable as per clause 9(3) of the Scheme.
7) The complaint can be filed if the bank has rejected the complaint or the
complainant had not received any reply within a period of one month after
the bank received his representation or if the complainant is not satisfied with
the reply given to him by the bank.
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8) The complaint to the Banking Ombudsman is to be made not later than one
year after the complainant has received the reply of the bank to his
representation or, where no reply is received, not later than one year and one
month after the date of the representation to the bank.
9) The complaint should not be in respect of the same subject matter which was
settled or dealt with on merits by the Banking Ombudsman in any previous
proceedings whether or not received from the same complainant or along with
one or more complainants or one or more of the parties concerned with the
subject matter.
10) The complaint should not pertain to the same subject matter, for which
any proceedings before any court, tribunal or arbitrator or any other forum is
pending or a decree or Award or order has been passed by any such court,
tribunal, arbitrator or forum.
12) The complaint should be made before the expiry of the period of
limitation prescribed under the Indian Limitation Act, 1963 for such claims.
(1) For the purpose of carrying out his duties under this Scheme, a Banking
Ombudsman may require the bank against whom the complaint is made or anyother
bank concerned with the complaint to provide any information or furnishcertified
copies of any document relating to the complaint which is or is alleged to be in its
possession.
Provided that in the event of the failure of a bank to comply with the
requisition without sufficient cause, the Banking Ombudsman may, if he deems fit,
draw the inference that the information if provided or copies if furnished would be
unfavorable to the bank.
discharging his duties and shall not disclose such information or document to any
person except with the consent of the person furnishing such information or
document.
Provided that nothing in this clause shall prevent the Banking Ombudsman
from disclosing information or document furnished by a party in a complaint to the
other party or parties to the extent considered by him to be reasonably required to
comply with any legal requirement or the principles of natural justice and fair play in
the proceedings.
(1) As soon as it may be practicable to do, the Banking Ombudsman shall send
a copy of the complaint to the branch or office of the bank named in the complaint,
under advice to the nodal officer referred to in Sub Clause (3) of Clause 15, and
endeavour to promote a settlement of the complaint by agreement between the
complainant and the bank through conciliation or mediation.
(2) For the purpose of promoting a settlement of the complaint, the Banking
Ombudsman may follow such procedure as he may consider just and proper and he
shall not be bound by any rules of evidence.
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(2) The Banking Ombudsman shall take into account the evidence placed
before him by the parties, the principles of banking law and practice, directions,
instructions and guidelines issued by the Reserve Bank from time to time and such
other factors which in his opinion are relevant to the complaint.
(3) The award shall state briefly the reasons for passing the award.
(4) The Award passed under Sub Clause (1) shall contain the direction/s, if any,
to the bank for specific performance of its obligations and in addition to or otherwise,
the amount, if any, to be paid by the bank to the complainant by wayof compensation
for any loss suffered by the complainant, arising directly out of the act or omission of
the bank.
(6) In the case of complaints, arising out of credit card operations, the Banking
Ombudsman may also award compensation not exceeding Rs. 1 lakh to the
complainant, taking into account the loss of the complainant's time, expenses incurred
by the complainant, harassment and mental anguish suffered by the complainant.
(7) A copy of the Award shall be sent to the complainant and the bank.
(8) An award shall lapse and be of no effect unless the complainant furnishes to
the bank concerned within a period of 30 days from the date of receipt of copy of the
Award, a letter of acceptance of the Award in full and final settlement of his claim.
(9)The bank shall, unless it has preferred an appeal under Sub Clause (1) of
Clause 14, within one month from the date of receipt by it of the acceptance in writing
of the Award by the complainant under Sub Clause (8), comply with the Award and
intimate compliance to the Banking Ombudsman.
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The Banking Ombudsman may reject a complaint at any stage if it appears to him
that a complaint made to him is:
(c) Requiring consideration of elaborate documentary and oral evidence and the
proceedings before the Banking Ombudsman are not appropriate for
adjudication of such complaint; or
If one is not satisfied with the decision passed by the Banking Ombudsman, one
can approach the appellate authority against the Banking Ombudsman’s decision.
Appellate Authority is vested with a Deputy Governor of the RBI.
One can also explore any other recourse and/or remedies available to him/her as per
the law. The bank also has the option to file an appeal before the appellate authority
under the scheme.
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Provided that in case of appeal by a bank, the period of thirty days for filing an
appeal shall commence from the date on which the bank receives letter of acceptance
of Award by complainant under Sub Clause (6) of clause 12;
Provided that the Appellate Authority may, if he is satisfied that the applicant had
sufficient cause for not making the appeal within time, allow a further period not
exceeding 30 days;
Provided further that appeal may be filed by a bank only with the previous
sanction of the Chairman or, in his absence, the Managing Director or the Executive
Director or the Chief Executive Officer or any other officer of equal rank.
The Appellate Authority shall, after giving the parties a reasonable opportunity of
being heard:
d) Modify the award and pass such directions as may be necessary to give
effect to the modified award; or
The order of the Appellate Authority shall have the same effect as the Award
passed by Banking Ombudsman under clause 12 or the order rejecting the complaint
under clause 13, as the case may be.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
The banks covered by the Scheme shall ensure that the purpose of the Scheme
and the contact details of the Banking Ombudsman to whom the complaints are to be
made by the aggrieved party are displayed prominently in all the offices and branches
of the bank in such manner that a person visiting the office or branch has adequate
information of the Scheme.
CHAPTER – IV
DIFFERENCE BETWEEN
BANKING OMBUDSMAN
SCHEME 1995, 2002 & 2006
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
4.1) INTRODUCTION
In India, any person whose grievances against a bank are not resolved to his
satisfaction by that bank within a period of two months then he can approach the
Banking Ombudsman for redressal. This is however subject to the complaint
pertaining to any of the matters specified in the Banking Ombudsman Scheme.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Reserve Bank of India (RBI) which assumes the role similar to that of quasi-
legal machinery as it is established by a competent authority to provide for an
additional but optional legal remedy for effective, expeditious and inexpensive
redressal of customer grievances. Towards effective compliance of this optional legal
remedy it introduced the Banking Ombudsmen Scheme in 1995 and got it further
amended in 2002 and in 2006.
The Reserve Bank of India notified the revised Banking Ombudsman Scheme,
2006 which came into effect from January 1, 2006. The new scheme widens its scope
thereby to include customer complaints on certain areas like credit card complaints,
deficiencies in providing the promised services even by banks’ sales agents, levying
service charges without prior notice to the customer and non- adherence to the fair
practices code as adopted by the individual banks. It is made applicable to all
commercial banks, regional rural banks and scheduled primary cooperative banks
whose principal place of business is in India.
The Revised Scheme with well-equipped staff is wholly funded by the Reserve
Bank of India. This new scheme allows the complainants to file a complaint in any
form, including online and the bank customers are entitled to file an appeal with the
Reserve Bank of India. It provides a forum for bank customers for redressal of their
common complaints against banks. On the basis of the new Banking Ombudsman
Scheme, 2006 the customers are also privileged to complain about non-payment or
any inordinate delay in payments or collection of cheques towards bills or remittances
by banks, as also non acceptance of small denomination notes and coins or charging
of commission for acceptance of small denomination notes and coins by banks. The
Banking Ombudsmen currently have their offices in 15 centers covering the entire
country.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Yes, the new scheme 2006 differs from its previous schemes. The extent and
scope of the scheme, 2006 is much wider than its earlier schemes of 1995 and 2002.
Because the new scheme introduces for the first time;
The extent and scope of the new Scheme is wider than the earlier Scheme of 2002.
The new Scheme also provides for online submission of complaints. The new Scheme
additionally provides for the institution of an 'appellate authority' for providing scope
for appeal against an award passed by the Ombudsman both by the bank as well as the
complainant.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Amendment 1:
RBI expands Scope of Banking Ombudsman Scheme; Includes Fair
Banking Practices.
Date: 26 Dec 2005
The Reserve Bank of India today announced the revised Banking Ombudsman
Scheme with enlarged scope to include customer complaints on certain new areas,
such as, credit card complaints, deficiencies in providing the promised services even
by banks' sales agents, levying service charges without prior notice to the customer
and non adherence to the fair practices code as adopted by individual banks.
Applicable to all commercial banks, regional rural banks and scheduled primary
cooperative banks having business in India, the revised scheme will come into effect
from January 1, 2006.
The new scheme provides a forum to bank customers to seek redressal of their
most common complaints against banks, including those relating to credit cards,
service charges, promises given by the sales agents of banks, but not kept by banks, as
also, delays in delivery of bank services. The bank customers would now be able to
complain about non-payment or any inordinate delay in payments or collection of
cheques towards bills or remittances by banks, as also non- acceptance of small
denomination notes and coins or charging of commission for acceptance of small
denomination notes and coins by banks.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
The Reserve Bank had first introduced the Banking Ombudsman Scheme in
1995 to provide expeditious and inexpensive forum to bank customers for resolution
of their complaints relating to deficiency in banking services. The Scheme was revised
in 2002 mainly to cover Regional Rural Banks and to permit review of the Banking
Ombudsmen’s awards against banks by the Reserve Bank. The Banking Ombudsmen
currently have their offices in 15 centers.
Amendment 2:
Customers can now appeal against the Banking Ombudsman's
Decision.
Date: 24 May 2007
Bank customers can now appeal against the decision of the Banking
Ombudsman where he has rejected the customer's complaint relating to matters falling
within the grounds of complaints specified under the scheme. The Reserve Bank of
India has amended the Banking Ombudsman Scheme, 2006 to enable the customers to
appeal against the Banking Ombudsman's decision. The amendments are available on
the RBI website. Before the scheme was amended, the bank customers could appeal
only against the awards given by the Banking Ombudsman. The appellate authority
for the Banking Ombudsman Scheme is the Deputy Governor of Reserve Bank of
India.
It may be recalled that in the Annual Policy for 2007-2008, the Reserve Bank
had announced that based on customer feedback, it would amend the Banking
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Ombudsman Scheme, 2006 to extend the appeal option also to the decisions of the
Banking Ombudsman.
Amendment 3:
RBI amends Banking Ombudsman Scheme: includes complaints
relating to Internet Banking and Non-adherence to BCSBI Code.
Date: 05 Feb 2009
The Reserve Bank of India has widened the scope of its Banking Ombudsman
Scheme 2006, to include deficiencies arising out of internet banking. Under the
amended Scheme, a customer would also be able to lodge a complaint against the
bank for its non-adherence to the provisions of the fair practices code for lenders or
the Code of Bank's Commitment to Customers issued by the Banking Codes and
Standards Board of India (BCSBI). The BCSBI is an independent and autonomous
watchdog set up by the Reserve Bank to monitor and ensure that the codes and
standards adopted by the banks for rendering banking services are adhered to in true
spirit.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
complaints arising out of credit card operations, taking into account the loss of the
complainant's time, expenses incurred by him as also, harassment and mental anguish
suffered. Further, non-observance of the Reserve Bank's guidelines on engagement of
recovery agents by banks has also been brought specifically under the purview of the
Scheme.
Any customer who has a grievance against a bank can complain to the Banking
Ombudsman in whose jurisdiction the branch of the bank complained against is
located. Some banks have centralized certain transactions, like housing loans, credit
cards, etc. If there are complaints regarding such transactions, complaints would have
to be made to the Banking Ombudsman in the State in which the bank customer
receives the bill.
In addition, the Reserve Bank has simplified the format for lodging complaint
to the Banking Ombudsman. Though the complainant need not lodge his complaint in
a specific format, the Scheme now provides for an easy-to-fill format for lodging
complaints, in case complainants prefer to use it. The jurisdictions of the Banking
Ombudsman at Kanpur, New Delhi, Chandigarh, Chennai and Thiruvananthapuram
have been rationalized to include/exclude certain areas taking into account the
geographical proximity of those areas to the Office of the Banking Ombudsman.
The amended Scheme however, does not include certain banking transactions,
such as, failure to honor bank guarantee or letter of credit, etc. Complaints on these
areas of banking services are insignificant in number.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
CHAPTER – V
CONSUMER GRIEVANCES
DURING 2007 – 2010
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
about the BOS and online accessibility to BO office through internet also contributed
to the increase in receipt of complaints.
Four BO offices at Chennai, New Delhi, Mumbai and Kanpur accounted for
54% of all the complaints in that order, with Chennai at 16.10%, followed by New
Delhi 15.20%, Mumbai 12.7% and Kanpur at 9.9%. Among other BO offices,
Hyderabad accounted for 7.1% of the complaints followed by Kolkata 6.7%.
Percentage wise, Kolkata office witnessed the highest increase in the number of
complaints 45% during the year, followed by Hyderabad 42%.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Region No of No of No of % increase
complaints complaints complaints
received received received
during during during
2007-08 2008-09 2009-10
Rural 8418 13915 25,055 (32%) 80%
Semi Urban 6641 9817 10,741(14%) 9%
Urban 10,978 15,723 16,423 (20%) 5%
Metropolita 21,850 29,662 27,047(34%) (-) 9%
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
n
Total 47,887 69,117 79,266 15%
(100%)
While the number of complaints from rural areas increased by 80 % during the
year 2009-10, complaints from the semi-urban areas increased by 9 % only. On the
other hand, complaints from the metros had decreased by 9%. These figures can be
well compared against the total increase in the number of complaints by 15 %.
Since 46% of the complaints are received from the rural (32%) and semi urban
(14%) areas, the receipt of complaints through the postal mode has increased from
63% to 74% during the current year, indicating the less access to internet facilities in
the rural/semi urban areas as compared to the urban and metro. Email complaints have
decreased from 23 % to 12 % of the total complaints during the year.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
taken into the book of the Banking Ombudsman. The Complaint Tracking Software is
updated from time to time to meet the changing requirements related to complaints.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Conciliation meetings which enable two parties to meet “face to face” have
played an important role in the process of resolution of complaints. Although,
Banking Ombudsman does not force parties to come to settlement, such meetings
facilitate them to come to their own solution rather than have a solution imposed on
them by way of an award. During the year, as many as 31278 complaints were settled
by the BO offices after holding conciliation meetings and other persuasive efforts.
Thus, the objective of the BO Scheme (expeditious and inexpensive resolution of
customer complaints without having to examine elaborate documentary evidences)
could be satisfactorily achieved to a large extent by promoting settlement by mutual
consent.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Although as much as 51847 complaints were shown as rejected during the year,
it may be mentioned that, as stated in paragraph 5.2, in most of these cases, the
Scheme could provide relief to the complainant to a large extent by way of reversal of
bank charges, overdue interest, over limit charges, partial settlement/ write off of
overdue, etc during the process of resolution.
5.10) FIRST RESORT COMPLAINTS (19.4% of total complaints
handled)
However, copies of these complaints, as in the case of first resort complaints, were
endorsed to the banks concerned. Banks were generally prompt in redressing the cases
forwarded to them. In several cases, banks have kept BO informed of the redressal
measures taken on these complaints. Some of these complaints were sent to other RBI
departments like Department of Banking Supervision, Department of Banking
Operations and Development, Department of Non Banking Supervision, Rural
Planning and Credit Department, etc or other organizations like Securities and
Exchange Board of India, Insurance Regulatory and Development Authority for
redressal.
Such complaints constituting 44% of the rejected complaints were rejected due
to reasons like Complicated complaints requiring elaborate evidence, bank branches
outside the BO jurisdiction, Not pursued by the complainants, No loss to the
complainants, incomplete address, complaints dealt with earlier, Frivolous complaints,
Complaints pending in other forum etc as shown in Table 13. Rejection of such
complaints will be done only after giving proper opportunities to both the parties and
due examination of bank’s submissions.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
India
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
CHAPTER – VI
FINDINGS AND CONCLUSIONS
6.1) FINDINGS
1) During 2009-10, the Banking Ombudsmen (BO) received 79, 266 complaints,
recording an increase of 15 per cent from 69,117 complaints received in 2008-
09. The rate of increase, however, dropped significantly – from 44 per cent in
2008-2009 to 15 per cent in 2009-2010. The number of complaints increased
mainly due to awareness campaigns carried out by the Banking Ombudsmen
(BOs) and various proactive measures taken by the Reserve Bank.
2) BO offices at Chennai accounted for maximum receipt of complaints (16.10
per cent), followed by New Delhi at 15.20 per cent, Mumbai at 13.7 per cent
and Kanpur 9.9 per cent.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Using the feedback received from BOs, the Reserve Bank took many proactive
customer-centric initiatives. Some illustrations:
1) Agency banks were directed to pay compensation at Bank rate + 2 per cent
penalty for delay in payment of pension dues.
2) Banks were advised to pay compensation of Rs. 100 per day to the
complainants for delay in resolving complaints in respect of failed ATM
transactions.
3) Banks were advised to display their contact details, such as, telephone numbers
of help desk/contact person for lodging of ATM related complaints at all ATM
locations.
4) Effective April 1, 2010, payment of interest on savings bank deposits was made
to be paid on a daily product basis.
5) Banks were advised to issue no-due certificates in all cases resolved through
Banking Ombudsmen's intervention within a week of reaching such settlement
and also suitably modify records of Credit Information Bureau of India Limited
(CIBIL).
6) Banks were advised to issue loan statements to borrowers every year.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
6.2) CONCLUSIONS
Though the Banking Ombudsman Scheme was introduced, in the year 1995,
with a view to do away wit the banking customer complaints, the scheme was
amended in subsequent years 2002 and 2006. But the banks do not seem to have
adopted the norms of their efficient functioning, that is the reason behind the
increasing consumer cases against banks which are governed under the scheme.
In the system of Banking Ombudsman, the results are delivered very soon, the
procedures are fair together with cost, and proportionate to the nature of the issues
involved. The system deals with cases at reasonable speed, is understandable to those
who use it, is responsive to the needs of those who use it, and provides as much
certainty as the nature of particular cases allows. This is true because over the past
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
five years nearly 36000 complaints are being resolved by the Banking Ombudsman
under this Banking Ombudsman Scheme. Though the Banking Ombudsman is eligible
enough to deliver the bank customer complaints at the earliest yet the Consumer
Redressal Forum/Commission is being taken resort of by most of the bank customers
for their redressal of grievances with the bank. The reason is they are well popular
among the common public which is lacking with the banking ombudsman and its
working. Definitely the Scheme needs popularity in the society for its more
appropriateness and effectiveness so that the aggrieved bank customer with the
services of the bank prefers to knock the door of the banking ombudsman for
redressal. The scheme should provide more powers and levy more duties on the
banking ombudsman so that they can easily be approachable by the aggrieved bank
customer.
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
REVIEW OF LITERATURE
(BIBLIOGRAPHY AND
WIBLIOGRAPHY)
BIBLIOGRAPHY
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
• RBI Journals
• Annual Report by Reserve Bank Of India 2009 – 2010.
• Booklet of Banking Ombudsman Scheme 2006.
• The Ombudsman Handbook, Designing and Managing An Effective Problem
Solving – James T.Ziegenfuss, Jr. patrica Orourke.
• Modern Banking technology – Dr.Friods T.Shroff.
• Modern Banking Theory And Practice – Muralidharan.
• Banking Theory Law And practice – Rajesh.
WIBLIOGRAPHY
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
• www.rbi.org.in
• www.bankingupdate.com
• www.indbank.com/ombudsman.htm
• www.ucobank.com/ombudsman.htm
• http://www.nos.org/Secbuscour/25.pdf
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
ANNEXURES
ANNEXURE - I
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Tel.No.079- 26582357,
079-26586718/2657 5807
Fax No.079-26583325
080-22275629
Fax No.080-22244047
0755-2573776
Fax No.0755-2573779
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
Tel.No.0674-2396207, 0674-
2396008
Fax No.0674-2393906
Fax.No.0172-2721880
Click here to send email
6 Chennai Shri S. Ganesh,C/o Reserve Tamil Nadu, Union
Bank of India,Fort Glacis, Territories of
Chennai 600 001 Pondicherry and
Tel No. (044) 2539 9170 / Andaman and Nicobar
25395964 / 2539 9159. Islands
Fax No.044-25395488
Tel.No.0361-2542556, 0361-
2540445
Fax No.0361-2540445
Tel.No.040-23210013,
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
040-23243970
Fax No.040-23210014
Tel.No.
(0141)5107973/5101331, Fax
No.0141-2562220
Tel.No.0512-2361191/0512-
2310593
Fax No.0512-2362553
Tel.No.033-22306222/033-
22305580
Fax No.033-22305899
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
TelNo.
(011)23730632/23730633/
23736270/23736271/23725445
/ 23710882
Tel.No.0612 2322569/2323734
Fax No.0612-2320407
Tel.No.0471-2326852 /
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
2332723/2323959
Fax.No.0471-2321625
Click here to send email
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
ANNEXURE - II
FORM OF COMPLAINT (TO BE LODGED) WITH THE
BANKING OMBUDSMAN
To:
The Banking Ombudsman
Place of BO’s office…………………………..
Dear Sir,
3. Complaint against
(Name and full address of the branch/bank) ………………………….
………………………….
Pin Code …………………….
Phone No. / Fax No. …………………….
…………………………………………………………………………
8. Whether any reply (Within a period of one month after the bank concerned
received the representation) has been received from the bank? Yes/ No
10. Nature and extent of monetary loss, if any, claimed by the complainant by way of
compensation (please refer to clauses 12 (5) & 12 (6) of the Scheme) Rs……………..
12. Declaration:
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
(ii) The complaint is filed before expiry of period of one year reckoned in accordance
with the provisions of Clause 9(3) (a) and (b) of the Scheme.
(iii) The subject matter of the present complaint has never been brought before the
Office of the Banking Ombudsman by me/ us or by any of the parties concerned with
the subject matter to the best of my/ our knowledge.
(iv) The subject matter of the present complaint has not been decided by/pending with
any forum/court/arbitrator.
(v) I/We authorize the bank to disclose any such information/ documents furnished by
us to the Banking Ombudsman and disclosure whereof in the opinion of the Banking
Ombudsman is necessary and is required for redressal of our complaint.
(vi) I/We have noted the contents of the Banking Ombudsman Scheme, 2006.
Yours faithfully,
(Signature of Complainant)
ACCEPTED
(Signature of Representative)
(Signature of Complainant)
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OMBUDSMAN SERVICES IN BANKING INDUSTRY – AN OVERVIEW
84