Banking Ombudsman Mechanism and Its Effectiveness

Dr. Mamta Jain

Associate Professor, Department of Economic Administration and Financial Management
University of Rajasthan Jaipur, Rajasthan- India
Email:-mamta_deoli@yahoo.com, Mob: - 9314505983
Ms. Syeda Shaziya Naz,
Research Scholar
Department of Economic Administration and Financial Management, University of Rajasthan
Jaipur, Rajasthan- India
Email:-nazshaziya@gmail.com, Mob: - 7791027151
Dr. T.N. Mathur
Professor
Department of E.A.F.M., University of Rajasthan, Jaipur-302004
Email: triloka.mathur@gmail.com;
mob.9414074774

ABSTRACT
Customer is the king and the reason for existence of any business enterprises.Hence, successful
organization is always looking for new techniques and tools for developing and improving
relationship with their customers.In the competitive banking era, banks have to strive hard for
retaining and enlarging their customer base by providing prompt and efficient
services.Customers are satisfied only when the services provided by the banks are according to
their expectation and when their grievances are handled carefully. Reserve bank of India has
taken a great step to redress the grievances of customers and it is called as Banking Ombudsman
Scheme. Banking Ombudsman provides a platform for the customers so that customers can
approach for getting solutions of their grievances.For this research study 100 customers are taken
as sample size.The paper initially focuses on the Banking Ombudsman Scheme and further
analyses the reasons behind dissatisfaction among the bank customer in Jaipur district in
Rajasthan. From this study it is concluded that many customers are dissatisfied with the bank
services mainly due to delay in services but only the few customers approach to banking
Ombudsman for their grievances. So it is very essential for the banks to create awareness about
Banking Ombudsman Scheme among the customers.No doubt, the scheme will gain more
popularity in future and its impact on service quality would be positive.
KEYWORDS: Banking Ombudsman, Redressal, Resolutions and Grievances.

Banking Ombudsman Mechanism and Its Effectiveness

INTRODUCTION
In the present scenario, Indian banking service sector is becoming more and more competitive.
The success of banking service providers depends on its capability to acquire new customers and
retaining the existing ones.Customers are satisfied only when the services provided by the banks
are according to their expectation and when their grievances are handled carefully. Reserve bank
of India has taken a great step to redress the grievances of customers and it is called as Banking
Ombudsman Scheme. The Reserve bank of India was flooded with many complaints, so RBI
first introduced Banking Ombudsman Scheme in 1995 on the recommendations of Narasimhan
committee on Banking and Financial Sector Reforms. The main objective of this scheme to
provide a quick and cost free resolution of complaints on deficiency of banking services for
common bank customer, who otherwise find it difficult to approach any other redressal for such
as courts. The scheme was revised in 2005 mainly by Reserve bank of India for including the
regional rural banks under this scheme. This revised scheme also included many other services
which were not included previouslyand came into effect from 1 st January 2006.It is implemented
through 15 offices of Banking Ombudsman situated across the country.
In this scheme, any person who has a grievance against bank on any one or more of the grounds
mentioned in Clause 8 of the scheme may himself or through his authorized representative other
than an advocate, file a complaint arising out of the operations of credit cards and other types of
banking services.

Review of Literature
Very less work have been done regarding the services of banking ombudsman to their
customer. According to AparnaMeduri (2006), she focused in her paper that the banking
ombudsman under the banking ombudsman scheme and the Customer Redressal
Authorities under the consumer protection Act both redresses the same type of cases i.e.
insufficiency or grievances of banking services, though, their roles are different in terms
of redressal machinery , the procedure for redressal. The most aggrieved bank customers
are forced to take shelter under the consumer protection act rather than of under their
Banking Ombudsman Scheme.
Chatterjee (2007) and Khan (2010) evaluated various scheme of banking ombudsman
schemes in operation from time to time. Khan recommended that work should be done to
increase the instances of disputes being resolved & settled down by an arbitrator or
conciliation rather than by awards. Further, in the event, if ombudsman has to give an
award; it should be made final and binding on the parties with the provision of a single
appeal allowed in a higher court of law.
Dr. Tejinderpal Singh(2011) evaluated that there is a significant increment in the
complaints received by the banking ombudsman, it shows that awareness are increased in
the customer regarding banking ombudsman scheme, but it still has not reached to rural

poor, so campaigns should be spread to rural areas to increase the awareness about this
scheme among the rural customers.
Myladri and Sirisha (2011) observed that banking ombudsman is a godsend for the
customer because it provides an easy platform to the customers to redress their
complaints.
Mahesh Baburao (2012) pointed out that the awareness provided by the Reserve Bank of
India is very low and still the awareness has to be created. He also analyzed that if there
is an individual ombudsman for each urban co-operative bank, then his objective would
be satisfied.
Dr Devendra Singh and Dr. GauravAgarwal (2014) evaluated the effectiveness of the
Banks Ombudsman as a banking dispute redressal body and also pointed out that a good
number of complaintsis received and resolved by the bank ombudsman at various
locations of India.
Dr. Dinakar G and Girivasuaki K (2015) observed that effectiveness of BO scheme. They
evaluated that BO scheme during its working is very effective because there was no more
pending complaints more than a month.

Research objectives
To study the effectiveness of banking Ombudsman Scheme in banks.
To analyze the reasons for dissatisfaction of the customers.
To find out the various steps taken by RBI for spreading awareness about this scheme.

Research methodology
In this paper both primary and secondary data are used for survey work. Primary data have been
collected through structured questionnaire which was distributed among the respondents, who
are the customers/ account holders of different banks. Mainly two methods were used for
collecting primary data like survey and interview.The survey was conducted among 100
customers/account holders of the banks, and this was done by personally administering the
questions to them. Secondary data have been collected through various websites and publication
of RBI.

Data Analysis and Its Interpretation

Primary data have been collected through structured questionnaire for research objectives. The
data have been collected mainly to analyze the customers perception and their satisfaction level
towards banking. For this purpose some following parameters have been taken to find out the
effectiveness of Banking Ombudsman Scheme.
1. Education status of Accounts Holders: In this following chart demographic
characteristics like education status of accounts holders has been discussed

Chart: 1 Education status of Accounts Holders

Source: Primary Source

The data shows that more than 90% people are educated in which well educated customers have
knowledge about the various services provided by the banks and also aware about the procedure
of lodging their complaints to concerned banks, if they were not satisfied with the banking
services.

2. Frequency of Customers to visit the banks

Chart: 2 Frequency of Customers to visit the banks

Source: Primary Source

The data shows that the frequency of customers to visit the banks is varied from customer to
customer. The study finds that most of the bank customers are using internet banking for all their
transactions, it means the number of visits they will make to the banks will be comparatively
less. It also shows that the number of customer who visit the banks once in a month are 40%,
while 24% of the customers visit the banks once or twice quarterly and the other customers who
visit the banks twice or thrice in half yearly and yearly is about 16%.

So it is duty of the banks to ensure that whether the number of

visits of a customer is decreasing or increasing. So that bank can understand the satisfaction level
of the customers towards banking services.
3. Reasons For the Dissatisfaction among the customers: The bank customers are
always flooded with many complaints. There are so many reasons behind their
dissatisfaction. Reserve Bank of India has mentioned certain grounds of complaints in clause
no 8 under Banking Ombudsman Scheme.
Chart: 3:- Reason For the Dissatisfaction among the customers

Source: Primary Source

The data shows that 46% of the total customers are dissatisfied with the delay in services,
whether 27% customers are dissatisfied due to misbehavior of banks employees while providing
services. 7% of total customers were dissatisfied because of levying of high charges without
giving any adequate prior notice to the customers and some customers were given other reasons
for their dissatisfaction.
So proper care must be taken by the bank to provide
services in time and also on bank employees so that they could work better and to make satisfy
the customers.
4. Satisfaction Level of the Customer towards Banking Services: In the below
chart analyzed satisfaction level of the customers towards banking services provided by the
banks.
Chart: 4 Satisfaction Level of the Customer towards Banking Services

Source: Primary Source

The data analyzes the satisfaction level of the customers towards banking services. From the
research study, it is revealed that majority of customers were not satisfied with thebanking
services.38% of total customers are neutral in their satisfaction level while 15% of total
customers are very dissatisfied and the number of customer who were extremely satisfied were
7%.
Though a number of customers are dissatisfied with the services provided by the banks
but only few of them register their complaints in a particular bank. They are generally unaware
about the procedure for registering their complaints or sometimes they think that it is of no use.
5. Sources for Registering Complaints
Chart: 5 Sources for Registering Complaints

Source: Primary Source

The data shows that most of the customers lodge their complaints through complaint box and
customer care. Only few customers register their complaints to head office and only 10%
complaints are given to Banking Ombudsman by the customers.

So it is very essential for the banks to create awareness about the

Banking Ombudsman Scheme of Reserve Bank of India.
6. Awareness about Banking Ombudsman Scheme among Bank Customers
Chart: 6 Awareness about Banking Ombudsman among Bank Customers

Source: Primary Source

The study reveals that only 34% of the total customers are aware about banking ombudsman
scheme of RBI. They are unaware about the services provided by banking ombudsman.
Uneducated, rural and some of the urban customers would also be unaware. So it is necessary for
RBI to create awareness about this scheme among the customers through various ways.
7.

Experience about the Responses of Banking Ombudsman

Chart: 7 Experience about the Responses of Banking Ombudsman

Source: Primary Source

The above chart shows the experience level about the responses of banking ombudsman. It
shows that more than 95% customers are satisfied with services rendered by banking
ombudsman. To get the benefit of this scheme awareness has to be spread so that each and every
customer or account holder can take an advantage of this scheme.

Awareness Campaigns and other Initiatives taken by RBI

RBI continuously make its efforts to reach out to the members of public with the objective of
increasing awareness about the grievance redressal mechanism provided by banking
ombudsman. This has been done through various methods like advertising through electronic
media, direct interactions with general public, bankers customer meets, exhibitions and fairs
etc.Advertisement campaigns were organized in vernacular languages so that its objective can
reach to maximum number of people, especially in rural areas. RBI has used following different
techniques to create the awareness among the customers about this scheme and these are

Town Hall Events

Awareness Campaigns
Participation In Melas/ Trade Fairs / Exhibitions
Inclusion of Lessons on Banking Ombudsman Scheme in School Syllabus.
Press Conferences
Meeting With Nodal Officer of Banks
Skill Building of Staff.

Some Exemplary Cases Handled by Banking Ombudsman:

A persons debit card was unauthorizedly used by someone so that his account was being
debited by RS. 4.82 lakh for POS transactions in two tranches. Complainant had lodged
his complaint with the branch to block his card but however his account was again
debited for another transaction for ATM withdrawals. In banking ombudsman, it is found
that all the banks contentions were not appropriate and incorrect so the bank was advised
to reimburse the complainant the entire disputed amount together with interest at saving
bank interest.
A person has lodged his compliant to banking ombudsman offices, stating that a credit
card agency had sent him phone calls, emails etc. demanding for payment of outstanding
card dues to the tune of Rs. 1.49 lakh, though he had never owned a card. After the
investigation it was verified that the complainant was not the customer or defaulter of
aforesaid card. Considering the mental agony/ harassment suffered by the complainant,
the card agency was advised to pay him Rs.10,000 as a token of compensation.
A complainant, widow of defense pensioner, complained that she was being paid less
pension than what she was entitled to. The bank in its reply contended that she was a
recipient of ordinary Family Pension and correct pension was being paid. The bank,
however, could not produce the relative circulars/instructions for its contention. Both the
Controller of Defense Accounts and Zila Sainik Board were contacted for relevant
information/circulars were obtained. In terms of the extant instructions applicable for the
subject the complainant was paid arrears to the tune of 5, 72,822/- and her pension was
also revised.

Findings of the study

From the research study, it is analyzed that some customers are satisfied with services
provided by the banks while other customers are not satisfied with many services
rendered by the banks.
The reasons behind the dissatisfaction among the customer are numerous but the major
reason of dissatisfaction is delay in services provided by the banks. Employees harassing
and misbehaving with customers is also an important reason of dissatisfaction. There are
so many other reasons by which customers are dissatisfied with the banks.
The study shows that only 10% customers are given their complaints to banking
ombudsman and sometimes they think that it is of no use. There are only 34% customers
who are aware about this banking Ombudsman Scheme.
Majority of the customers are satisfied with services provided by the banking
ombudsman, it means that grievances are properly redressed by Reserve Bank of India.

Suggestions
From the overall study of this research it is found that there is some lacking in customer
knowledge about the benefits of Banking Ombudsman Scheme. So it is very essential to
spread awareness among the customers so that bank customers can avoid unnecessary
risk related to banking transactions.
Awareness about this scheme should be created through many ways like social media
where majority of customers access. By distributing the pamphlets and keeping banners
in every bank can also create the awareness among the customers. Awareness campaigns
should be conducted by organizing seminars, conferences etc.

Conclusions
The banking ombudsman scheme is a boon and very important channel for redressal of
grievances by the general public against banks and banking services. .In the competitive banking
era, banks have to strive hard for retaining and enlarging their customer base by providing
prompt and efficient services.Customers are satisfied only when the services provided by the
banks are according to their expectation and when their grievances are handled carefully.
Reserve bank of India has taken a great step to redress the grievances of customers and it is
called as Banking Ombudsman Scheme. Banking Ombudsman provides a platform for the
customers so the customers can approach for getting solutions of their grievances. From the
above discussion and analysis shows that a good number of complaints is received and redressed
by banking ombudsman, it can be said that customers are very much satisfied with the services
of banking ombudsman. This is in the case in urban population but rural population is still not
aware about the banking ombudsman.

References:

Banking Ombudsman Scheme 2006, Annual Report 2014-15, www.rbi.org.in

MrsPrasannaPrakash&seemaBadiger, (2014), A Study On The Impact Of Banking

Ombudsman Scheme In Banglore in International Journal Of Management Research

Dr. Dinakar G, (2015), Analysis of Banking Ombudsman Scheme, in IJEMR.

Dr. Devendra Singh, (2013), Bank Ombudsman InIndia As Dispute Redressal Mechanism
And Its Effectiveness, in NIET, Journal of Management.