The Reserve Bank of India (RBI) launched the Banking Ombudsman Scheme in 1995 to give bank clients a quick and affordable place to file complaints against financial Institutions. It is a quasi-judicial authority that resolves complaints related to banking services, such as deposits, loans, credit cards, remittances, etc.
Background
Under Section 35A of the Banking Regulation Act of 1949, the RBI established the Banking Ombudsman Scheme. Since the first ombudsman was appointed in 1995, the programme has undergone several revisions to improve its efficiency and customer-friendliness. All scheduled commercial banks designed rural banks, and scheduled primary cooperative banks are covered under the programme.
Process
Filing a complaint with the Banking Ombudsman is simple. A customer can file a complaint with the ombudsman if they are not satisfied with the bank’s response or have not responded within one month. The complaint can be filed online or by post.
The ombudsman will first try to resolve the complaint through mediation and conciliation. If that fails, the ombudsman will investigate and pass an award. The award is binding on the bank but not on the customer. Customers can approach a higher court if they are unsatisfied with the award.
Significance
The Banking Ombudsman Scheme has several benefits for customers as well as banks. Some of the key benefits are:
- Speedy redressal: The Banking Ombudsman Scheme provides a speedy resolution of complaints, which helps customers get their grievances redressed quickly.
- Cost-effective: The scheme is cost-effective as it does not involve legal fees, and the customer does not have to hire a lawyer.
- Fairness: The ombudsman is an independent authority that provides a fair and impartial judgment, ensuring that customers and banks are treated fairly.
- Transparency: The ombudsman operates transparently, meaning that all the proceedings are open and accessible to both parties.
How does it improve customer satisfaction in India?
The Banking Ombudsman Scheme has played a significant role in improving customer services in the banking sector in India.
Here are a few ways in which the scheme has helped in this regard:
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Customer-centric approach
The Banking Ombudsman Scheme puts the customer at the centre of the redressal process. The scheme addresses customers’ grievances and provides them with a fair and impartial judgment. This customer-centric approach has encouraged banks to improve customer service and quickly resolve complaints.
- Encourages proactive measures
The scheme encourages banks to take proactive measures to prevent complaints from escalating to the ombudsman. Banks are incentivized to address complaints at the earliest and to ensure that their customers are satisfied with the resolution.
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Accountability
The scheme holds banks accountable for their actions and ensures that they are answerable to their customers. This accountability has led to banks becoming more responsive to customer complaints and taking corrective measures to improve their services.
- Feedback mechanism
The Banking Ombudsman Scheme also acts as a feedback mechanism for banks. The scheme gives banks valuable insights into customer complaints and helps them identify areas where they need to improve their services.
