Dr. K.C. Chakrabarty
Deputy Governor & Appellate Authority

Foreword

1. The aftermath of the recent global financial crisis has shown that impact of the turmoil has been severe and the recovery has been and will be protracted. Even though two years have passed since the crisis started, there are lingering apprehensions that global growth may not pick up anytime soon. The financial sector consumers are wary of the uncertainties and looking up to the Governments and Regulators to address the issues concerning them. There has been notable progress in regulatory reforms and collaborative efforts, both at national and international levels, over the last two years, but the agenda ahead remains challenging and complex.

2. In this given scenario, the three intertwining strands of Stability, Financial Inclusion and Consumer Protection have moved to the centrestage of the financial landscape and discourse. For a country like ours, the interface and trade-off of this trio is quite complex as augmenting financial stability through, inter alia, addressing systemic risk, extending scope of regulation, mitigating pro-cyclicality and strengthening prudential oversight comes with the associated concerns on financial inclusion. This is so as increased stability often comes at a price of hiking the cost of banking business and thereby making it difficult for the poor to be partners in financial sector services.

3. Thus, in India, banks need to constantly focus on and work around the challenges of upscaling financial inclusion initiatives in the form of extending opportunities of cost effective banking to the underprivileged and low income groups that has the potential for being a catalyst for augmenting growth prospects in terms of enhancing bank savings and financial deepening.

4. There is also the inter-connected issue of consumer trust and protection that has always been an issue of interest and concern for policy makers all over. This is rightly so as financial sector consumers usually bear the brunt of market vagaries. Technically, we can ensure consumer protection by having suitable commercial laws and enabling open competition and the consequent interplay of market forces. It may, however, be much more difficult to do so in real-life situations.

5. In fact, our experience in dealing with provision of financial products and services tells us that these laws rarely help out the most vulnerable sections of the society who because of their lack of resources and unfamiliarity with the complexities of the legal system fail to take advantage of even the most enabling laws. It, therefore, comes as a double blow for the ordinary consumer : while boom-time sees the financial services industry coming out with expensive services and products, which the common person in any case cannot afford to access, a downturn means absence or dearth of even basic financial services.

6. This is ironical as Governments and financial businesses benefit if consumers have confidence in financial markets. Like the Courts, the Banking Ombudsmen resolve individual disputes. Unlike the Courts, they can also deal with consumer enquiries and feedback the lessons from their work to help Governments, Regulators, banks and consumers to improve things for the future. The Banking Ombudsmen help to support improvements and reduce disputes, help banks themselves to resolve disputes with consumers, resolve any consumer disputes that banks fail to resolve themselves and reduce the burden on the Courts. Internationally, it is becoming increasingly evident that both consumers and service providers find it easier to resolve disputes through Ombudsmen than through the Courts.

7. As Banking Ombudsman provides an alternative to the Courts, it is imperative that he be as independent and impartial as a judge having necessary skills to resolve financial disputes in a fair and transparent manner. In the Indian context, the independence of the Banking Ombudsman has been ensured by his appointment by the regulator, i.e. the RBI. Further, with a view to ensure his impartiality, the tenure is generally capped at a maximum of three years. The existing appeal provisions in the Banking Ombudsman Scheme (BOS) are aimed at ensuring justice and remedy of systemic issues.

8. The interaction between Banking Ombudsmen, Banking Codes and Standards Board of India (BCSBI), Indian Banks Association (IBA) and the regulatory departments within the RBI is channeled through a dedicated department, viz., Customer Service Department. Customer care issues are at the top of RBI’s agenda and the Bank makes a conscious evaluation of the customer service and financial inclusion issues while approving any new innovation in the financial sector. The World Bank - IMF led Financial Sector Assessment Programme (FSAP) has also concluded that India has comprehensive policies and compliance mechanisms for the protection of banking consumers and is ahead of most countries in the world in this area. While this observation may make us proud, it also casts a great burden on us to be able to stand up and sustain this achievement over a long period of time.

9. The new set of customers that would be joining the banking mainstream both in the normal course and as a result of the financial inclusion drive need proper introduction and handholding. Indeed, a financially aware and literate customer can be the biggest asset on the banks’ balance sheet. The financial consumer, however, needs to be carefully educated about the following:

• Information design and disclosure and

• Contracts, charges and practices

10. Notwithstanding proper dissemination of information, the following aspects do pose serious challenges in matters relating to customer grievances:

• failure to gain the informed consent of the consumer.

• unfair or unreasonable fees and costs charged to consumers and included in consumer contracts for financial services products.

• clauses in financial service contracts that result in consumers waiving core consumer protections, and

• the sale of financial services that are unsuitable for the consumer.

11. In India, the BOS that has been in vogue for the past 16 years has become more broad-based and customer focused over the years. The total number of complaints handled under the BOS has been growing steadily and we handled a total of 76638 complaints during 2010 - 11. The small drop in the number of complaints does not point to any specific visible trend. What is a matter of satisfaction is that the rate of disposal has been sustained at 94%. The various initiatives undertaken by the RBI to address customer care issues got a shot in the arm with the setting up of the Committee on Customer Service in Banks under the Chairmanship of Shri M Damodaran, former Chairman of SEBI.

12. The Committee’s recommendations, to the extent accepted and implemented, are going to have far reaching impact on the way we handle grievances in banks as also under the BOS. The recommendations concerning use of technology for customer service and consumer protection need proper study and training of all concerned i.e. staff and customers alike. As a first step, the RBI has requested IBA to issue guidelines to its members to operationalize 88 of the 232 recommendations made by the Committee. The concept of a Chief Customer Service Officer and Internal Ombudsmen in banks, as recommended by the Committee, would go a long way in establishing the credentials and credibility of the internal machinery for grievances redressal in banks.

13. The need for complainants to seek BO’s intervention could be minimized once banks’ improve their systems and procedures in relation to customer service and customer care. This is not intended to reduce or pass on the BO’s work to somebody else. The limited resources available in the system, by way of alternate dispute resolution mechanism, need to be optimally used to cater to the requirements of the ever-increasing customer base of banks. Further, the BOs have also been directed to embark on a awareness drive and spread the message about usefulness and effectiveness of the BOS.

14. During the last two years, I have been stressing the need for enunciating principles for fair treatment of the financial sector consumers. I find that the recommendations made by the Damodaran Committee in this regard are useful and need a studied approach by banks for accepting the same. We celebrate 25 years of the Consumer Protection Act this year. It is time for us to look back and take stock of the unfinished agenda and plan for the future.

15. The RBI has brought down the curtain on the last of the regulated interest rate products, viz., savings bank deposits. There are many apprehensions, expectations in the minds of the customers and bankers’ alike. The situation calls for a careful, calibrated and balanced approach to ensure that the customers are not let down by the banks nor the banks’ themselves end up in situations where they are not able to deliver what they have promised. These are exciting and challenging times. We must all be prepared to face the challenges and convert the opportunity knocking at our doors into a winwin situation both for the bankers and customers. We need to establish clearly the links in the service - profit chain by defining performance benchmarks and aim to achieve a zero-tolerance limit for customer grievances.

16. The Banking Ombudsman’s Offices across India will continue to be the pivots for redressal of all customer grievances and provide the common person of this country a truly efficient, cost- effective and timetested alternate dispute resolution mechanism.

Dated: 05.12.2011

Vision and Goals of the Banking Ombudsman Offices

Vision

• To be a visible and credible system of dispute resolution mechanism for common persons utilizing banking services.

Goals

• To ensure redressal of grievances of users of banking services in an inexpensive, expeditious and fair manner that will provide impetus to improved customer services in the banking sector on a continuous basis.

• To provide feedback/suggestions to Reserve Bank of India towards framing appropriate and timely guidelines to banks to improve the level of customer service and to strengthen their internal grievance redressal systems

• To enhance the awareness of the Banking Ombudsman Scheme.

• To facilitate quick and fair (non-discriminatory) redressal of grievances through use of IT systems, comprehensive and easily accessible database and enhanced capabilities of staff through training.

1. Customer Service Initiatives by the Reserve Bank of India

Over the years, Reserve Bank of India (RBI) has initiated several customer service measures to ensure availability of smooth and hassle-free banking services to the citizens. In 1990, RBI appointed the Goiporia Committee on Customer Service in Banks. The Committee on Procedures and Performance Audit on Public Services (CPPAPS - commonly referred to as Tarapore Committee) was constituted in 2004. One of the important recommendations of the Tarapore Committee led to the formation of Board level committees for monitoring customer service in banks. Simultaneously, evolving standards and codes for banking services was also of paramount importance. This need for benchmarking of services prompted the RBI to set up the Banking Codes and Standards Board of India (BCSBI) as a voluntary organization of banks. The BCSBI has put in place two sets of codes and is constantly engaged in the process of review of the standards and codes. The standards and codes enunciated by BCSBI reinforce the requirement of adherence to regulatory prescriptions and fair practices promised to be adopted by the banks. Communicating with bank customers in a simple, cogent and cohesive manner is assuming importance in a world where high marketing pitch is often accompanied by complex jargons which customers find difficult to fully understand. The legal framework too makes it difficult for bank consumers to fight for their rights, since the terms of the contract / agreement are heavily loaded in favour of the bankers. These paradoxes, in a market-driven or competitionled environment, call for appropriate regulatory intervention, especially with a view to protect the most vulnerable sections of the bank customers.

With a view to discharging its role effectively, the RBI issues guidelines based on the recommendations of various Committees / Working Groups, complaints handled by Banking Ombudsmen (BOs), suggestions received from consumer organizations and other regulatory departments. These guidelines are reviewed and appropriately modified to reflect the present business requirements of banks and service concerns of customers. The focus of present deliberations on central banks’ role vis-à-vis the common person is on financial inclusion, financial education and consumer protection. The global financial crisis has taught us very painful and expensive lessons. The trust that masses have in the banking system as also in its stability cannot be eroded in our bid to expand at a very rapid pace. The ability of banks to scale up their operations to cover more and more villages / semi - urban centres has been supported by the guidelines issued by RBI for appointment of Business Correspondents (BC). There were no arrangements for special care / dispensation for the physically / visually challenged persons to access and avail banking services. Today, we have moved forward in this regard by putting in place necessary guidelines for benefitting the physically / visually challenged bank customers. The influence of information technology and computerization on banking has been tremendous. The penetration and proliferation of banking products / services has changed the delivery models and delivery strategies adopted by banks. There is a discernible shift in customers opting for non-face-to-face transactions by using the new / novel customer touch points. These trends are irreversible.

Committee on Customer Service in Banks:

The manifold growth in customer base of banks with extensive use of technology, introduction of internet banking and new banking products have given rise to new avenues of consumer grievances. This changing banking paradigm needed a relook into existing customer care practices and policies. The gen-next prospective customers of banks would like gen-next solutions and may focus more on convenience rather than emotional attachment to a banking relationship. There was therefore, an urgent need to mix and match policies and practices catering both to the old and new generation customers of banks without compromising / sacrificing the essence of consumer protection. Use of technology is expected to bring about efficiencies of scale and make services available at a cheap / affordable level to the bank consumers. This is an area where bank consumers in India have not benefitted to the desired extent.

Against the backdrop of the above developments, RBI constituted a Committee in May 2010 under the Chairmanship of Shri M. Damodaran - Ex Chairman, SEBI to look into the banking services rendered to retail / small customers and pensioners, structure and efficacy of the grievance redressal mechanism and to suggest measures for expeditious resolution of complaints. The Committee interacted with various stakeholders across the country on all aspects of customer service - fair treatment, improvement in the service to pensioners, attitude of the bank staff towards the small and rural customers, service charges and fees, loans, transparency in operations, grievance redressal, promptness in service, education and information on new products, services, customer rights, expectations, etc. The committee also called for suggestions from members of public. In response to Committee’s appeal a large number of suggestions were received from public through e-mail, fax and post. The Committee submitted its final report on July 4, 2011. The report was placed on the Bank’s website calling for feedback / comments from members of public / all stakeholders on the Committee’s recommendations.

Important recommendations of the Committee are given in Box I.

BOX I: IMPORTANT RECOMMENDATIONS OF THE COMMITTEE ON CUSTOMER SERVICE IN BANKS

1. Creation of a toll free Common Bank Call Number: IBA should consider a toll free Common Call Center number (like Dial 100) for all banks.

2. Providing plain vanilla savings account without prescription of minimum balance: Banks should offer a basic bank account with certain privileges like number of transactions (say three per month), cheque facility, ATM Card, etc., without any prescription of a minimum balance. This would be a regular account with full KYC, and the bank should clearly indicate the transaction charge for each type of transaction above the permissible number of transactions. Banks may then prescribe Average Quarterly Balance of various slabs with offer of higher privileges and facilities.

3. Setting up of third party KYC Data Bank: Indian Banks Association may consider setting up a trusted third party KYC Data Bank which can be relied upon for KYC purposes and perhaps hosted under the UID number of the customer.

4. Prescription of Service Charges for basic services: The Committee has recommended prescription of service charges for select aspects in the same way the charges for NEFT usage have been prescribed.

5. Small Remittances at reasonable price: Customer has to pay heavy DD charges for a DD of a very small amount. Banks should consider having an electronic transfer of draft amount to the receiving institution and issue a numbered tear away receipt which would reduce time and cost for the user and the bank. In the meantime, the Committee felt there should be prepaid instruments of pre-determined value ( Rs. 10, 50, 100, 500) available to the customers at a reasonable price.

6. Providing non-discriminatory floating rates of interest on housing loans: In a floating interest rate scenario, when an entire class of borrowers has the same characteristic and risk level, the point of entry in time (old customers and new customers) should not create discrimination in interest rate offered to the customers. In such cases, the spread over the base rate should not vary when individual risk rating for loans is absent, as is usually the case in retail loans.

7. Compensation for loss of title deeds: The title deeds should be returned to the customers within a period of 15 days after the loan closure and the Boards of banks should put in place a suitable compensatory policy to compensate the customer for delayed return of title deeds or where there is a loss of title deeds in the custody of the banks.

8. Zero Liability against Loss in ATM and Online Transactions: There should be a secure total protection policy / zero liability against loss for any customer induced transaction utilizing technology through ATMs/ PoS/Online banking etc. A customer should not be made to be out of funds when any loss is suffered on account of Net/ATM banking transactions. All the rules in respect of internet banking should be so designed as to encourage consumers to feel safe about electronic transactions. In all the above scenarios, an immediate temporary credit, pending investigation, should be afforded.

9. Enhancement of DICGC cover: The deposit insurance cover should be raised to Rs. 5,00,000/-.

10. Prepaid Instruments with threshold for frequent travellers: The banks may be permitted to issue such allpurpose prepaid cards with a maximum withdrawal limit of Rs 50,000/- per day. This will reduce the excessive dependence on cash by customers.

11. Self-personalization of Cards: Call centres as well as the online systems through net banking should enable a customer to:

- Fix individual transaction limits for debit/credit card use.

- Debar or fix limits for purchase of electronic or jewellery items.

- Modify the limits for add on cards.

- Activate/deactivate use of card internationally.

- Limit the use of card to any particular state or a defined area.

The above processes should be similar to electronic locking of STD or ISD facilities in telephone system, and akin to international roaming in cell phones.

12. Instant Blocking of ATM card: In case of misuse on receipt of SMS about use of the card, the customer should be able to immediately send return SMS to block the card (if he observes misuse) with a single word like ‘BLOCK’ to prevent further withdrawals.

13. Transition to Chip based card (EMV) with Photograph: Banks should in a phased manner switch over to the use of chip based card (EMV) instead of the current magnetic stripe based ones, in order to prevent skimming and damage / erosion of data due to wear and tear and misuse. This would accordingly entail necessary changes at all the front end machines like ATMs/PoS etc. To avoid identity issues, all credit and debit cards (including chip cards) should be photo cards with the scanned signatures laminated on the card.

14. Every bank to have a Chief Customer Service Officer (CCSO) for grievance redressal: The Boards of banks should appoint a Chief Customer Service Officer (CCSO), not less than the rank of a retired General Manager of a Scheduled Commercial bank preferably from outside the bank (under advice to RBI). He should be reporting directly to the Chairman/CMD/CEO of the bank. A person aggrieved with a banking service as hitherto will first complain to the bank and if within a month does not receive a reply or is unsatisfied with the reply, will appeal to the CCSO of the bank. In view of CBS environment and latest technology available in communication, it is expected that banks would resolve the grievance within 30 days of the receipt of complaint including the period required for conciliation meeting etc. On failure to get a reply within a month, from the CCSO, or if unsatisfied with the reply of the CCSO, the complainant can appeal to the BO of the relevant jurisdiction. The decision of the BO shall be final and no further appeal will be allowed. Once the appointment of the CCSO is cleared and stabilized, the role of BO would be that of an Appellate Authority. The above arrangement would also ensure that the RBI Top Management is not involved with individual complaints / decisions.

15. Constitution of staff in OBOs: The base-level Dealing Officers of the Banking Ombudsman Office (other than the Banking Ombudsman, Secretary to the Scheme and the sub-staff), should be staffed by the officers of commercial banks in the region preferably from the three largest banks in the region. The cost of deputation of such officers should be suitably reimbursed to the banks by RBI.

16. Life Certificate for Pensioners: Pensioner may be allowed to submit the annual life certificate at any of the (linked) branches. All the life certificates may be maintained in a centralized database.

17. Senior Citizen updation: The CBS software should provide for automatic updation of the customer to the senior citizen category based on date of birth to enable them to benefit from higher deposit rates.

18. Financial Inclusion through branch expansion in the North East: The RBI may follow up with Government of India and the State Governments in the region for implementing the branch expansion plan that envisages coverage of all the habitats with population of 2000 or more by end of March 2012

19. Moving towards paperless fund transfers: Customers may be encouraged and given incentives to reduce cheque based transfers and migrate to other channels of fund transfers like NEFT, RTGS, ECS (debit/credit), Internet Banking and Mobile Banking. For the residual cheques in the system, cheque truncation should be implemented all over the country.

20. Ensure fulfillment of the tenets of customer service through inspections: RBI through its regulation should ensure fair treatment of customers, non-discriminatory, non-exploitative, reasonable and transparent pricing and protection of the small customers who hail from the vulnerable sections of the society. RBI through a mechanism of on-site and off-site inspections, separately or as a part of its Annual Financial Inspection exercise should ensure that the intent of regulation in regard to customer service in matters of access, pricing, information dissemination, and grievance redressal is properly implemented at the service delivery points. The internal inspection / audit reports of banks should also adequately focus on customer service and the audit rating should appropriately reflect the importance of customer service.

RBI proactively initiates several customer centric measures based on the feedback from stakeholders and complaints handled by BO Offices and various Departments. Some of such important guidelines pertaining to customer service issued during the year are summarized below.

Review of customer service by Boards: Exclusive time for customer service in Board meeting - Feedback:

In the Annual Monetary and Credit Policy for the year 2010-11, it was announced that the banks should devote exclusive time in a Board meeting once every six months to review and deliberate on issues concerning customer service / customer care. Accordingly, all Scheduled Commercial Banks, Scheduled Urban Co-operative Banks and RRBs were advised to review customer service / customer care aspects in the bank and submit a detailed memorandum in this regard to the Board of Directors, once every six months and initiate prompt corrective action wherever service quality / skill gaps have been noticed.

Feedback from banks in this matter shows that various important aspects of customer service are being deliberated upon by the Boards in these meetings. Some of the important issues discussed were root cause analysis of complaints, measures to avoid recurrence, strengthening grievance redressal mechanism within the bank, bridging skill gaps, training in respect of attitude and empathy of the staff, improving staff behavior, streamlining of processes, infrastructure at branches, branch ambience, basic amenities for customers, etc. This has ensured the oversight of the Boards on customer service issues in the banks. The deliberations in these meetings would be instrumental in resolving systemic issues emanating from complaints and ensure efficient customer service.

Interest rates on deposits: Interest rates on domestic and ordinary Non-Resident savings deposits as well as savings deposits under Non- Resident (External) Accounts Scheme were increased by 0.5 percentage point from 3.5 per cent to 4.0 per cent per annum.

Deregulation of Savings Bank Deposit Interest Rate: Savings bank deposit interest rate was deregulated effective from October 25, 2011. Banks are free to determine their savings bank deposit interest rate, subject to the following conditions:

• Each bank will have to offer a uniform interest rate on savings bank deposits up to ` 1 lakh, irrespective of the amount in the account within this limit.

• For savings bank deposits over ` 1 lakh, a bank may provide differential rates of interest, if it so chooses, subject to the condition that banks will not discriminate in the matter of interest paid on such deposits, between one deposit and another of similar amount, accepted on the same date, at any of its offices.

Credit card operations: It was observed that despite the issue of comprehensive instructions on credit card operations of banks, RBI and the Offices of the Banking Ombudsmen continue to receive numerous complaints especially with regard to excessive finance charges, issuance of unsolicited credit cards / insurance policies and recovery of premium charges, charging of annual fee in spite of being offered as ‘free’ cards, etc. All banks were therefore advised to strictly adhere to the guidelines contained in the Master Circular on Credit Card Operations, both in letter and spirit, failing which, RBI shall be constrained to initiate suitable penal action, including levy of monetary penalties, under the relevant statutory provisions.

Online alerts to cardholders: Recently, incidents of unauthorized / fraudulent withdrawals at ATMs came to the notice of RBI. Banks were therefore, advised to put in place, latest by June 30, 2011, a system of online alerts for all types of transactions involving usage of cards at various channels irrespective of the amount. Banks have also been advised to make available the complaint templates at all ATM locations for lodging ATM related complaints.

Spreading usage of electronic transactions: RBI has been making concerted efforts for increasing the acceptability, reach and efficiency of electronic transactions. On a review of developments in this regard, charges for outstation cheque collection as also cheques collected under Speed Clearing arrangements were mandated for different value bands. Threshold value limit for RTGS transaction was increased from ` 1 lakh to ` 2 lakh. As an incentive to customers to move their transactions to NEFT, a new value band for ` 1 lakh to ` 2 lakh segment was created with customers having to pay lower charges vis-a-vis RTGS transactions. To ensure prompt redressal and resolution of customer complaints regarding RTGS transactions, banks have been advised that the existing Customer Facilitation Centres set up for NEFT customer complaints may be used for RTGS customer transactions also. To facilitate easy reconciliation of RTGS/NEFT return transactions, banks were advised to provide necessary information to customers on return transactions in the account statement. Further, the banks were also advised to furnish remitter details in the pass book/ pass sheet / account statement for credits received by customers through NEFT/NECS / ECS.

Compensation for failed ATM transactions: Time limit for resolution of customer complaints on failed ATM transactions has been reduced from 12 working days to 7 working days. Delay beyond 7 working days in resolving failed ATM transactions will attract a penalty of ` 100/- per day.

Customer satisfaction survey: ATM transactions: RBI commissioned a survey to assess customer satisfaction in the usage of ATMs across the country. The survey covered 600 ATMs constituting one percent of the total number of 60,000 ATMs commissioned in the country. To make the survey representative of all segments of the country, the samples were proportionately spread over Metro, Urban, Semi-urban and Rural regions. Following are the major findings of the survey:

• Cards are mainly used for withdrawing cash or shopping purposes.

• The usage of debit cards for paying bills and buying tickets is still low.

• The usage of debit cards for shopping purpose was the highest in Maharashtra followed by Andhra Pradesh

• Females, youth, post grads & professionally qualified were the major card users for shopping purpose.

• Major problems encountered by the users in the usage of ATMs were short dispensation of cash, non-dispensation of cash and card getting stuck in the ATM machine.

Cheque drop box facility: In view of a large number of complaints of refusal by some banks to give acknowledgement to customers for the cheques tendered at the counter and compelling them to drop the cheque in drop-boxes, banks were advised to instruct all branches/controlling offices to ensure strict compliance with the extant instructions regarding cheque drop box facility to avoid recurrence of such type of complaints. Banks were further advised that under no circumstances, the branch should refuse to accept cheques over the counter by giving proper acknowledgement and that customer should not be forced to drop the cheque in the cheque drop-box.

Pass book / Statement of accounts: Banks were advised to invariably offer pass book facility to all its savings bank account holders (individuals) and in case the bank offers the facility of sending statement of account and the customer chooses to get statement of account, the banks were advised to issue monthly statement of accounts. The cost of providing such Pass Book or Statements should not be charged to the customer. Banks were advised to give constant attention to ensure entry of correct and legible particulars in the pass books and statement of accounts. With a view to avoiding inconvenience to depositors, banks were advised to avoid inscrutable entries in pass books / statement of accounts and ensure that brief, intelligible particulars are invariably entered in pass books / statement of account.

No - frills accounts: Banks were advised to ensure opening of no-frills accounts or other accounts for students from minority communities and other disadvantaged groups to enable them to avail various scholarships or other benefits offered by the Government.

Pension payments to Central / State government pensioners by agency banks - Compensation for delay: In March 2011, agency banks were advised to ensure that any delay in disbursement of regular pension, revised pension, pension arrears, etc., is compensated at Bank Rate plus 2% penal interest for the delayed period and the same is credited to the pension account on the same day when the bank affords the delayed credit without awaiting any claim from the pensioner.

‘All in Cost’: With a view to bringing in fairness and transparency, banks were advised to disclose ‘ all in cost ‘ inclusive of all charges involved in processing / sanction of loan application in a transparent manner to enable the customer to compare the rates/ charges with other sources of finance. The banks were also advised to ensure that such charges are non-discriminatory.

Master Circulars: RBI releases Master Circulars on various subjects every year. Master Circular is the compilation of all instructions issued by RBI on the subject. The Master Circular on Customer Service incorporates RBI instructions/ guidelines on various customer service related issues such as operations of deposit accounts, levy of service charges, disclosure of information, remittances, collection of instruments, dishonor of cheques, safe deposit lockers, nomination facility, dealing with complaints etc. These Master Circulars are placed on the website of RBI for larger and quicker dissemination of information.

Frequently Asked Questions (FAQs): RBI also publishes on its website, FAQs on various important topics of customer interest. During the year FAQs on KYC, Electronic Clearing Services, Cheque Truncation, NEFT, RTGS, Speed Clearing, and ATM were placed on the website of the RBI.

Profile of Customer Complaints Received at OBOs

2. The Banking Ombudsman Scheme 2006

In terms of the powers conferred on the RBI underSection 35A of the Banking Regulation Act, 1949,the Banking Ombudsman Scheme (BOS) 1995 wasfirst notified by RBI on June 14, 1995 to provide analternative dispute redressal mechanism to bankcustomers. The Scheme sought to establish asystem of expeditious and inexpensive resolutionof customer complaints on account of deficiencyin banking services. The Scheme, which is inoperation since 1995, was revised four times so farduring the years 2002 (vide notification Ref.RPCD.No.950/13.01.01/2001-02 dated 14 June 2002), 2006(vide notification RPCD.BOS.No.441/13.01.01/2005-06 dated 26 December 2005), 2007 (vide notificationCSD. BOS.4638 /13.01.01/2006-07 dated 24 May2007, 2009 (vide notification CSD. BOS.4736/13.01.01/2008-09 dated February 3, 2009).Presently, the BOS 2006 version (as amended up toFebruary 3, 2009) is in operation with fifteen BankingOmbudsmen (BOs) with specific jurisdiction,appointed by RBI, covering the 29 States and seven Union Territories in India.

The Scheme covers major areas of customergrievances including credit card complaints, internetbanking, deficiencies in providing the promisedservices by both bank and its sales agents (DSAs),levying service charges without prior notice to thecustomers, non- adherence to the Fair PracticesCode adopted by individual banks, Non adherence toBCSBI’s Code of Bank’s Commitment to Customers,etc. As on date, there are 27 grounds on whichcustomers can approach the Banking Ombudsmanciting deficiency in banking services. BankingOmbudsman has the power to handle any complaintrelating to violation of any RBI directive in relationto banking services. Both the complainants andbanks can appeal to the Appellate Authority against the orders issued by BO under the Scheme. The Deputy Governor in charge of the Department of RBI implementing the Scheme, presently the Customer Service Department, is the Appellate Authority under the Scheme.

RBI operates the BOS, free of cost, so as to make itcommon people oriented. The Scheme is applicableto all commercial banks, regional rural banks andscheduled primary cooperative banks havingbusiness in India, covering banking transactionswithin the national boundaries, including internettransactions. In order to increase its effectivenessand utility, the offices of the BO are fully mannedfrom the staff drawn from RBI. The complainants canfile their complaints in any form, including online submission through the RBI Website.

The Committee on Customer Service in Banksconstituted by RBI in May 2010 was also asked tolook into “the functioning of Banking OmbudsmanScheme - its structure, legal framework andrecommend steps to make it more effective andresponsive”. The Committee submitted its reportin July 2011 which was placed in public domain for feedback.

The most important recommendation of theCommittee pertaining to BO Scheme is “Appointmentof a Chief Customer Service Officer (CCSO) as anInternal Ombudsman for a bank”. Committee’s viewbased on deliberations with various stakeholdersacross the country was that, the full responsibilityof customer service should rest with the serviceproviders viz. banks. The Committee further observedthat the general view among the bank customersthat the BOs would ensure prompt and effectivecustomer service in banks had cast a vicariousresponsibility on OBOs which was contrary to theirmain objective of providing simple dispute resolution option to the customers. Though the OBOs, even at present, are in the nature of appellate authority for bank customers, the same was not clearly forthcoming during Committee’s interaction with bank customers. The banks needed to strengthen their internal machinery for grievance redressal to ensure that minimum number of complaints finally gets escalated to the BOs and the Scheme is strictly utilized as an apex level forum for dispute redressal. The Committee was, therefore, of the view that each bank must have its own Internal Ombudsman so that routine complaints can easily be handled by banks themselves without any cost and time overruns.

The Committee’s recommendations pertaining to BOS are given in the Box II.

BOX II: REPORT OF THE COMMITTEE ON CUSTOMER SERVICE IN BANKS -
RECOMMENDATIONS ON THE BANKING OMBUDSMAN SCHEME

• There is a need for the banks in developing their Internal Grievance Redressal Mechanism to ensure only the minimum number of cases get escalated to the Banking Ombudsman and the Scheme is strictly utilized only as an appellate mechanism.

• The above can be made possible by having an official within the bank in the form of an internal Ombudsman which is in vogue in some countries like Canada and France. The Boards of banks should appoint a Chief Customer Service Officer (CCSO) not less than the rank of a retired General Manager of a Scheduled Commercial bank preferably from outside the bank (under advice to RBI). The person so appointed should have necessary exposure in working of operational side of banking. The Audit Committee of the Board would have an oversight over the CCSO. He should be reporting directly to the Chairman / CMD / CEO of the bank. The initial term of appointment may be kept for 2-3 years and necessary extension may be granted as per suitability criteria.

• A person aggrieved with a banking service as hitherto will first complain to the bank and if within a month does not receive a reply or is unsatisfied with the reply, will appeal to the CCSO of the bank. In view of CBS environment and latest technology available in communication it is expected that bank’s CCSO would resolve the grievance within 30 days of the receipt of complaint including the period required for conciliation meeting etc. On failure to get a reply within a month from the CCSO or if unsatisfied with the reply of the CCSO, the complainant can appeal to the Banking Ombudsman of the relevant jurisdiction. The decision of the BO shall be final and no further appeal will be allowed.

• The appeal to the BO may be made only on banking services on which complaints are presently entertained under the BO Scheme.

• Once the appointment of the CCSO is cleared and stabilized, the role of Banking Ombudsman would be that of an Appellate Authority. The above arrangement would also ensure that the RBI Top Management is not involved with individual complaints / decisions.

• The nodal administrative department at the RBI Central Office level, viz: the Customer Service Department should ensure uniformity of decision making among the Banking Ombudsmen by active consultation and exchange of information. Thus, a customer aggrieved with the decision of BO can go to the formal fora like Consumer Courts, Civil Courts etc. The banks aggrieved with a BO decision may seek the advice of the Customer Service Department before approaching the Courts.

• Moreover, before challenging any such award or decision in higher Court every bank must examine the cost implications of such a decision from the bank’s perspective.

• Further, any decision or Award given by BO or any Grievance Redressal Forum must be internally examined by the bank concerned for initiating possible Class Action in the branch/bank.

• RBI and BO Offices are trying to educate the public about the BO Scheme through awareness campaigns, outreach programmes, publicity through print media, All India Radio and Doordarshan. However, these efforts need to be complemented by the banking industry. All the communications sent by the banks should have an insert on the Banking Ombudsman Scheme and its applicability.

• The base-level dealing Officers of the Banking Ombudsman Office (other than the BO, Secretary to the Scheme and the sub-staff), should be staffed by the Officers of commercial banks in the region preferably from the three largest banks in the region.

• The cost of deputation of such Officers should be suitably reimbursed to the banks by RBI.

• To ensure quality of the Officers deputed by the banks, suitable monetary incentives, similar to those given to members of faculty of the RBI’s training colleges, should be given.

• It should also be ensured that no staff of a BO office shall handle a complaint pertaining to his/her parent bank.

• The ambit and scope of the Scheme should be restricted to common individuals, retail customers, small borrowers and Micro and Small Enterprises (as per the Government of India definition) only.

• Presently there are 15 Banking Ombudsman Offices in major State Capitals having jurisdiction over the entire country. Several States do not have a BO office. The bank customers in Jammu and Kashmir and the North- Eastern States have stated that it was not possible to interact with the far away BO offices in New Delhi and Guwahati respectively. RBI should therefore ensure that there is an office of Banking Ombudsman in the State of Jammu and Kashmir and a representative BO office of a lower level in each of the other States of the country.

• An appeal / complaint under BO Scheme should pertain to a transaction which has occurred within two years of the date of appeal as it is very difficult to resolve very old disputes on the basis of records which at times, are difficult to trace. Thus, complaints which are older but redressal delayed in correspondence with a bank cannot be referred to BO citing the last reply received from the bank. Thus, the Clause 9 (3) (b) which reads ‘The complaint is 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’ is required to be amended as. ‘The complaint is made not later than two years after the occurrence of the transaction which has resulted in the complaint’.

• The Clause 12 (5) of BOS 2006 reads ‘Notwithstanding anything contained in sub Clause (4), the Banking Ombudsman shall not have the power to pass an award directing payment of an amount which is more than the actual loss suffered by the complainant as a direct consequence of the act of omission or commission of the bank, or ten lakh rupees whichever is lower is required to be amended as “Notwithstanding anything contained in sub Clause (4), the Banking Ombudsman shall not have the power to pass an award directing payment of an amount which is more than the actual loss suffered by the complainant as a direct consequence of the act of omission or commission of the bank, or ten lakh (excluding the amount of dispute) rupees whichever is lower.”

• Further, the compensation allowed should be restricted to actual loss only as the Banking Ombudsman not being a Judicial Forum; may not give compensation for any mental harassment which cannot be easily computed.

• The Scheme should be limited to banking transactions taking place in India only including internet transactions. Transactions initiated/taken place abroad need not be covered in the scheme.

• Nodal Officer is an important liaison officer between the bank and the BO office. He is responsible for supplying desired information to BO Office quickly. Nodal Officer should be competent and equipped to take decisions during the conciliatory meetings. Certain instances where Nodal Officers were not found to be competent enough were observed during the interaction with the Banking Ombudsmen.

• In case of On-line complaints, the Complaint Tracking Software used in BO Offices should be modified suitably to divert the first resort complaint to the respective bank site online by developing link with the bank’s complaint site.

• The applicability of the Scheme is limited to Commercial Banks/RRBs/ Scheduled Urban Banks. As customers of Co- Operative banks all over the country expressed the need for such a scheme for the Co- Operative sector, RBI may take up suitably with NABARD for evolving an Ombudsman Scheme suitable for redressing the grievances of the customers of the Co- Operative banking institutions not covered under RBI scheme.

Procedure for filing Complaints under BOS - Awareness

Over the years, it is observed that a large number of complaints received in OBOs are First Resort Complaints where the complainant approaches the OBO instead of first approaching the bank to resolve his / her grievance. Such complaints, being not as per the provisions of the BOS are rejected by OBOs. However, while advising rejection, OBOs send a copy of the complaint to the bank concerned for direct redressal and most of these are generally resolved by banks. This exercise however delays the redressal and puts pressure on OBOs in terms of the time and resources they can spend on adjudicating maintainable complaints. Receipt of large number of First Resort Complaints in OBOs indicates that banks have not adequately publicized their system of grievance redressal. Though OBOs are making conscious efforts to spread awareness about the Scheme, their efforts need to be supplemented by banks by toning up their grievance redressal systems. The banks must develop a culture of owning their customers.

3. Receipt of Complaints

3.1 The OBOs receive complaints pertaining to deficiency in service provided by banks. The number of complaints received has marginally decreased by 10% during 2010-11 compared to previous year.

However six OBOs received more complaints in 2010-11 than in the previous year as indicated in Table 2 below.

OBO- wise receipt of complaints

3.2 The 15 OBOs receive and consider complaints from customers relating to the deficiencies in banking services in respect to their territorial jurisdiction. The current territorial jurisdiction is given in Annex 1.

The receipt of complaints at Ahmedabad, Bhopal, and Patna was higher by 25 - 35% in 2010-11 compared to the previous year, while it was lower by 12-25% at the major metros viz., Chennai, Mumbai and New Delhi. The four OBOs located at Ahmedabad, Chennai, Mumbai and New Delhi accounted for 54% of the total complaints received in 2010-11. The OBOs at Bhubaneswar, Guwahati, Patna and Thiruvananthapuram continued to have low volume of complaints. In numerical terms, New Delhi received the highest number of complaints i.e. 10508 and Guwahati received the least number of complaints at 584 during the year 2010-11. There are no specific reasons that can be attributed to the sudden rise or fall in the number of complaints at a given OBO. The awareness campaigns being conducted by the BOs need to be fine-tuned to sensitize the banks and customers about their respective roles and responsibilities. With increased emphasis being placed on opening of more bank branches in the unbanked / under-banked pockets of the country, there is a need for banks and OBOs to ensure that adequate physical and institutional arrangements are in place to take proper care of the new customers joining the mainstream banking channels.

The comparison of OBO wise receipt of complaints is given in Chart 2.

Average number of complaints received

3.3 The average number of complaints received per OBO has marginally reduced by 10% over the previous year due to the overall decline in the number of complaints received at all the OBOs. On an average, each OBO handled 4752 complaints during the year 2010-11 compared to 5284 during the year 2009-10 as indicated in Table 3.

Population group-wise distribution of complaints received

3.4 During the year 2010-11, the OBOs received maximum number of complaints from urban and metropolitan areas. The complaints from metropolitan centres were 44% and from urban areas were 30% of total complaints. The complaints received from rural and semi urban centres constituted 11% and 15% of the total complaints received, respectively. The products and services available at the semiurban and rural branches are limited in number and volume. This is cited as an important reason for lower level of complaints from these population groups. Further, it may be worth mentioning that at most of the semi-urban and rural locations there is just one branch of a commercial bank making it a local necessity as well as a monopoly. Hence, the customers may prefer not to complain about any deficiency in service or hardship to which they may be exposed. The detailed population groupwise distribution of complaints received is given in Table 4.

The Population group-wise receipt of complaint is graphically represented in Chart 4

Mode-wise receipt of complaints

3.5 Complainants can log on to the RBI web site (www.rbi.org.in) and lodge their complaint about deficiency in banking services by using the online complaint form. The email addresses of the OBOs are also available in the public domain and complainants can forward their complaints through emails to them. For those who have no access to internet, complaints can be sent by post. During the year 2008-09, 2009-10 and 2010-11 the comparative position of complaints received by different modes is as under:

Limited access to internet could be the main reason for people preferring to lodge complaints using the postal mode, though, email complaints have marginally increased from 12 % to 14 % of total complaints received during the year.

All complaints received in the OBOs are recorded in the Complaint Tracking Software (CTS) which facilitates tracking of the movement of complaints. The CTS is accessible to banks for the purpose of uploading documents / letters to facilitate grievance redressal / quick closure of cases by the BOs by obviating postal delays. This also helps reduce the use of paper and is hence, an eco-friendly initiative.

Complainant’s group-wise distribution of complaints

3.6 As observed during previous years also, majority of the complaints were received from individuals, as seen from the break up given in Table 6. Since the Scheme is primarily meant for common persons, its focus is on the non-institutional category. The receipt of complaints from individual customers was 89% and individual businessmen was 4% while the complaints from Proprietorship/ Partnership firms, Trusts and PSUs were very few in number.

Bank-group-wise distribution of complaints received

3.7 The complaints received by OBOs against different bank groups are indicated in Table 7. SBI and its Associates received the maximum number of complaints (22307) accounting for 31% of the total number of complaints which was 2% higher than their previous year’s share of complaints. Complaints against nationalized banks formed 29% of the total complaints received in 2010-11, which was 5% higher than their previous year’s share. There was a drop of 4 % in the share of complaints against private sector banks as well as foreign banks during 2010-11.

Complaints vis-a-vis business size

3.8 The number of complaints received has been analyzed with reference to the bank’s business size and number of accounts instead of considering complaints based on number of branches only. The SBI group continued to have a larger share in the number of complaints vis-a-vis share of deposits and loan accounts. The Private Sector banks with 11% of the total deposit and loan accounts constituted 25% of the complaints received in 2010-11. The foreign banks accounted for 10% of the complaints received against 1% business share during 2010- 11. The bank group wise complaints received in relation to the number of deposit and loan accounts are given in Table 8. Chart 8 depicts the bank group wise complaints received vis-à-vis business size for 2010-11.

Public Sector banks with 73% of the deposits and loan accounts accounted for 63% of the total number of complaints as on March 2011, indicating better level of customer service by them. Private sector banks and foreign banks with 12% of the deposits and loan accounts as on March 2011 accounted for 35% of the total number of complaints received during the year.

The large number of complaints received against banks especially First Resort Complaints indicates that the internal machinery for grievance redressal in banks needs to be strengthened and made more responsive and robust. The Box III narrates the guidelines in place for enhancing the efficacy of internal machinery for grievance redressal in banks.

The detailed break-up of bank wise (Commercial banks) complaints received on various grounds in the year 2010 - 11 is enumerated in Annex V.

BOX III. ENHANCING EFFICACY OF INTERNAL GRIEVANCE REDRESSAL MACHINERY IN BANKS

With a view to enhance the effectiveness of the internal grievance redressal mechanism, banks were advised to place a review of complaints before their Boards / Customer Service Committees along with an analysis of the complaints received by them. The analysis should (i) Identify customer service areas in which the complaints are frequently received, (ii) Identify frequent sources of complaints, (iii) Identify systemic deficiencies and (iv) Make recommendations for initiating appropriate action to make the grievance redressal mechanism more effective. Details of complaints received and disposed off, awards passed and unimplemented awards of the Banking Ombudsman are required to be disclosed along with financial results. Banks were also advised to (i) Ensure that the complaint registers are kept at prominent place in their branches which would make it possible for the customers to enter their complaints, (ii) Have a system of acknowledging the complaints, where the complaints are received through letters / forms, (iii) Fix a time frame for resolving the complaints received at different levels, (iv) Ensure that redressal of complaints emanating from rural areas and those relating to financial assistance to Priority Sector and Government’s Poverty Alleviation Programmes also form part of the above process, (v) Prominently display at the branches, the names of the officials who can be contacted for redressal of complaints, together with their direct telephone number, fax number, complete address (other than Post Box No.) and e-mail address etc. for proper and timely contact by the customers and for enhancing the effectiveness of the redressal machinery (vi) Place a complaint form in their home page on their website.

4. Nature of Complaints Handled

4.1 The grounds of complaints for deficiency in banking services have been enumerated in Clause 8 of the BOS 2006. Table 9 gives the details of the complaints received during last three years on the broad category of grounds of complaint for deficiency in banking services.

4.2 Complaints relating to card products (ATM, Debit and Credit cards) constituted 24% of the complaints received and continue to be the major area of complaints in 2010-11. The card-related complaints mainly related to:

• Unsolicited credit cards

• Unsolicited insurance policies

• Recovery of premium charges

• Charging of annual fee in spite of being offered as ‘free’ card

• Authorization of loans over phone

• Disputes over wrong billing

• Settlement offers conveyed telephonically

• Non-settlement of insurance claims after the demise of the card holder

• Abusive calls

• Excessive charges

• Wrong debits to account

• Non-dispensation of money from ATM

• Skimming of cards

The main reason for these complaints is the difficulty faced by the bank customers in accessing the card issuing banks from various locations where a person could be using the card or may have lost / misplaced the card. Further, most of the queries relating to credit card are handled by the Call Centres. The staff employed at these Call Centres is not very familiar with the banks’ card products or the banks’ customers. As such, the response from the Call Centres is not helpful in resolving customer grievances.

4.3 Complaints under the head, Others’ constituted 29% of the total complaints in 2010-11 as against 24% in the previous year. These include :

• Non-adherence to prescribed working hours,

• Refusal to accept or delay in accepting payments towards taxes as required by RBI/ Government of India,

• Refusal to accept/delay in issuing or failure to service or delay in servicing or redemption of Government securities,

• Non-adherence to BCSBI code, non-adherence to the fair practices code, etc.

Most of these complaints are primary in nature and do not require to be escalated to the OBOs and could be redressed at individual banks’ level.

4.4 Complaints relating to delay in payment of pension, pension arrears / wrong pension calculations etc. have increased from 6% in 2009-10 to 8% in 2010-11.

4.5 Complaints relating to loans and advances (6%) mainly pertained to educational loans and MSME loans, delay in payment or collection of cheques, drafts, bills and delayed payment of remittances etc.

5. Disposal of Complaints

5.1 A snap shot of the profile of complaints disposed off by the OBOs during the past three years is given in Table 10 and Chart 10. The OBOs disposed off 94% (72,021) of the 76,638 complaints, handled during the year 2010-11.The rate of disposal has been sustained for two consecutive years. In absolute terms, the number of complaints pending disposal at 4617 at the end of the year 2010-11 has been the lowest during the last three years. Conscious efforts are being made to ensure minimum turnaround time (TAT) for grievance redressal at all the OBOs and the position in this regard is monitored through the Complaint Tracking Software (CTS).

5.2 Classification of complaints

The disposal of complaints received at the OBOs is classified into two broad categories as Maintainable and Non-maintainable complaints. All complaints that do not fulfill the laid down criteria for grounds of complaints as enumerated in Clause 8 of BOS 2006 and also those complaints that do not fulfill the criteria laid down in Clause 9 (3) of BOS 2006 are classified as Non-maintainable and are rejected and / or forwarded to banks concerned for necessary corrective action.

Table 11 below gives the position of classification of complaints disposed by all the OBOs during the last three years. Of the 72021 complaints disposed by the OBOs in 2010-11, 49% complaints were maintainable as against 56% in 2009-10 and 43% in 2008-09.

The classification of disposal of complaints as above highlights the need for the banks and the OBOs to create greater awareness about the internal machinery for grievance redressal in banks as also proper use of the BO Scheme.

5.3 Mode of disposal of maintainable complaints

The maintainable complaints are examined and disposed, either by mutual settlement i.e. by mediation and conciliation or issue of awards, else rejected due to various reasons.

As many as 21269 complaints out of 21547 maintainable complaints were settled by mutual agreement during the year 2010-11 as compared to 31278 complaints settled by mutual agreement during the previous year. BOs issued 278 awards during the year as compared to 211 awards issued during the previous year. 99% of the maintainable disposed complaints were settled by mediation and conciliation in 2010-11.

5.4 Conciliation meetings

Conciliation meetings which enable two parties to meet “face to face” have played an important role in the process of resolution of complaints. Although, BO does not compel the parties to reach a settlement, conciliation meetings facilitate them to arrive at a mutually acceptable solution which is time and cost effective. During the year, 21269 complaints were settled by the OBOs after arranging conciliation meetings and other persuasive efforts. Thus, the objective of the BOS (expeditious and inexpensive resolution of customer complaints without having to examine elaborate documentary evidences) could be achieved to a large extent by promoting a mutual settlement for resolution of disputes.

5.5 Categorization of complaints rejected into maintainable and non-maintainable complaints

The complaints received by the OBOs are primarily segregated as Maintainable and Nonmaintainable based on the guidelines of the BOS 2006. The Non-maintainable complaints such as First Resort Complaints, Subject matter outside the Scheme, Complaints outside the BO jurisdiction, etc. are rejected at the time of initial scrutiny.

Out of the 50474 complaints rejected by the 15 OBOs, 36522 complaints i.e. 72% of the rejected complaints were Non-maintainable in 2010-11 as against 71% in 2009-10.

5.6 Rejected complaints

The number of complaints rejected on various grounds is showing a rising trend. While 62% of the total complaints disposed in 2009-10 were on account of rejection, the same accounted for 71% of the complaints disposed during 2010-11. This aspect also highlights the need for proper awareness campaigns targeted at bank customers and the involvement of banks in such campaigns to educate the customers about the existence of a properly functioning grievance redressal mechanism in their organization.

Broadly, around 30% of the complaints dealt with have been settled by way of mutual settlement or by issue of awards while 70% of the complaints have been disposed off (rejected) citing reasons indicated in Table 14. Complaints such as Complicated complaints requiring elaborate evidence, Complaints without sufficient cause, complaints dealt with earlier, etc., are rejected after due processing.

Although 50474 complaints were rejected during 2010- 11, it may be mentioned that, 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.

5.7 First resort complaints (23% of total complaints handled)

The complaints that have been referred to OBOs without lodging it with the respective bank or before lapse of thirty days from the date of lodging the complaint with the bank are termed as First Resort Complaints. Such complaints aggregated to (16755) 22% of the total complaints handled in 2010-11 vis-à-vis 20% in the previous year.

First Resort Complaints accounted for the highest percentage of complaints rejected (33% in 2010-11 as against 31 % in 2009-10, 42 % in 2008-09). High percentage of First Resort Complaints indicates greater faith of the complainants in the BO Scheme rather than in their banks or inept handling of customer complaints by front line staff in the banks. While this highlights a marked increase in the awareness about the BOS, it also points to the requirement of educating the bank customers to lodge their complaints first with the bank concerned and to approach the OBO later, if they are not satisfied with the response from the bank. While rejecting such complaints, one copy of the complaint is endorsed to the bank concerned by OBOs. The banks are generally prompt in redressing such complaints forwarded to them. Thus, although no data is available as to the exact number of such complaints redressed, it is our experience that very few First Resort Complaints rejected by BOs were received back. This could be due to the fact that the reference to BO helps the complainants get their grievances redressed from the banks concerned.

5.8 Complaints outside the BOS (12% of total complaints handled)

The second-highest cause of rejection of complaints was on the ground ‘Complaints outside the purview of BOS’ (17% in 2010-11, 23 % in 2009-10 and 25 % in 2008-09 of rejected complaints). This indicates that the customer awareness campaigns need to be more finetuned and focused. These complaints are also rejected in initial scrutiny. However, copies of these complaints are endorsed to the banks concerned. Some of these complaints are 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.

5.9 Complaints made without sufficient cause (8% of total complaints)

Complaints made without sufficient cause, constituting 11% of the rejected complaints, represent those complaints where the banks concerned may have acted as per the covenants of the products and service contracts. In such cases, the complaint is processed as usual and a decision is taken to reject the same as it was made without sufficient cause.

5.10 Rejection of complaints due to other reasons

Out of the total complaints rejected, 47% 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 fora, etc. as shown in Table 14. Such complaints are rejected after giving proper opportunities to both the parties and due examination of bank’s submissions.

5.11 Pending position of complaints at OBOs

As regards pendency, only 6% of the complaints received during the year 2010-11 were carried forward to the next year as was the case in the previous year. In numerical terms, this year witnessed the least number of pending cases (4617) among the past three years. Only 6% of the pending complaints were outstanding for more than 2 months and 1% for more than 3 months as compared to 15 % and 5 % respectively during the previous year.

Absence of adequate supporting documentary evidence, delayed response by banks to queries raised by BOs / complainants, etc. were the main reasons for delay in disposing the complaints.

Only 35 cases constituting 1% of the total pending cases were pending beyond three months as on June 30, 2011 as against 242 and 685 cases pending as on June 30, 2010 and 2009 respectively. 297 cases were pending between two to three months as on June 30, 2011 as against 808 and 956 cases in the previous years. Also 63% of the cases i.e. 2888 cases out of 4617 pending cases were less than a month old and were in various stages of disposal.

Disposal of complaints staff-wise

5.12 The OBOs are completely managed by the staff of the RBI. The data on number of complaints handled per officer by respective OBOs excluding the Secretary and the BO is given in Table 16. It is observed that many OBOs have sustained high disposal rate despite reduction in the number of officers handling the complaints on account of transfer or retirements.

Highest number of complaints handled per officer was by OBO New Delhi at 618 complaints followed by Bhopal with 579, Patna with 570. OBO Guwahati handled only 117 complaints per officer. Six OBOs handled more number of complaints per officer as against the average of 427 complaints for all OBOs during the year 2010-11. The staff strength has reduced from 174 in the previous year to 167 in 2010-11.

6. Cost of Running the Scheme

6.1 From January 1, 2006, the total expenditure in operationalizing the BOS is fully borne by the RBI in terms of the revised BOS 2006. The cost includes the revenue expenditure and capital expenditure incurred in running the OBOs. The revenue expenditure includes establishment items like salary and allowances of the staff attached to OBOs and non-establishment items such as rent, taxes, insurance, law charges, postage and telegram charges, printing and stationery expenses, publicity expenses, depreciation and other miscellaneous items. The capital expenditure items include furniture, electrical installations, computers/related equipments, telecommunication equipments and motor vehicle.

While the aggregate cost of running the 15 OBOs has increased by 32 % during the year 2010-11, the cost per complaint disposed has burgeoned by 53%. This highlights a need for strengthening the grievance redressal machinery in banks so that minimum number of complaints get escalated to the OBOs. This can be achieved through a more proactive and customer centric approach by frontline staff of banks which will be helpful in resolving grievances at the initial touch point itself.

BOX IV : “WHAT EXACTLY DO THE CUSTOMERS WANT?’’

The Committee on Customer Service in Banks in its report has crystallized customers’ expectations as follows:

i. Customers desire the banks to be customer centric in all their dealings with the customers. To ensure a fair treatment from the banks, every bank should have a transparent policy outlining the fair treatment to customers in the various dealings in addition to compliance with the provisions of mandatory RBI Guidelines, Circulars, and the voluntary BCSBI Code to which the banks have subscribed. Any deficiency in implementation must undergo systemic correction under the directive of RBI.

ii. Banks should be transparent, objective, non-discriminatory and non-exploitative in all dealings with customers including pricing and quality of service and full disclosure of information.

iii. Customers expect a fair hearing of their complaints, and want an expeditious grievance redressal from banks. As banker-customer is an unequal relationship both in terms of resources and information levels, banks should not indefinitely delay implementing decisions favoring the customers by escalating the issues to higher levels as customers cannot fight mighty organizations.

iv. A simple deposit account in a bank is a right of every citizen of the country as it is imperative for economic wellbeing and for financial stability. The process of suo moto offering bouquet services without customer demand for the same and charging for the same as well as creating higher threshold should be avoided. All the basic transactions like deposits/withdrawals/updating passbooks must be done at the same time without requiring the customer to wait in queue more than once.

v. Rural customers see banks as vehicles of socio-economic development and expect a very pro-active and supportive role in this regard from them.

vi. Customers should be adequately educated on all products sold by a bank as customer protection is best given through customer education. Bank customers should be made aware of their rights in respect of all banking products. A Financial Literacy and Counseling Centre should be available in every block in the country to assist informed decision making of the bank customers.

vii. Customers desire total secure protection (zero liability) against loss with regard to all customer induced transactions utilizing technology such as ATM operations, Net banking etc. Even negligence of a customer should not interfere with his customer and consumer rights. All rules of banks should be designed to enhance customer confidence in respect of electronic transactions.

viii. Reasonableness of charges for the 27 basic banking services which was left to the individual Boards of banks as per RBI Guideline has not yielded the desired results of making banking services affordable to the base of the pyramid. This has to be ensured by regulation as it is being done in case of payment system products.

ix. No penalty prescribed by a bank should exceed in value the shortfall if any which has resulted in violation in meeting any requirement stipulated by a bank. Any penalty prescribed by bank in case of customer failure must be matched by equivalent compensation in case of a mistake committed by the bank.

x. A comprehensive legislation suitable to technology driven modern banking which has complex products cutting across different sectors like banking and insurance is necessary as under existing system, banking is done under various Acts like Indian Contract Act 1857, Negotiable Instruments Act 1881, Limitation Act 1963, Stamp Act 1899, Telegraph Act 1985, Wireless Telegraphy Act 1933, Banking Regulation Act 1949, RBI Act 1935, TRAI Act 1997, IT Act 2000 etc. This will considerably help banking operations and redressal of customer grievances.

7. Appeals against the Decisions of the BOs

7.1 The BOS 2006 permits banks and complainants to appeal against the decisions of the BO. The Deputy Governor in charge of the Department of RBI implementing the Scheme (Customer Service Department) is the Appellate Authority (AA). The secretarial assistance is provided by the Customer Service Department. The data on Appeals preferred by the complainants and banks during the last three years is given in Table 18.

7.2 The facility of appeal against any decision of BO (rejections, awards, other decisions, etc) by both the complainant and banks was introduced in May 2007. Earlier, appeal facility was available only to the banks and that too, against the awards issued by the BO.

The number of appeals received by the AA has considerably decreased by 57% in 2010-11 compared to previous year. Though the BOs passed 278 awards during the year, only 40 awards were contested. The AA has received 133 appeals during the year as against 308 and 269 appeals during the years 2009-10 and 2008-09. 93 out of the 133 appeals received during the year were from the public and 40 appeals were from banks. The AA handled 167 appeals during the year, including 34 appeals carried forward from the previous year, all of which have been disposed during the year, leaving no appeal pending for disposal at the end of the year.

7.3 Out of 167 appeals disposed off, the AA upheld the decisions of BOs in 71 cases (43%), while in 55 cases (33%), BO decisions were set aside by the AA. In addition, 9 cases (5%) were remanded to the BO for fresh disposal in accordance with the directions of the AA while 32 appeals (19%) were withdrawn by the complainants since the bank had resolved the issue to their satisfaction during the appeal stage.

8. Important Developments During the Year 2010-11

8.1. Customer service meeting:

With a view to have a coordinated approach to customer service, Customer Service Department (CSD) of RBI convenes half yearly meetings among the Regulatory Departments of RBI, IBA and BCSBI. Few BOs also participate in these meetings. The systemic issues observed by CSD and the OBOs are addressed through this forum. This serves as an institutional arrangement for coordinated approach to customer service and exchange of views/ suggestions on systemic issues.

The seventh such Customer Service Meeting was convened on January 24, 2011. The meeting, chaired by Deputy Governor Dr. K. C. Chakrabarty was attended by IBA, BCSBI, CIBIL, Banking Ombudsman New Delhi and Thiruvananthpuram and various regulatory departments of the RBI.

Important Policy issues such as synchronization of floating rates of interest on home loans for old & new customers, reasonableness of service charges, fore-closure charges, reporting to CIBIL, software linkage to NSDL for TDS, strengthening of internal grievance redressal mechanism in banks, high Average Quarterly Balance and exorbitant penalty for not maintaining the same, need for simplified MITC for retail loan products, complaints in respect of submission of 15G/15H and tax deduction at source, etc. were discussed in the meeting.

8.2. INFE- OECD meetings: Seventh meeting of International Network on Financial Education (INFE) – OECD was held at Toronto- Canada during May 24 to 27, 2011. The meeting was attended by the Deputy Governor, Dr K. C. Chakrabarty. A presentation on ‘Evolving a national strategy for Financial Literacy -The Financial Inclusion and Access Challenges’ was made by Dr. K. C. Chakrabarty in the meeting.

8.3. Banking Ombudsman’s Handbook

Customer Service Department brought out a comprehensive reference book, titled ‘Banking Ombudsman Handbook’, containing all the relevant circulars/instructions issued since the inception of the Banking Ombudsman Scheme in a single document for the use of the Banking Ombudsmen and the Dealing Officers in the OBOs. This Hand Book is aimed at creating an environment of excellence in complaint handling and resolution by guiding the decision making process and will go a long way in updating the knowledge and upgrading the skills of the dealing officials. The Handbook was released at an In-house function on January 3, 2011.

8.4. Annual Conference of Banking Ombudsmen

The Annual Conference of the Banking Ombudsmen was held on September 5, 2011 in Mumbai. The Governor, in his inaugural address, stated that rendering good customer service was like ‘prevention’ and was better than the ‘cure’. He flagged various issues relating to banks’ customer service for the consideration of the participants. He asked whether customer service was a criterion in evaluating the performance of a branch level official or did levying of penalty on a bank reflect in any manner on the staff which caused the levy of penalty; do all banks have customer grievances redressal officer and at what level; were the most important terms and conditions (MITC) explained to the bank customers before they signed the documents and whether deviation from the MITC of a banking product transparent. He urged bankers and BOs to identify ten action points to further improve their customer service.

The ten action points which emerged from the Conference are given in the Box V.

BOX V : ANNUAL CONFERENCE OF BANKING OMBUDSMEN 2011- ACTION POINTS FOR BANKS AND BOs

1. Indian Banks’ Association (IBA) will standardise most important terms and conditions (MITC) for at least ten important banking transactions and circulate among banks for adaptation.

2. Banks would initiate the process of providing “one view” of all bank accounts of a customer including deposits, loans, etc., with the help of available technology, such as, core banking solution. Banks would complete the process within one year.

3. Banks would convey to the Reserve Bank, a consensus view on the recommendations of the Damodaran Committee Report on Customer Service in Banks that could be immediately implemented.

4. To create awareness about the Banking Ombudsman Scheme, the Banking Ombudsmen will annually share with local media, information regarding complaints received and resolved, including important cases and awards given. This will be done immediately on submission of the annual report to the Governor by the BOs.

5. A series of town-hall events will be organised by banks to generate awareness about customer service in banks. Bank customers, bank officials and Banking Ombudsmen will participate in these events.

6. The Reserve Bank/IBA would examine the issues pertaining to monetary compensation for mental harassment suffered by bank customers. Issues that may receive attention in the analysis would be:

• Whether only actual loss should be considered for compensation

• Whether mental harassment issues can be codified for compensation and whether compensation should be capped

• Whether the policies of the banks’ boards on compensation should include mental harassment as a ground for compensation

7. Banks should issue tax deduction at source (TDS) certificates duly completed in all respects to the account holders and dispatch it to their mailing address available on the bank’s record.

8. In case of ATM/Internet based banking transactions, in the event of any monetary dispute involving the customer and the bank, the onus should be on the bank to prove the customer’s negligence or mistake. Customer must be compensated for the losses arising out of customers’ non-authorised transactions.

9. Banks’ should initiate steps to incorporate in their code of ‘Fair Practices to the Customers’ the following items -

• Insurance of some reasonable amount on their customers’ credit and debit card transactions

• Providing periodical loan statements to small borrowers

• Borrowers should be conveyed information on the annualised all-in cost (Annual Effective Rate) on their loan accounts.

10. Banks must not recover pre-payment charges in floating rate loans. Banks may also offer long-term fixed rate housing loans to their customers and address their asset liability mismatch (ALM) issues by recourse to the Interest Rate Swaps (IRS) market. Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it to borrowers and, thus, banks only substitute interest rate risk with potential credit risk. The bank will, however, be free to recover / charge appropriate pre-payment penalties in the case of fixed rate loans.

8.5. Town Hall Meeting:

Town Hall Meeting is one of the initiatives by RBI as a part of its efforts to take banking awareness to the masses across the length and breadth of the country. These meetings allow the general public to interact with the officials on important policy or administrative issues and also enhance public understanding of Reserve Bank, it’s sensitiveness to their welfare needs and how transparent and proactive its actions have been to empower them in matters of financial services.

On August 19, 2011 Town Hall Meeting was organised at Guwahati. Banking Ombudsmen from Ahmedabad, Guwahati and New Delhi formed a part of the panel of resource persons. Besides Chief General Manager, Customer Service Department, RBI. Chief Executive Officer of BCSBI, senior level functionaries of SBI, ICICI Bank and HDFC Bank were also present. Banking Ombudsmen present at the meeting briefed the audience about BO Scheme, procedure for redressal, appeals, compensation, etc.

The audience included students, academics, bankers, customer organizations, pensioner associations, representatives of trade / industry bodies, press and media persons, Self Help Groups, etc. The questions posed by the members of the public were responded by the panelists either in English, Hindi or Assamese. The areas of interest for the audience were KYC, Simplification of account opening forms/ loan documents, Safety issues in Internet Banking, Pension payment delays and difficulties in release of family pension in the same account to the nominees, Education Loans, Delays in sanction of loans, Fake / forged currency notes, Shortage of Coins, TDS Certificates not being given promptly by banks, Financial Literacy and need for Financial Inclusion and Service Charges / Foreclosure Charges

The event was covered by local press / electronic media as also the national network. CNBC Awaaz, the Hindi channel of Network 18 was the media partner for this event. The edited version of the meeting was telecast on CNBC Awaaz in the form of a 30 minute capsule.

BOX VI:

‘EXTRACTS FROM THE SPEECH DELIVERED BY DG, DR. K. C. CHAKRABARTY AT INFO 2011 ON IMPACT OF GLOBAL FINANCIAL CRISIS ON FINANCIAL CONSUMERS – GLOBAL AND INDIAN PERSPECTIVE ON NEED FOR CONSUMER PROTECTION – ROLE OF OMBUDSMEN’

“Where the Banking Ombudsman Comes In”

The role of the Ombudsmen adjudicating financial consumer disputes is onerous and the recent upheavals in the market place have only heightened the consumers’ expectations. The existence of a legal framework is a must for consumer protection. The Ombudsmen, by definition, deal with individual grievances about which the common person is agitated. They cannot substitute effective legal and regulatory systems. Expecting them to bring about systemic improvements of a sustainable nature by resorting to class action may be to expect too much from the schemes. The Ombudsman Schemes achieve two important objectives viz., timely disposal of grievances and continuing the relationship between the financial service provider and the consumer. While the courts of law decide cases in finality, many a times bringing contractual relations to an end, the decisions or awards passed by Ombudsmen generally do not have such implications.

What needs to be done is to have a constant interaction between law makers, regulators, standards & codes setting bodies and the Ombudsmen to sort out systemic issues that may be leading to individual grievances. The regulators also need to be aware of their responsibility of protecting the vulnerable sections of the poor in matters of pricing, fair treatment, non-discriminatory approach to consumer care and transparency in dealings with customers. Very often, the Ombudsmen are bogged down with issues of jurisdiction, either pecuniary or physical. This should not hinder them from encouraging a conciliatory approach to redress the grievances. We just cannot leave it to the care of the market forces and competition and expect them to serve the cause of the consumers. The standards and codes setting bodies must evaluate the quality and effectiveness of consumer care measures including the financial education initiatives taken by the service providers. The Ombudsmen need to move out of their Offices to spread awareness about existing redress systems available within the framework of the financial services industry. All the initiatives must be aimed at empowering the customer to be able to make a studied and reasonable choice of a financial product or service. The effectiveness of the Ombudsmen is not to be judged by the number of complaints handled every year but by the cases that resulted in bringing about sustainable continuous systemic improvement.

In this age of networking, fora like the INFO play an important role in broadening our outlook and understanding of issues from a local as well as global perspective. While globalization has had its share of success in improving markets and competition, it has also exposed the limitations of national regulators in protecting their consumers from actions arising out of trans-border transactions. Hence, the Ombudsmen who are part of INFO and the regulators must adopt the high level principles on financial consumer protection that have been put in public domain by G-20 OCED.

8.6. INFO 2011:

The Annual Conference of the International Network of Financial Services Ombudsman Schemes (INFO) for 2011 was held in Vancouver, British Columbia during September 19 to 23, 2011. The Conference was attended by Deputy Governor, Dr. K. C. Chakrabarty and Shri M. Sebastian, BO, Hyderabad. Dr. K. C. Chakrabarty delivered a speech on ‘ Impact of Global Financial Crisis on Financial Consumers – Global and Indian Perspective on Need for Consumer Protection – Role of Ombudsmen’ at the Conference.

8.7. Spreading awareness about BO Scheme:

Awareness about the BO Scheme is one of the tools for empowering banking customers. Over the years since inception of the BO Scheme, it has been observed that the awareness about the BO Scheme is restricted to metro and urban areas.

With spread of banking to remote corners of the country, lack of knowledge about internal grievance redressal mechanism of banks and the apex level redressal mechanism available under BO Scheme is the major handicap of banking customers, especially in rural and semi urban areas. Even in metros and urban areas, people are not aware about proper procedure to be followed while lodging complaint under BO scheme. This is evident from a large number of “First Resort Complaints” received in OBOs.

All the BOs are doing their best to spread awareness about the scheme especially in rural areas. Some of the initiatives taken by OBOs during the year are summarized below.

8.7.1. Awareness campaigns/ visits:

Intensive awareness campaigns were undertaken throughout the year to ensure greater reach of the Scheme among the members of public and to make them aware about the internal grievance redressal system available in the banks and the alternate grievance redressal mechanism available at the Office of Banking Ombudsman, RBI.

Banking Ombudsmen also participated in various awareness campaigns undertaken by RBI under its Financial Inclusion and Literacy Programme. A number of villages in various Districts under the jurisdiction of the OBOs were covered during these campaigns.

Banking Ombudsmen visited various districts of the State under the territorial jurisdiction of their Offices. Participation in various important fairs and festivals in the State, face to face interaction with members of public at various places at block level, participating in seminars organised by Government of India in association with RBI were some of the other initiatives undertaken by the OBOs.

To caution the public about falling prey to fictitious mails / SMS about lottery winnings abroad, OBOs distributed brochures and leaflets regarding such fictitious mails/SMS in the various awareness campaigns organised by them. Some OBOs distributed DVDs containing documentary film on the Scheme, to major banks for screening during certain public contact programmes arranged by them.

8.7.2. Advertisement campaign / broadcast through All India Radio / Doordarshan:

Considering the reach of Radio and Doordarshan to remote parts of the country, OBOs are extensively using these channels for spreading awareness about the Scheme by broadcasting audio and visual advertisements in local languages on these channels. In order to reach out to remote areas some OBOs utilized the services of Post and Telegraph Department by displaying posters containing salient feature of the Scheme in the Post Office premises.

One OBO displayed posters on BO Scheme at major off-site ATMs of banks and at select multi-chain stores.

8.7.3. Visits to bank branches:

The Banking Ombudsmen visited bank branches and interacted with bank customers to ascertain their grievances and provided summary redressal of grievances as appropriate. The Banking Ombudsmen held exclusive meetings with representatives of Pensioners’ Associations and District Treasury officials in order to ascertain their feedback regarding service quality expectations from banks and issues relating to pension payments.

8.7.4. Interaction with Press:

Banking Ombudsmen attended Press Meets and replied to various queries of media persons. In one State, Banking Ombudsman responds to public queries on banking services related issues through a periodical feature published in the vernacular daily with extensive circulation in the State. As a unique outreach initiative, the Banking Ombudsman also participated in the live phone-in programme organized by a leading vernacular daily.

ANNEX - I

ANNEX - II

ANNEX - III

Exemplary Cases dealt with by BO offices during 2010-11

1. Non-reversal of credit card outstanding

A credit card holder paid the outstanding card dues as per the terms of settlement in March 2008. However, the bank did not reverse the outstanding dues on his card account and continued follow-up measures by issuing legal notices and reported his name to CIBIL. The complainant approached the BO with a claim of ` 50,000/- as compensation for mental harassment by the bank. On taking up the matter, the bank reversed the outstanding dues and updated his records at CIBIL However; the BO observed that the bank had violated para 5.1(d) of the BCSBI Code by not updating his records at CIBIL for about two years. Thus, the bank was found negligent in rendering services to the complainant and accordingly directed to pay a sum of ` 10,000/- by way of exemplary compensation for the harassment and mental agony suffered by the complainant. The complainant did not accept the Award and appealed to the Appellate Authority (AA) for the grant of a compensation of ` 50,000/-. The AA observed that the appellant was also responsible for the cause of action by being a defaulter. The bank had already sacrificed a good amount and the BO had also granted an additional amount of ` 10,000/- as compensation. The appeal was rejected.

2. Harassment by recovery agents

A customer was receiving frequent calls from his bank for recovery of credit card dues, even though he did not possess any credit card of the bank. Despite bringing the fact to the notice of the bank several times, the bank did not rectify the mistake and continued calling the complainant at odd hours. The complainant approached BO and requested to penalize the bank. The bank submitted that the defaulting credit card holder and the complainant were two different persons with similar name. The bank rectified the error and apologized for the inconvenience caused to the complainant. BO observed that the bank was negligent in initiating follow up action and recovery measures, without verifying and confirming the identity of the customer.

Accordingly, the bank was directed to pay ` 5,000/- to the complainant towards compensation for harassment and mental anguish suffered by the complainant.

3. Recovery demands on “undelivered” card

A complainant approached the OBO stating that he was issued statements for the credit card which was never received and used by him. The card agency continued to send the statements to the complainant, despite serving notice by the complainant through his advocate to the agency and even after confirmation by the agency that the status of the credit card was “undelivered”. The agency continued its lapse by initiating measures for recovery of dues, causing mental anguish to the complainant. The agency also debited premium for insurance cover for which the complainant had not given his consent. On taking up the matter with the agency, the agency reversed the entire outstanding balance on the card and also apologized to the complainant for the inconvenience caused. However, the case was adjudicated for issues relating to deficiency in providing services by the agency. An Award was passed by the BO and the agency was directed to pay an amount of ` 10,000/- to the complainant by way of compensation for harassment and mental anguish suffered by him.

4. Extension of PPF account of HUF

A complainant was having a Public Provident Fund (PPF) account in the name of Hindu Undivided Family (HUF) with a bank. On maturity, the account was extended for five years as requested by the account holder. After two years, the bank asked the account holder to close the account as it was not eligible for extension. The bank also informed the account holder that no interest would be payable for the extended period. The complainant was compelled to get his account closed with the bank. The bank also reversed the interest credited in the account for the last two years. The complainant approached the OBO with the plea to advise the bank to continue the extension of the account already granted by the bank and to repay the interest deducted. On taking up the matter, the bank contended that they had recovered the interest amount in the PPF account for the post maturity period as per the amendments to the PPF Scheme, 1968. (The bank also stated that an amount of ` 1,000/- was paid to the customer as a goodwill gesture for the inconvenience caused to the account holder). It was observed that the PPF HUF account was not eligible for extension and payment of interest beyond its maturity. The bank was found deficient in providing service to the account holder as the bank allowed extension beyond its maturity instead of closing the account on maturity in terms of Government/RBI instructions on the Scheme. The bank was advised to pay an amount of ` 1,000/- to the complainant for the act of commission by the bank and the inconvenience caused to the complainant. Subsequently, the Award was amended vide AA’s order to pay interest at the interest rate of fixed deposit from the date of maturity to the date of closure of the account.

5. Changing the rate of interest without notice

A complainant approached the OBO stating that she was sanctioned housing loan at a fixed rate of interest of 8% by the bank. However, after 3 years, the bank started charging interest at the rate of 8.5% without any intimation to the complainant. The complainant had requested that the bank may be directed to charge interest at fixed rate of 8% as per the bank’s commitment and refund the excess interest recovered. On taking up the matter, the bank stated that the change in rate of interest was as per the loan agreement signed by the complainant. One of the clauses stipulated reset of prevailing rates after every 3 years. The bank added that the change was reflected in statement of account provided from time to time and annual statement of interest provided to the customer for income-tax purpose. It was observed that the bank was required to issue notice to the borrower intimating the change in rate of interest and the borrower, if not agreeable to the revised interest rate so fixed, may request within 15 days to terminate the loan agreement and repay the loan in full and final settlement according to the provisions of the agreement relating to prepayment. The bank’s contention was not found acceptable as statement of account/interest could not be considered as a substitute for notice and as such the bank was found deficient in not adhering to the terms and conditions of the agreement. However, the complainant could have also approached the bank to get her account closed when the change in rate of interest came to her notice. Therefore, the request of the complainant for refund of interest in excess of 8% was not accepted. However, an Award was issued to the bank to pay ` 1,000/- as token compensation for the inconvenience caused to the complainant.

6. Levying charges without prior notice

A complainant firm approached the OBO when the bank levied charges in their current account without prior notice and requested for refund of charges from the bank. On taking up the matter with the bank, it was submitted that the charges were recovered by the system automatically as per the extant guidelines. The charges were displayed on the notice board of all the branches of the bank. On perusal, it was observed that the bank did not furnish break-up of charges levied either to the complainant or to the Office. The bank recovered the charges on quarterly basis instead of half yearly basis as stipulated. It had also not followed the instructions of RBI while identifying and designating the account as inoperative. It did not provide a copy of the account opening form of the subject account and the terms & conditions of account opening, requisitioned by the BO. The bank’s deficiency in rendering service to the complainant was established as it had acted in a non-transparent manner and also violated its internal instructions, BCSBI Codes and RBI guidelines. An Award was passed and the bank was directed to refund the charges levied and also pay a token compensation of ` 500/- to the complainant firm for the inconvenience caused.

7. Fraudulent withdrawal through lost debit card

A complainant lodged a complaint for mis-utilisation of his lost debit card, despite reporting its loss to the bank on the same day by e-mail to the bank’s branch. The complainant requested for refund of ` 20,703/- withdrawn by a miscreant by using the lost card before it was blocked by the bank. On taking up the matter, the bank submitted that the complainant had neither lodged his complaint through toll free number nor lodged FIR in the local police station as required. However, on receipt of complainant’s e-mail, the branch initiated the necessary action to get his debit card blocked. The bank’s card company could block the card only on the next day.

The BO observed that the delay in blocking the card by the bank paved the way for the fraudulent transaction(s) to occur. Further, since the matter involved a fraud, the bank should have compensated the customer as per the bank’s policy and extant RBI guidelines in this regard. Thus, the deficiency in services of the part of the bank was established. An Award was passed on the bank to credit the disputed amount of ` 20,703/- with interest at savings bank interest rate from the date of transaction to the date of credit of the disputed amount to the customer’s account.

8. Banker’s lien for recovery of dues

A complainant was having a credit card of a bank and was regular in payment of dues. He approached the OBO when the bank informed him that the bank had exercised the right of banker’s lien and debited his savings bank account held with the bank towards outstanding in his card account. The complainant submitted that:

• Statements were not sent at proper address of the card holder, forcing him to make payments with delay, resulting in levying of various charges for delay in payment on card account;

• He had made a payment of ` 3,000/- towards full and final payment for outstanding balance on his card account;

• The bank, without verifying its records, exercised the right of bankers lien on his account for not making payment towards outstanding balance on the credit card account.

The bank stated that on verifying their settlement records, they found that no such settlement was updated in their system. However, considering the fact that the complainant had gone ahead and made payment on the basis of a settlement, the bank refunded an amount of ` 4,562/- and cleared his credit card dues by reversing all amount wrongly charged on the card account, as a service gesture. The reply submitted by the bank that the settlement offered to the complainant was not updated in the system but the payments towards the same were reflected in the records, was not found satisfactory. On taking up the matter, the bank compensated the complainant by paying an amount of ` 5,000/-.

9. Delay in removal of pledge

A complainant had pledged 17,700 UTI 6.6% Demat ARS bonds issued by UTI with a bank as security for loan availed. The complainant repaid the loan on October 01, 2009. However, in spite of repaying the loan, the bonds maturing on April 01, 2009 were held under pledge by the bank up to March 31, 2010. The complainant received redemption proceeds of the bonds vide cheque dated May 13, 2010 i.e. late by thirteen months from the date of maturity resulting in loss of substantial amount of interest. On taking up the matter with the bank, the bank submitted that they had not received any request from the complainant for removing the pledge after the repayment of loan resulting in delay in receiving the proceeds. On detailed examination of the issue, it was found that the bank initiated the process of removal of pledge with delay. The bank finally made a payment of ` 1,62,828/- to the complainant at fixed deposit interest rate as per their compensation policy for the delay in removal of pledge once the loan was repaid by the complainant.

10. Inter-city/non-home transaction charges on cheque returned unpaid

A complainant maintaining savings bank account with a bank deposited a cheque of ` 10,06,000/- in his account on November 22, 2010. The bank debited ` 1006/- as inter-city charges. The bank stated that the inter-city charges were levied towards services provided for collection of cheque to an account which was maintained in a branch of a bank at other city. The charges were collected once the cheque was deposited and processed for collection. However, as the cheque was returned unpaid, cheque return charges were debited to the account as per internal guidelines of the bank. The bank expressed their inability to the complainant to refund inter-city/non home transaction charges. The matter was taken up with the bank to ascertain whether the cheque was payable in speed clearing or was it sent for collection. Resultantly, the bank refunded ` 1006/- to the complainant.

11. Complaint against BO before consumer forum

The complainant alleged that an amount of ` 7734/- was debited from Savings / Salary Account by the bank exercising the “Right to Set Off” against credit card dues. The complainant claimed that she did not hold any card / owed any dues to the bank and the amount of ` 7734/- was debited to her SB Account without her consent. As the BO could not intervene in matters relating to settlement / recovery, the complaint was closed under Clause 13(a) of BOS, 2006 based on the reply given by the bank. The complainant filed a complaint with the Consumer Disputes Redressal Forum against the bank making BO a second respondent. After hearing all the parties, the Forum ordered that the complaint against BO be dismissed with cost of ` 2000/- to be paid by the complainant. The complainant paid the amount.

12. Loss of title deed - Inability to return after repayment of housing loan

A complainant approached the BO alleging that the bank was not returning original title deed kept as a security for housing loan availed, even though the loan had been fully paid. The bank replied that they were not able to trace the documents and had arranged for a certified copy of the documents and handed over the same to the complainant. The BO observed that loosing of original Title Deed was a serious lapse and the certified copies can never substitute the originals. The bank was, therefore, advised to give the complainant a certificate advising the loss of original documents from their custody. They were also asked to insert an advertisement in the local newspaper at their cost, informing the loss of documents. In addition, the bank was directed to pay compensation of ` 25,000/- to the complainant for deficiency in service.

13. Fraudulent withdrawal from SB account using withdrawal slip

The complainant, an old lady, complained that ` 70,000/- had been withdrawn from her pension account in December 2009 in two installments though she had not operated her account between December 2009 and November 2010 and during this period pass book was with her. No ATM card or cheque book was issued to her.

The bank replied that the amount was duly withdrawn by the complainant who had presented herself for receipt of the captioned amount along with passbook. The bank further claimed that as the complaint was made to BO 15 months after the disputed withdrawal, the same be rejected as per clause 9(3)(b) of the BOS 2006. The BO observed that since the fraud was noticed by the complainant late, she lodged the complaint with the bank on March 3, 2011 and one month thereafter to the BO. As such, the complaint was maintainable under the BOS. The bank was advised to submit a copy of disputed withdrawal slips and a copy of specimen signature card. Apparent difference was observed between the specimen signature on the card and withdrawal slips. The bank had made the payment without proper mandate from the customer. The bank was advised to refund the disputed amount with interest at Savings Bank rate.

14. Unjustified levy and recovery of processing charges

The complaint was about recovery of processing charges on the new term loan sanctioned to the firm in spite of the fact that the terms and conditions of sanction were not accepted and the loan was not availed by the firm. The complainant firm, had applied for a fresh term loan of ` 720 lakh and enhancement of Cash Credit limit. The bank took almost 11 months for processing the credit proposal and finally conveyed its sanction for renewal-cum-enhancement of the existing limits and sanction of fresh term loan. Although the complainant did not accept the terms and conditions of sanction, the bank debited his account for full processing charges amounting to more than ` 9 lakh.

The BO observed that the bank had taken about 11 months to complete processing of the credit proposal against stipulated 20 days as per its policy for lending to MSME Sector. As per the bank’s fair practices code, the loan application forms would be comprehensive and include information about fees, if any, payable for processing, the amount of such fees refundable in case of non-acceptance of application, etc. However, the loan application form issued to the complainant did not mention any information on fees payable for processing. Further, as per the bank’s internal circular on “Revision of Service Charges”, no pre-processing charges had been prescribed for Priority Sector Advances. The complainant’s loan being priority sector advance, the recovery of processing charges was, therefore, not justified. For non-priority sector advances, as per the bank’s circular, only 10% of the applicable processing charges were recoverable upfront and 90% before disbursement began. So even if the advance would have been non-priority sector advance, recovery of 100% of processing charge was irregular inasmuch as the terms and conditions of sanction were not accepted by the applicant and the disbursement had never taken place.

The bank was, therefore, directed to refund the processing fee in respect of fresh term loan sanctioned to the complainant. The bank went in appeal against the decision of the Banking Ombudsman. However, the appeal was dismissed by the AA.

15. Non-payment of interest on the proceeds of the cheque collected

The cheque for retirement benefits deposited by a customer was sent for collection by the bank in the year 2000. Since the credit for the cheque was not received, the customer approached the bank. However, from time to time, the bank denied having received the cheque. The customer finally obtained a photocopy of paid cheque from the issuer. It was found that the cheque was duly debited to issuer’s account and the bank who received the proceeds was same bank where the customer maintained his account. The bank credited the amount of cheque to customer’s account in January 2010 but did not pay any interest on the amount despite representation. The customer approached the BO.

BO observed that there was gross deficiency of service on part of the bank. The complainant was a person of small means and he was deprived of his retirement benefits for ten years. The bank did not make any serious efforts to trace the proceeds of the cheque. The bank was, therefore, directed to pay interest at applicable fixed deposit rate plus two percent for the period till July 31, 2007. For the period from August 1, 2007 till January 1, 2010, the bank was directed to pay interest as per its compensation policy, which was stated to be effective from August 10, 2007. The bank was also directed to pay a compensation of ` 10,000/- to the complainant.

16. Fraudulent ATM withdrawals - Importance of video footage

A series of complaints were received against a few banks alleging unauthorized debits in complainants’ accounts as a result of fraudulent withdrawals through ATMs. Considering the volume, value, timing and modus operandi of disputed transactions, the bank was advised to preserve camera footage and submit all documentary evidences relating to these transactions. The vital evidence, which helped in taking a firm view, came through the camera recording provided by the bank. It was observed in all the cases that, a suspicious looking person having covered his face was in possession of multiple cards and he had made withdrawals of ` 20,000/- in successive transactions. In the absence of SMS alert facility, he succeeded in withdrawing almost ` 40,000/- every day using most of the cards till almost entire balance in the account was withdrawn or the accounts were blocked by the customer or bank. Video footage also revealed that he chose midnight or early morning hours for these operations which allowed him considerable time to be alone inside the ATMs. On one occasion he carried out almost 40 transactions in a row using more than 25 cards. All the complainants had claimed that they had not parted with their cards and PIN details and were in possession thereof when actual withdrawals took place. Although the bank’s usual stand had been that the money cannot be withdrawn without compromising with the security of card and PIN details, in view of the overwhelming circumstantial evidence suggesting that the withdrawals from ATMs were of fraudulent nature, awards were issued in all cases and banks were advised to pay the complainants, amounts fraudulently withdrawn.

17. Failure to honour terms of housing loan insurance policy

The complainant informed that her late husband had taken two housing loans aggregating ` 8.00 lakhs from a bank. He had assigned two personal insurance policies - one for ` 1.00 lakh and another for ` 5.00 lakh as collateral securities for above loans. Besides, on the advice of the bank, he obtained a “Home Loan Surksha Bima Policy” from Insurance Company in favour of the bank covering the full amount of the loan for 15 years. Unfortunately, the borrower expired in a road accident. His wife requested the bank to lodge insurance claim with the Insurance Company for closure of housing loan, and return both the personal LIC policies of her deceased husband. However, since the Insurance Company settled the loan for ` 5.47 lakh i.e. less than the outstanding amount, the bank initiated action for recovery of balance amount from the legal heir (wife). The borrower’s wife represented that the entire amount of loan was covered under the “Home Loan Surksha Bima Policy” and, therefore, the balance outstanding should be claimed from the Insurance Company.

The matter was referred to the bank, which informed that since the Insurance Company had not settled insurance claim for full amount of loan, the bank had a right to recover balance amount from LIC policies pledged by her deceased husband.

While examining the documents produced by bank, it was observed that the complainant had submitted a fresh claim request addressed to the Insurance Company for settlement of entire outstanding amount which was merely forwarded to the Insurance Company without any supporting documents/ recommendations for additional claim. Further, the bank could not produce terms & conditions of master policy obtained from the Insurance Company in respect of housing loans. However, it submitted an annexure to “Home Loan Surksha Bima” circular which provided that only the first named borrower was covered at the cost of the bank. The BO felt that since premium was paid for ` 8.00 lakh loan, the Insurance Company should have admitted the claim in full. He, therefore, advised the bank to lodge a fresh claim with the Insurance Company duly supported by all documentary evidences. As per the directions of BO, the bank lodged a fresh claim for balance with the Insurance Company which settled full balance outstanding in loan account as on the date of death of borrower and paid balance amount of ` 1,13,787/- to the bank. Thereafter, the bank was advised to waive off remaining balance outstanding in the loan accounts which represented interest etc. levied subsequent to death of her husband. The bank was also advised to release two LIC policies pledged to it by the borrower and issue ‘No due certificate’ to the complainant and “wash out” reporting to the CIBIL, if any.

18. Illegal internet transfers

The complainant had alleged that four illegal transfer transactions were conducted from his savings bank account through internet banking in a day for an aggregate amount of ` 1,02,000/-. The funds were transferred to two different accounts. He also informed that after receiving SMS for the first transaction, few minutes later SMS for the second transaction was received when he was lodging a complaint with the bank’s Call Centre. The remaining two transactions were made while he was still discussing the matter with the Call Centre. He, therefore, requested the Call Centre to block the ATM cards. While the bank blocked ATM card of one account with its Delhi branch, it failed to block the ATM card of the account with its Bangalore branch facilitating withdrawal by the fraudster. The complainant, thereafter, lodged an FIR and got part refund leaving a balance of about ` 50,000/-. After a lot of persuasion, he could get back another ` 26,000/- with unsettled balance of ` 24,802/-. As the bank was not refunding the balance, he approached BO.

On referring the matter to the bank, it informed that the accounts to which the funds were unauthorisedly transferred were frozen on receipt of call from the complainant. It maintained that the cyber fraud was done using the password of the complainant, which appeared to have been hacked.

To resolve the matter amicably, a conciliation meeting was called. The complainant informed during the meeting that one of the account holders was caught by Delhi Police and during enquiries, he paid ` 26,000/- to the complainant after admitting that the amount transferred to his account was not a valid transfer. It was also observed that while KYC documents for beneficiary account with bank’s Delhi branch were complete, the documents relating to beneficiary account with Bangalore branch were incomplete. The latter account holder was not traceable. The internal investigation report of the bank admitted that the transactions were a cyber-fraud. BO ordered the bank to pay the remaining amount of ` 24,802/- to the complainant and recover the same from account holder of the Bangalore branch.

19. Claim for card dues despite complete payment & deactivation of card

The complainant had taken a loan of ` 30,000/- in June 2008 repayable in 24 EMIs on his credit card. There was some confusion in payments, which resulted in excess payment to the card company. After discussing with the Customer Care, he paid the difference but the bank did not make required adjustments in his card statement. He requested intervention of BO to resolve the matter. On taking up the matter with the card company, it confirmed having reversed the amount of excess billing on the complainant’s card. The company also confirmed that the card was inactive for usage and no dues were payable thereon.

However, the complainant reported in November 2010 that the bank had again sent him EMI bill. The Card Company was advised to ensure that its system reflected correct position of the complainant’s card and confirm to BO. It was also advised to wash out CIBIL reporting, if any. The Card Company was also advised that it would be liable to pay compensation of ` 5, 000/- for any violation of the above order.

The complainant again received a fresh bill with extra charges in February 2011. The complaint was re-registered due to constant harassment of the complainant and misreporting to BO. The Card Company was ordered to pay ` 5,000/- to the complainant as a compensation. It was also advised that no more card statements should be sent to the complainant and CIBIL status should be “washed out” else BO will consider issuing an award against the card company.

20. Dispute about interest rate differential

The complainant had alleged that he was sanctioned Cash Credit limit for ` 40.00 lakhs @ 3.5% below SBAR with a minimum of 9.25% on March 31, 2007 but the bank had started charging interest at much higher rate from January 2009. The rate was revised upwards significantly without notice to him. On taking up the matter with the bank, it informed that the complainant was enjoying cash credit limit under “Indirect finance to Agriculture”. It further advised that bank had decided to dispense with interest rate differential between direct and indirect agriculture borrowers w.e.f. January 01, 2009. Accordingly, the revised rate applicable to “Direct agricultural finance”, which was 2.5% above SBAR, was applied. The revised rate had been displayed on the notice board of the branch. However, the branch failed to apply revised rate of interest and the borrower had been charged lower rate of interest. On realizing the mistake, the bank had made recovery of interest with retrospective effect according to the revised rate of interest.

A perusal of the relevant records revealed that the complainant was sanctioned loan at 3.5% below SBAR. Further, the letter of arrangement provided for renewal of the limit at every six month or on expiry of 12 months from the date of sanction. Further, there was no provision to change the linkage to SBAR although changes in SBAR were at the discretion of the bank. It could not provide any evidence that the fact that revised rate of interest as applicable to direct agriculture borrowers will also apply to indirect borrowers w.e.f. January 01, 2009, was intimated to the borrower. The BO observed that the clause in the letter of arrangement and sanction terms & conditions as to revision in rate of interest linked to SBAR did not empower bank to effect any changes in the basic terms of contract i.e. interest rate differential over SBAR. In the absence of any notice given to the complainant or renewal of the loan limits, the old terms & conditions shall prevailed till the date of next renewal. BO ordered that the date of application of new rate of interest based on renewal shall be treated as effective date of notice and the excess interest charged as a result of the above should be credited back to complainant’s account. In compliance with the directions issued by BO, the bank refunded a sum of ` 95,208/- to the complainant.

21. Case of mistaken identity

The complainant was regularly operating his account with a bank since December 31, 1966. A cheque of ` 49,000/- issued by him in August 2010 was dishonoured on the ground “Account under caution”. The complainant, a senior citizen of about 85 years of age, approached the bank as he needed money for medical care. He also issued a legal notice through his advocate to get the money released, but the branch did not agree. He was advised by the bank that his account was under caution as daughter of another person with similar name (since deceased) had lodged a claim for the balance outstanding in that account. He, therefore, approached BO and submitted copies of the pass book from 1993 onwards. The passbook indicated that account was opened in 1966 and it was a second passbook. The bank represented that the account had come under dispute as daughter of another person of same name but different father’s name has claimed the amount lying in the account.

To resolve the grievance, a conciliation meeting was called wherein the other claimant was also advised to present her case. However, she did not attend the conciliation meeting.

While examining the ledgers and specimen signatures of account opened in 1966, it was observed that there were two specimen signature cards, one for Account No.406 of the complainant in the name of Sh. Swarup Kumar s/o Sh. Sapan Kumar and another for Account No.572 in the name of Sh. Swarup Kumar, s/o Sh. Anup Kumar. The complainant produced original Passbook No.2 along with a few cash deposit slips. He also informed that he had not changed his residence since opening of account. His specimen signature card was updated in 1996 when he got his wife’s name added as a joint account holder. The branch manager confirmed that the complainant had been visiting their branch during his earlier postings. He further confirmed that the daughter of other person, who had lodged the claim for the balance outstanding in her late father’s account had failed to produce any documentary evidence. Further, she had not produced any court order to freeze S/B account No.406 in the name of Sh. Swarup Kumar, s/o Sh. Sapan Kumar. The signatures in the account opening form of S/B Account No.572 were in English while that of the complainant were in Punjabi.

In view of the above facts, it was concluded that the complainant was the legitimate account holder of S/B Account No.406 and the bank had no right to freeze the account without any court order. The BO, therefore, advised the bank to lift the freeze on S/B account No. 406 and allow the complainant to operate the account.

22. Issue of cheque book without identification

The complainant had a joint account with daughter and had deposited a sum of ` 10,71,000/- in her account for the purpose of daughter’s education in UK. However, the bank issued the cheque book to a third person without identification and authorization and allowed him to withdraw a sum of ` 5,20,000/- by using a cheque leaf of the cheque book so issued through forgery. The complainant alleged that the signatures on the cheque, encashed across the counter, were forged and the bank was not able to show her the CCTV footage for the disputed dates to identify the person who had withdrawn the money fraudulently. She had also lodged an FIR with the police. She approached BO for refund of fraudulently withdrawn money.

The bank submitted that the cheque book was issued on the basis of authority given by daughter of the complainant, who was also one of the joint account holders. Although the branch had refused issuance of cheque book on the first occasion, it was issued to the same person on receipt of an authority letter along with copy of passport of one of the account holders i.e. daughter of the complainant. The bank maintained that the cheque drawn by daughter of the complainant, one of the joint account holders, was paid in due course.

The examination of original documents revealed that the bank had erred in issuing the cheque book to a third person on the basis of plain paper authorization. Further, the signatures of account holder and recipient of cheque book were at variance with signatures on account opening form and cheque book receipt record respectively. The police report had concluded that the person who collected the cheque book had impersonated as another person and forged the signature of account holder. The withdrawal was facilitated due to serious lapse on the part of bank officials to verify the identity of the person while handing over the first cheque book. It was, therefore, concluded that there was deficiency on the part of the bank. The bank was advised to refund ` 5,20,000/- to the complainant.

23. Mis-selling of insurance policy

The complainant had purchased two life polices from an Insurance Company through his bank one in his name and the other in wife’s name for ` 50,000/- each. After receiving the insurance policy documents, he realized that both the policies required payment of premium of ` 50,000/- on half yearly basis. As his financial position did not support payment of the premium, he approached the bank, who in turn advised him to contact the Insurance Company. During his visit to Insurance Company, he was assured that nothing was payable on these policies. Later on, he requested the Company to cancel the policies but received an intimation that the policies had lapsed due to non-payment of periodical premiums and hence no amount was payable to the complainant.

In a conciliation meeting called by the BO, the Insurance Company representative was also requested to be present. The area manager of the Company produced copies of application form for the disputed policies, which were duly routed through the bank, although it did not have any attestation of the bank official. He further submitted that, routine reminders through ordinary post and telephonic reminders were given to the policy holder for payment of premium in default. However, he failed to produce any documentary evidence except a record of posting of letters through ordinary post. The then branch manager of the bank, who was present during the meeting, confirmed that he remembered having explained to the complainant that the policy sold required one-time payment of premium, as explained by the Insurance Company representative to the policy holders.

BO observed that the policy was sold to the complainant without taking into account his financial status, monthly earning and education level. No evidence was available to suggest that the terms/ features of the insurance policy, periodical payments and uncertainty of returns was properly explained to the complainant. The BO therefore, concluded that the Insurance Company had mis-sold the policy and the concerned bank branch was a party to it. The company agreed to refund the premium of ` 1.00 lakh collected from the complainant.

24. Foreclosure charges, ledger folio charges, etc. on shifting loan account

The bank had recovered from the borrower ` 2.11 lakh towards pre-closure charges, Professional fee/ legal expenses and ledger folio charges on shifting of loan account to other bank. The borrower also alleged that the bank was charging usurious interest rate which was more than 2% above the rate charged by other banks for similar facility.

The bank submitted that since charges levied were as per the terms & conditions of sanction of loan and were duly accepted by the borrower, he had due notice of such charges.

On perusal of documents submitted by both, the Banking Ombudsman observed that the bank had not informed the borrower about service tax/service charges applicable on pre-closure of loan. BO also observed that in a computerized environment, there was no relevance of ledger folio charges. The bank was, therefore, advised to refund the amount of pre-closure charges over and above 1%, indicated in the terms & conditions of sanction and also to refund the amount of ledger folio charges. In compliance with BO’s order the bank refunded ` 34,815.50 to the complainant.

25. Delay in transmitting funds through RTGS

The complainant had alleged inordinate delay, on the part of the bank in transferring funds under RTGS and demanded ` 1 lakh in damages towards mental agony and for delay in disbursement of salary to the workmen. The bank clarified that as the request for the fund transfer sent to the beneficiary bank was without the account number of the beneficiary, the amount was kept in suspense and later credited back to inward account and subsequently credited to the beneficiary’s account.

As this was a lapse on the part of the bank, BO directed the bank to pay ` 80,000/- towards the loss of man hours and productivity due to non-payment of salary in time, as quantified by the complainant and certified by the Chartered Accountant.

26. Adverse reporting to CIBIL

A complaint was regarding adverse CIBIL reporting, though full and final settlement was done. On perusal, it was observed that on the backside of the receipt there was a remark ‘the payment is towards full and final settlement’. However, the payment made was credited to the account as usual and the account was not closed, leading to accumulation of charges. The complainant could not get home loan due to adverse CIBIL report. The Complainant approached the bank again but did not get any response.

On BO taking up the matter with the bank, the outstanding was made ‘Nil’ and the CIBIL record of the complainant was updated as ‘Settled’. BO observed that since CIBIL record is an important parameter for sanctioning any loan to a person, the bank should be prompt in updating the CIBIL records. In the instant case, since the bank did not correct the record even after several reminders, deficiency of service was established. The bank was advised to pay compensation of ` 5000/- towards the expenses incurred as well as for the mental anguish suffered by the complainant.

27. ‘Know Your Customer’ and due diligence

The complainant had applied for a personal loan of ` 1,00,000/- through the Direct Sales Agent (DSA). However, before the loan was sanctioned, he informed the DSA that he no longer required the loan and the application may be treated as withdrawn. The bank did not return the documents and the loan was sanctioned against his name and was disbursed by the DSA to another person with a similar name from another locality. The cheques towards the loan installment submitted by the other person bounced and the bank filed a case under Section 138 of Negotiable Instruments Act. A non-bailable warrant was issued against the complainant and the Police started visiting his place to apprehend him. The complainant requested the bank to strike out his name from the loan account and also gave details about the other person to whom the loan was disbursed, based on his own discreet investigation. The bank was convinced about its mistake and withdrew the case from the Court. After this, the bank again lodged fresh FIR with the Police Station under whose jurisdiction the complainant stayed instead of lodging it with the Police Station under whose jurisdiction the real borrower stayed. The Police started visiting the complainant’s place once again and mis-behaved with him and his family members. This time he lodged a complaint with the Banking Ombudsman.

BO observed that the bank had failed miserably to implement the KYC norms and also lacked control over its agents. It also reflected callous attitude and carelessness of bank’s officials in handling such sensitive matter. Bank initially wanted to settle the matter with the complainant and proposed to give a sum of ` 20,000/- as compensation. However, this compromise formula was not acceptable to the complainant as bank had not offered any apology in its letter. During the hearing, the bank’s officials informed that they were working out a compromise with him. Bank then submitted a letter to the Police Station, clearly indicating that the bank did not want any action to be taken against the complainant. The bank also paid the complainant a compensation amount of ` 1, 00,000/-.

28. Adherence to terms of agreement

A customer had availed a vehicle loan from a bank in the year 2006. The truck met with an accident and the borrower failed to pay installments. The vehicle was seized by the bank and kept under its custody.

The borrower accepted the settlement offered by the bank. However he failed to adhere to the terms of settlement and did not pay the installments in time. As a result the bank levied “delay charges”. The customer filed a complaint with the BO and requested that the bank should withdraw “delay charges” and other penal charges and the borrower would pay the remaining installments.

The bank officials stated that the borrower had not made the repayment as stipulated in the Settlement Agreement. Thus delay charges and penal charges for non-repayment of the overdue amount were levied. This aggregated to ` 1,97,489/-. The complainant offered to pay ` 1,80,000/- in one installment against a claim of over ` 3.00 lakh, after waiving the delay and penal charges.

The BO observed that the bank could not levy delay charges as such stipulation was not included in the settlement agreement. Further since the bank had not stipulated any penal rate of interest in the original loan agreement, it would not be fair for the bank to levy such charges specially since the Settlement Agreement stated that as on that date, all penal charges had been waived.

It was agreed by both the parties that the complainant would pay an amount of ` 2,00,000/- to the bank within 15 days. No penal or other charges would be levied by the bank on the account.

29. Non- credit of proceeds of cheque sent for collection

A cheque for ` 40,000/- sent for collection was lost in transit. The bank assured the complainant that the proceeds would be credited within a month. Though one month had passed, the amount was not credited. The complainant’s regular correspondence and numerous visits to bank were of no avail. As such, the complainant approached the BO.

The bank indicated that they had taken up with their branch as well as the Post Office and also submitted documents in support of their claims of having initiated action to obtain a duplicate cheque. In the conciliation meeting, after hearing both the sides, the BO directed the bank’s representative to make payment of ` 40,000/- along with interest at 2 % above the corresponding term deposit rate for the delayed period and ` 5000/- as service gesture, to the complainant.

30. Failed ATM transaction

The complainant tried to withdraw money through the ATM of another bank. Cash was not dispensed though his account was debited by ` 40,000/-. The matter was reported to both the banks. But the customer’s grievance was not redressed for about two years. As such, he complained to the BO.

Conciliation meeting was convened. The complainant and representatives of both the banks were present. The representatives of the bank, whose ATM was used, submitted a copy of the JP Log Printout and the Switch Centre Report which clearly indicated that the transaction was declined and cash was not dispensed. The representatives of the bank with whom the complainant was having his account and had debited his account had no plausible explanation for the delay except to say that the required information was not made available by the other bank despite e-mails. Further probing by the BO revealed that the bank had not made any efforts to contact the other bank’s Nodal Officer or other officials to obtain the information. They had simply sent e-mails to the bank’s ATM Switch Centre. It was a clear case of deficiency of customer service on the part of the first bank. The bank agreed to pay the disputed amount and ` 10000/- as service gesture to the customer.

31. Refusal to collect outstation cheque

The complainant had deposited a cheque in a branch other than his home branch. The amount was not credited to the account. On a visit to the branch, the cheque was returned without assigning any proper reason. Further, when he visited his home branch, the branch refused to receive the cheque as the stamp of the earlier branch was not cancelled. The bank informed that as per the bank’s Head Office instructions, the Inter-sole Transfer can be permitted from the parent branch or from the branch of the beneficiary / drawer. The customer then complained to the BO.

During the conciliation meeting before the BO it was agreed that the bank would collect the cheque and credit the same to the account of the complainant the next day itself. Bank also agreed to pay ` 750/- as a service gesture to the complainant.

32. Undue charges being levied

A customer had withdrawn an amount of ` 100.00 from his S.B. Account through an ATM of another bank. However he found that his bank account had been debited for ` 120.00. He complained to his bank branch but they could not redress his grievance stating that the deduction was done by the other bank maintaining the ATM and hence the amount had to be recovered from them. The customer complained to the bank whose ATM he had used, but they did not respond. As such he complained to the BO.

During the conciliation meeting before the BO it was revealed that the customer had not withdrawn funds through any ATM during the last five months and after a long time, when he withdrew money, he was levied a penalty of ` 20/- which was not in accordance with the extant guidelines of RBI. The BO in his Award directed the bank to have a relook at their systems, so that correct deductions/ debits would be made from the accounts of their customers, in accordance with the guidelines of the Regulator. The bank maintaining the account of the complainant was directed to make a payment of ` 1000/- as compensation to the complainant.

33. Imposition of fresh terms after sanction – penalty

Bank sanctioned a loan of ` 22 lakh under PMEGP and released a portion of the loan. The complainant then started the work and made advance payments for purchase of raw material. The bank refused to release further amount by imposing fresh condition of NOC from other banks including the one where his father was a borrower. It was observed that no such condition was there in bank’s policy or as per Central Govt. Scheme. BO passed an award for ` 2.00 lakh to compensate for the direct loss suffered by the complainant towards labor payment and forfeiture of advances by the suppliers.

34. Deficiency in service of collecting and paying bankers

Customer had applied for IPO and deposited cheque for ` 98,000/- with the application form. The collecting bank presented the same through clearing house but by mistake did not include it in the list. The paying bank debited the account of the customer but did not remit the amount to the collecting bank as the cheque was not listed. The application was rejected and the customer neither got allotment nor refund of the amount.

BO after listening to both the banks observed that both the banks were negligent. He passed an award directing the collecting bank to refund ` 98,000/- lying with them. He also ordered for payment of interest at FD rate plus 2 percent for the period each bank was holding the amount apart from awarding compensation of ` 28, 865/- to be shared between collecting and paying bank in the ratio of 75 % and 25%.

35. Penalty for leaving the clause blank in loan agreement

An education loan was sanctioned where collateral by way of JDA patta of a property was taken by the bank. The borrower wanted to construct house on the plot and wanted to foreclose the loan and shift to another bank. The bank insisted for payment of foreclosure charge of ` 38,960/- and the complainant paid the same but complained to BO Office. On examination of the documents it was found that the relevant clause in the loan agreement was left blank. BO passed an award directing the bank to refund the amount recovered as foreclosure charges.

36. Dishonour of demand draft

The complainant alleged that a demand draft was dishonoured by the collecting bank on the ground that it was not properly drawn and they were not able to contact the drawer bank. This resulted in loss of interest for delay in collection of proceeds, travel expenses and other related expenses to the beneficiary.

After going through the replies of the issuing bank / collecting bank / paying bank, it was observed that amount in words and figures could be clearly made out as against the contention of the bank. The drawer bank was not contacted before returning the draft by the paying bank. BO passed an award advising the paying bank to pay the complainant ` 20,000/- towards travel expenses and interest @ FD rate +2 percent for the period of delay.

37. Fate of the cheque dropped in drop box

The customer had deposited a cheque in the drop box of his banker. When he enquired about the credit of the same, he was told that the cheque was not received by the bank. Further after enquiry they informed him that the cheque in question was paid to some other bank through clearing. When he complained to the other bank it was found that a new account was opened in the same name and the amount was withdrawn soon after credit through clearing to that account.

A meeting was convened to arrive at a settlement but the same ended in failure. The BO observed that there was laxity on the part of the bank that opened the new account in monitoring the account, in KYC verification and the account holder was not traceable. Hence an award was passed against other bank for payment of the amount to the complainant.

38. Non-payment of personal accident insurance

On death of the borrower who had taken a loan under KCC, his wife requested the bank to get the insurance amount admissible to the deceased KCC holder under Personal Accident Insurance Scheme released from the insurance company. Getting no response from the bank, she approached BO. The bank submitted that the said loan was sanctioned under the KCC but no insurance premium was paid to the Insurance Company. The Insurance Company confirmed non-receipt of premium. BO observed that there was deficiency on the part of the bank in not paying premium to the Insurance Company. The bank, in fact, had acted against the provisions of PAI Scheme for KCC Holders. An award was passed for payment of ` 50, 000/- to the complainant.

39. Fraudulent transactions in the account

A complaint was received that ` 25,00,000/- were fraudulently withdrawn twice from the complainant’s account. The first withdrawal was made on February 19, 2010 and the second on March 05, 2010. The bank advised the BO that it was a case of fraud which was under investigation and Local SHO /S.P., DIG, Director of Economic Offences Wing were informed. As a sequel to persistent follow up by BO, the bank ultimately issued a banker’s cheque of ` 50,00,000/- to the complainant on November 23, 2010 in accordance with the extant instructions contained in RBI circular No. DBOD.LEG. BC.86/ 09.07.007 / 2001- 02 dated April 8, 2002. However, the bank did not pay the amount of interest lost on account of the aforesaid fraudulent transactions. The matter was, taken up for credit of the interest. The bank credited the account of the complainant with ` 1,94,178/- being the amount of interest.

40. Arbitrary set off against credit card dues

Complainant, the sister of a deceased account holder complained that the balance in the deceased account had been arbitrarily debited by the bank for setting it off against credit card dues.

The bank stated that since there was default in the credit card account of the deceased, it had levied finance charges. On perusal of the documents furnished by the bank, it was observed that the unpaid bills were for ` 9,939/- only whereas the bank had arrived at an outstanding amount of ` 3,66,391/- which was debited from the savings account in two installments. The bank stated that letters addressed to the deceased account holder were not responded to and since the payment was not received it had set off the amount against the balance in saving account of the deceased. BO advised the bank to indicate separately the amount of unpaid bills and the amount of charges levied as a result of nonpayment of the credit card dues.

In response to the above the bank advised that the complainant was offered a settlement of ` 15,000/- and the matter was resolved to the satisfaction of the complainant.

41. Credit card upgradation without consent

A complaint was received from a senior citizen who was holding credit card of a bank. On bank’s offer of platinum card, the complainant requested the bank to send the literature of the card to enable him to take a decision. The bank sent the literature along with platinum card also without his consent. Later a bill for ` 5510.83 was sent to the complainant. As the complainant was not interested in another card he requested the bank to cancel the card. The bank was harassing him for payment of outstanding on platinum card. The complainant approached OBO requesting for intervention to close his card account.

On intervention by BO, the bank reversed the card fees and other associate financial charges and also converted platinum card to life time free card and confirmed NIL outstanding on card a/c.

42. Change of status from minor to major-safeguarding rights

The complainant’s father had PPF account with a bank. He had nominated the complainant (who was a minor then) and his stepmother as nominees to the said PPF account. On demise of his father, the bank paid the balance in PPF account to complainant’s stepmother without his knowledge. The complainant requested the bank to pay his share. The bank refused stating that the amount will be credited to his account on recovering his share from his stepmother’s account.

The bank, in its reply, stated that the proceeds in the PPF account of the deceased were paid to the first nominee, i.e., the complainant’s stepmother, in good faith, as a trustee to the legal heir of deceased. The bank further stated that the said amount was paid to her as she had agreed to settle the share of the second nominee (complainant).

BO observed that at the time of payment of PPF proceeds, the second nominee i.e. complainant had become a major and therefore the bank’s action in paying the amount without his consent was not appropriate. The bank had deprived the complainant of his legitimate share in his father’s PPF account and complainant should not have been put to loss on account of the negligence on the part of the bank. The bank was advised to pay the complainant’s share of PPF amount with interest from the date of withdrawal till the date of payment and recover the same from the first nominee.

43. Compensation for dishonour of cheque without reason

A complainant had issued three cheques for purchase of bonds and shares after ensuring that there was sufficient balance in his account. These cheques were dishonoured and in the process the complainant could not get these bonds and shares. He therefore approached OBO claiming compensation for the notional financial loss suffered by him.

The bank in its response stated that as per the operational instructions, every working day, the CBS system classifies an a/c as non-operative, if there were no operations/transactions in the account for one year. Besides, its CBS system did not permit passing of cheques in clearing by any other branch including Central Clearing Office in such accounts and hence the cheque was returned.

The BO observed that the reasons given by the bank as above for rejecting the cheque could not be accepted because, under Negotiable Instruments Act, a cheque cannot be dishonoured if it is in accordance with the apparent tenor of the instrument. Besides, under CBS system, at par cheque can be paid by any branch of the bank. Dishonouring the said cheque as the customer’s a/c was inoperative for more than a year was not in conformity with extant RBI instructions.

As the bank did not honour the complainant’s cheque in spite of there being sufficient balance in his account, there was a deficiency in service provided by the bank. Bank was advised to pay ` 5000/- as compensation towards the financial loss.

44. Internet banking frauds - laxity of controls

In a complaint regarding fraudulent withdrawal through net banking it was reported that the complainant was unable to access his account as it gave an error message (invalid user ID /password). When he visited the branch, he learnt that there was an unauthorised transfer of an aggregate sum of ` 3,15,000/- to various accounts in branches of the same bank in different cities and the same had reportedly been withdrawn from those accounts. The complainant requested for refund of the amount. In their response, the bank alleged that the complainant might have compromised his internet password. On a scrutiny of records, it was observed that the KYC norms were not strictly adhered to by the bank. It was observed that large amounts were withdrawn on the same day on which the amounts were transferred from the account of the complainant. As such, there was a clear intention to defraud the complainant. There was laxity in controls introduced by the bank with regard to Internet Banking as well as violation of KYC norms in opening many of the above accounts, which enabled the perpetration of the fraud. The bank had recovered ` 30,247/- and credited back to complainant’s account. BO directed the bank to credit the residual amount of ` 2,84,753/- with value date. The bank was also directed to ensure that all controls pertaining to internet transfers are in place so that common customers feel protected and to address the KYC deficiencies observed which led to the perpetration of the fraud.

45. Changing rate of interest on loan unilaterally

A housing loan was sanctioned with the interest rate at 2% below PLR of the bank which was 12% p.a. Subsequently, the bank rescheduled the loan with interest at 11.50% as against the original rate of interest of 10% (2% below PLR). The bank declined complainant’s request to reduce the rate of interest to PLR minus 2% as agreed to.

The bank stated that loan was sanctioned with floating rate of interest @10% (2% below PLR) which was 12% at that time. Then, the customer requested that his loan to be converted to other scheme with floating rate of interest @10.25%. The loan was re-phased at the request of the complainant and interest charged was 1.5% below PLR since then.

The bank was advised to produce proof of request for change of loan to other scheme and also whether the revised terms were communicated to the complainant when change was made. The bank could not produce a proof except an unfilled, undated arrangement letter signed by the complainant. Revised terms and conditions were also not communicated to the complainant. The bank submitted a letter indicating changes in home loan rates. The statement revealed that the bank was not only changing PLR but also margins, thereby effecting change in rate of interest on loan unilaterally and against the terms of sanction. Since the loan agreement specifically stated that the rate of interest would be PLR minus 2% and the interest charged by the bank was higher than the bank’s PLR minus 2%, the bank was directed to rework the entire home loan @PLR minus 2% and refund the excess interest charged to the complainant.

46. ‘Stitch in-time could have saved a nine’

Though the complainant could not get ` 1,500 he tried to withdraw from ATM of other bank, his account was debited. He did not get any response from the bank. During the conciliation meeting, the bank informed that they had raised a charge-back with acquiring bank. The bank also informed that the amount of ` 1,500/- was credited to the account of the complainant after a delay of almost a year. The acquiring bank advised that they had paid the amount of ` 1,500/- to the acquirer bank on the same day it received the Charge Back as the transaction status was unsuccessful.

It was observed that the grievance redressal machinery of acquirer bank was weak in as much as despite the failure of the transaction being confirmed in time by acquiring bank, it failed to reverse the transaction for a year. Moreover, the bank had not responded to the BO in time. The bank was therefore directed to pay : (i) compensation to the complainant @ ` 100/- per day after 12 working days after the date of complaint till the date of crediting the amount to the customer’s account in terms of extant RBI instructions, (ii) interest to the complainant @ Bank Rate + 2% from the due date of payment of the penalty amount to the date of actual payment and (iii) ` 3,000/- for expenses relating to follow-up of the complaint and for not bothering to respond to the BO.

47. Loss of securities pledged against loan

The complainant took a loan against National Saving Certificates worth ` 48,000/- from the bank. He paid back the loan with the due interest but the bank did not return the pledged NSCs. He took up the case with the bank but when the documents were not returned for about two months without any reason, the complainant approached BO in April 2011.

The bank concerned submitted to BO that the said NSCs were not available and the bank had contacted the Post Office and initiated the process of issuing duplicate certificates. The case was closely monitored by BO. In June 2011, the bank submitted that duplicate certificates were yet to be issued. To resolve the complaint, the bank credited the maturity value of the NSCs (` 56,035/-) along with interest for delay (` 8,965.50/-) to the complainant’s account.

48. Internet banking - Do not “shoot from the hip”

The NRI complainant having NRE Savings account and Term Deposit accounts with a bank complained that various unauthorized withdrawals had taken place from his accounts and he wanted the bank to refund the money with interest. In its reply the bank stated that the complainant had provided a particular email id for communication. The bank received a fax message signed by the account holder, requesting the bank to note the change in his email id to a new one. Thereafter, an email was received from the new ID requesting for status of his accounts as well as a copy of the account statement. The bank gave all the necessary details. Further, instructions through email from the new Id were received for transfer of funds from the account and various withdrawals were effected by the bank.

When the complainant came to India on vacation he came to know about the withdrawals. He categorically denied having sent a fax message regarding change of his email ID and said it was sent by a fraudster. He stated that the bank had not exercised due diligence in confirming the veracity of the fax message and subsequent emails resulting in the unauthorized withdrawal of funds from his account. He had therefore lodged a complaint with the Banking Ombudsman. The bank thereafter lodged a complaint with Police (Cyber Crime) and took the stand that the case was pending with the Cyber Crime authorities and hence beyond the scope of the BO Scheme. The BO summoned bank officials and pointed out the lapse and deficiencies which led to several unauthorised payments. The bank was directed to reimburse a sum of ` 5,27,051/- to the complainant with interest.

49. Complainant is not always right

A complaint was received regarding unauthorized debit of ` 41,100/- made by the bank from the complainant’s account, without any prior intimation. The bank replied that a credit facility of ` 500 lakh was sanctioned to the complainant and this was to be secured by collateral security offered by the borrowers. Before accepting the immoveable property as security, legal scrutiny, valuation and search report were pre-requisites. The expenditure for carrying out these formalities came to ` 41,000/- The loan did not fructify on account of the complainant’s failure to provide full documentation for the collaterals offered. The bank further stated that as per the sanction letter, the bank could have also charged a processing fee of ` 1,50,000/- but did not do so.

The BO observed that a corporate customer seeking a loan of ` 5.00 crore and had offered properties worth ` 15.45 crore as collateral security should be well aware of the need for title scrutiny, valuation etc. For these, reasonable charges had to be paid to the advocate, the valuer and for the search report. The loan did not fructify on account of the failure on the part of the borrower in offering the collateral earmarked as security. In the circumstances, the bank cannot be asked to bear such expenses especially when the processing fee has been waived by them and the party cannot feign ignorance of such banking practices. He cannot have his land valued and title cleared free of cost at bank’s expenses. Accordingly, the complaint was rejected..

50. Harassment by recovery agents

The complaint was about harassment calls from recovery agents of the bank though the complainant had not availed any loan. The impact of these calls was that the complainant fell sick and had to be operated for heart problems. He was getting calls even when he was in ICU.

The bank misguided the BO that the telephone numbers from which he was getting the abusive calls did not belong to any of their recovery agents. Based on this, BO had closed the case. The complainant still continued to get the harassment calls. Hence he appealed to the Appellate Authority requesting to take punitive action against the bank for the abusive calls made to an innocent citizen who do not have any relationship with the bank as also for misguiding the BO.

The bank since admitted that the phone numbers belonged to their recovery agents and that they had since taken necessary corrective action to discontinue such calls. It also clarified that the reason for such repeated abusive calls was on account of lack of due communication and data issues with their outsourced collection agency. As regards the charge that due diligence/KYC formalities were not conducted before granting the loan to the unknown borrower, bank advised that all records relating to sanctioning the loan in question were not traceable, in other words, indicating KYC lapses in this regard. The Appellate Authority observed that the bank had not conducted due diligence and KYC formalities while sanctioning the loan and had blindly recorded the cell numbers without counter checking for correctness. The bank had also misguided BO informing that these calls did not belong to its recovery agents resulting in BO pronouncing wrong order. The Appellate Authority allowed the Appeal and awarded compensation of one lakh taking into account the loss of the appellant’s time, expenses incurred by him, harassment and mental anguish suffered by him along with a letter of apology from the bank.

51. Benefit of doubt

The depositor had applied for Special Term Deposit for ` 2.00 lakh for 550 days jointly with his wife, payable to ‘Either or Survivor’ on August 2, 2007. He had issued a cheque for transfer from SB a/c to STD. The branch, by mistake, issued two receipts bearing numbers 947882 & 947887 both wrongly dated as July 2, 2007 against a single deposit of ` 2.00 lakhs. Unfortunately, the depositor died on November 20, 2007. The grievance of the survivor, the depositor’s wife was that the bank refused payment of one of the STDRs on the plea that it was issued by mistake.

Bank’s contention was that after the death of depositor his wife approached the branch for issue of a duplicate receipt the original was not traceable. The branch issued duplicate receipt No.018329 in lieu of receipt No. 947887 on 12.03.2008 after obtaining necessary indemnity from her. On the date of maturity she presented the duplicate receipt along with receipt No. 947887 for encashment. The proceeds of the duplicate receipt were credited to her SB a/c. Subsequently, she had presented receipt No.947882 for payment which was rejected as it was issued erroneously.

After verifying the bank’s documents the BO observed that there was only one transaction of ` 2.00 lakhs on 02.08.2007 by debit to SB Account and transfer to internal FD a/c. As the complainant could not submit any additional information / document in support of her claim except telling that two receipts were issued by the bank, the BO closed the case. The complainant requested the Appellate Authority to look into the issue once again.

The Appellate Authority observed that as per the bank’s version there was reportedly only one transfer entry for Rs.2.00 lakh in this regard on the day the deposit was placed. The second receipt having been issued through oversight did not have duplicate marking on it. However, there was no underlying banking transaction behind it. Which meant that the books of the bank, especially the transfer scroll and FDR scroll, would not have balanced that day and thereafter until it was detected / rectified. The bank had not reported that the FDR portfolio was unmatched / un-reconciled in the branch. Bank had never detected this irregularity till it was pointed out by the BO. The internal audit exercise also seemed to have failed to detect this serious irregularity if the mistake was genuine. Bank had initiated disciplinary action against the staff like calling for explanation from the Accountant only after the same was pointed out by the BO. Further, when the depositor was alive, the bank never pointed out that the second receipt was not genuine, nor got it cancelled. The depositor was not alive to produce any evidence against the bank. The appellant (survivor) had no knowledge of the underlying transaction pertaining to the second FDR. Further there was another serious mistake regarding the date of deposit which was recorded as July 02, 2007 in the receipt instead of August 02, 2007. Thus, the claim on the second receipt seemed to be genuine since the bank had not disputed the genuineness of the second receipt. After all, the 2nd receipt was not a bogus one, nor a duplicate. The Appellate Authority decided to allow the appeal setting aside the decision of BO and giving the benefit of doubt to the appellant. The Appellate Authority directed the bank to make payment of the maturity value the FDR No. 947887 to the appellant.

52. Safeguard customer’s interest proactively

Bank had sanctioned an OD facility- Loan against Securities (LAS) with credit of ` 20 lakh with 50% margin. The appellant had given Power of Attorney to the bank for selling the margin shares in case of any shortfall in the margin value. When the value of the securities in the “Loan against shares” (OD) account was short of margin money due to sudden market crash, the bank sent several calls to the appellant to arrange adequate margin money/securities. The appellant failed to regularize the OD account by funding it in time/arranging further securities, which prompted the bank to send liquidation notice stating that the pledged securities would be sold. The appellant had arranged some securities- 88,322 units of Fidelity Equity Fund (FEF), aggregating ` 9.64 lakh @ NAV of ` 10.92 per unit to cover the margin shortfall. Even with these, the security cover was short of the required margin. The FEF assignment form was rejected by the bank as the name of the Security in the assignment form was indicated as“FEF” instead of “Fidelity Equity Funds”. This minor discrepancy was communicated after nine days. In the meantime, another department of the bank had sold her shares for margin money.

The appellant had approached the BO for a compensation of ` 40 lakh. The BO had identified deficiency in service but did not proceed further on the impression that the amount claimed towards compensation viz. ` 40.00 lakh was beyond the pecuniary jurisdiction under the BO Scheme.

The Appellate Authority observed that, the decision of the bank to sell the margin shares on the strength of the POA was in order. However, the bank had rejected the assignment form submitted by the appellant to cover the margin on minor technical grounds. Taking into account the sharp fall in the market prices, the bank should have been more proactive for the sake of protecting mutual interest by rectifying the simple technical discrepancy. Instead, the bank waited for nine days to point it out. After communicating the discrepancy which required just five seconds for rectification, the bank blindly sold the margin securities in its custody without informing the appellant. At least, the bank should have considered the FEF Units while calculating the margin before selling the securities. The bank had failed to act swiftly due to its internal problems for which customer cannot be held responsible. It could have rectified the technical mistake on the same day itself, had it acted promptly. Such delayed /irregular actions cannot be appreciated, nor justified. Thus there was gross deficiency in service.

Having thus established deficiency in service, the Appellate Authority set aside the decision of the BO and directed the bank to restore the loss suffered by the appellant due to the lapse by the bank by crediting the differential amount to the account of the appellant. Appellate Authority further directed that since the appellant had not arranged adequate securities in time to cover the prudential margin requirements against loan account, no other benefits like dividend, right issue, bonus issue, etc, if any, received by the bank need be passed on to the appellant. No interest also need be paid to the appellant for the amount up to the 30 day period.

BO’s decision benefitting a group of complainants - I

There was a burglary at a rural branch of a bank resulting in the loss of pledged gold ornaments belonging to nearly 279 borrowers. OBO received 23 individual complaints from gold loan borrowers who were aggrieved at the bank’s decision to redeem the lost gold ornaments at the appraised value as on the date of the loan, after deducting the loan outstanding including interest till the date of adjustment. The complainants sought return of the gold ornaments along with costs.

Considering that an entire rural locality was affected, a conciliation meeting was held with the bank and representatives of the complainants. The complainant’s request for return of the original gold ornaments was found to be impractical as these were reported to be stolen. However, it was also felt that in view of the current high value of gold, payment of cash compensation for lost gold valued at the rate prevailing on the date of loan would be unfair to the complainant and cause him undue loss and despair. Following the conciliation meeting, it was decided that the bank would freeze the outstanding in the loan account as on the date of reporting the theft. The weight and description of the gold ornaments recorded in the bank’s gold appraisal record and countersigned by the complainant should be accepted as correct for determining the actual loss to the complainant. In cases where the lost gold items included gold coins sold by the bank, the bank should make good the gold coins of the same weight from their stock available for sale. The bank would pay the complainant the equivalent value at current market prices (as on the date of payment) of 22 carat gold plus sales tax after adjusting the outstanding in gold loan account. If the equivalent value of the gold ornaments was inadequate to adjust the outstanding, the bank may appropriate the value of gold coins towards the same. The bank was also advised to pay each complainant, an amount of ` 500 towards cost. The complainants were required to provide the bank with a written undertaking that they would fully co-operate with the police authorities and the bank in any investigations into the burglary and in the event of the recovery of any of the gold items, they would have no claim on them and the same would stand relinquished in favour of the bank.

The bank complied with directions of the BO not only in respect of the 23 complaint cases dealt by OBO but also made payments in respect of the remaining cases on the same lines, involving a total amount of ` 1,63,56,178/- as the terms of settlement were acceptable to the affected persons.

BO’s decision benefitting a group of complainants - II

Nearly forty six individual complaints were received by OBO from customers of a rural branch regarding non - settlement of Agricultural Insurance claims. The complainants had availed agricultural loans for cultivation of crops. Their loans were covered under the National Agricultural Insurance Scheme and the relative premium amounts were deducted from their respective loan accounts. The areas under cultivation by the borrowers were declared as disaster affected and they became eligible for benefits under the National Agricultural Insurance Scheme. However, the insurance claims were repudiated by the Insurance Company as the areas under cultivation of the individual borrowers were wrongly recorded by the bank in the proposal form, as falling under a Mandal which was not declared as disaster affected. The bank was given a personal hearing in the matter. As per the guidance provided, the bank resolved the disputes by paying the eligible amount under the crop insurance aggregating ` 11,78,281/- to the forty six farmers. The bank was advised to pursue its dispute with the Insurance Company separately.

For a humanitarian cause:

1. OBO received a complaint from a widow whose husband had expired in Kargil war, for non-receipt of quarterly interest on fixed deposit placed with a branch of a Nationalised bank. There was no mention of the name of the complainant on the complaint. However, the matter was taken up with the bank on the basis of the account number provided on the complaint. On the same day, the bank informed dispatch of pay orders for the amount of quarterly interest due for payment and requested the complainant to provide her new savings bank account details to the bank to avoid any inconvenience in future. Thus, the complaint, which could have been rejected as non-maintainable as it was not represented properly, was redressed promptly.

2. OBO received a complaint against a bank regarding refusal to open a family pension account of a senior citizen. The bank clarified that it had never refused to open the account and had sent the account opening form to complainant with instruction to provide necessary documents under KYC norms. The bank’s reply was not satisfactory as it pertained to opening of a savings bank account of a 75 year old widow under liberalized KYC norms for the purpose of family pension. The matter was taken up with the bank. The bank confirmed that the account of the complainant was opened.

3. The complainant, a widow getting a pension of ` 600/- per month, was charged ` 1400/- towards non maintenance of minimum balance in her S.B. account. She sought refund of the charges and agreed to maintain the required balance in her account henceforth. On taking up the matter, it was found that the charges were recovered as per extant instructions of the bank and the bank had insisted that she maintain the stipulated minimum balance to avoid such charges in future. The BO, taking into account the financial status of the complainant and her inability to understand the bank’s conditions about minimum balance etc., advised the bank to recredit the charges to her account as also to convert the account into a “No Frills” account.

ANNEX IV

Ready Reckoner for the BOS 2006

DISCLAIMER

The Reserve Bank of India does not vouch the correctness, propriety or legality of orders and awards passed by Banking Ombudsmen. The object of placing this compendium is merely for the purpose of dissemination of information on the working of the Banking Ombudsman Scheme and the same shall not be treated as an authoritative report on the orders and awards passed by Banking Ombudsmen and the Reserve Bank of India shall not be responsible or liable to any person for any error in its preparation.

ANNEX- V