The Annual Report of the Ombudsman Scheme 2022-23 was released recently. Data indicates that cases have increased in the areas of mobile/electronic banking, loans and advances, and deposit accounts. It also reveals fluctuations in other areas such as credit cards. Cases related to ATM/ Debit Cards have declined in the recent years, but the number is still significant.
The Annual Report of the Ombudsman Scheme 2022-23 was released recently. It provides valuable insights and information to all stakeholders involved, showcasing the progress and effectiveness of the ombudsman scheme in protecting customer interests in the banking sector. This report is the second one after the Reserve Bank – Integrated Ombudsman Scheme (RB-IOS) was launched in 2021. It is also the first standalone report released under RB-IOS. To know more about the integrated scheme RB-IOS, check out the explainer by Factly.
Prior to the integrated scheme, there were separate Ombudsman schemes for banks, NBFCs and digital transactions. The erstwhile Banking Ombudsman Scheme (BOS) introduced by the RBI in 1995 covered Scheduled Commercial Banks (SCBs), Scheduled Primary Urban Co-operative Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), and Payment Banks (PBs). In this story, we examine the trends in complaints received by the Ombudsman for banking-related issues, as given in the annual reports.
It should be noted that the 2020-21 report covers the period from 01 July 2020 to 31 March 2021, aligning with RBI’s shift in the financial year from “July-June” to “April-March.” Previously, reports covered the period from July to June. Subsequent reports from 2021-22 and 2022-23 cover the period from April to March.
Cases handled by ORBIOs declined between 2021-22 and 2022-23
According to the latest report, in 2022-23, under RB-IOS, there was a significant 68.2% increase in complaints, crossing 7 lakh cases. Of these, 234,690 were handled by ORBIOs (Office of the Reserve Bank of India Ombudsman), and the remaining nearly 4.7 lakh cases were resolved by the Centralised Receipt and Processing Centre. In terms of the number of complaints dealt with at ORBIOs, there was a decline from the previous year, from over 3 lakh cases to below 2.35 lakh cases. The decline is due to the filtering out of non-maintainable complaints under the new RB-IOS framework.
About 84% of the cases in 2022-23 were against banks
Of the cases dealt with at ORBIOs, nearly 84% were complaints against banks. In the last 12 years, the number of complaints against banks received by the Banking Ombudsman or the ORBIOs increased from less than 73,000 in 2011-12 to over 3.41 lakh cases in 2020-21, a 4.7-fold increase. However, it has dropped in the last two years. In 2021-22, the number dropped by 21.5% and dropped further by 26.6% in 2022-23.
7 public sector banks and 5 private sector banks together accounted for 75% of the cases in 2022-23
12 banks alone accounted for 75% of the banking-related cases received by ORBIOs in 2022-23. These 12 banks accounted for an average of 73% of the cases between 2017-18 and 2022-23, except in 2020-21. Among these 12 banks, 7 were Public Sector Banks and 5 were Private Sector Banks. The cases against these 7 public sector banks alone accounted for an average of 42% of the cases against banks registered between 2017-18 and 2022-23.
Every year, complaints against the State Bank of India (SBI) constituted the highest share among all banks. Nonetheless, the share of complaints against SBI fluctuated over the years, starting at 28.73% in 2017-18, peaking at 30.38% in 2018-19, then decreasing to 16.82% in 2020-21, and slightly rising to 20.52% in 2022-23.
Among the private sector banks, until 2020-21, number of cases against HDFC Bank was the highest. In 2021-22, the cases against it dropped by 26% and cases against ICICI Bank became the highest among private sector banks.
Cases related to deposit accounts doubled while that related to ATM/Debit cards fell to a five-year low in 2022-23
The types of complaints against banks are classified into 10 categories. The trends in 9 categories excluding the ‘others’ category have been given considered for the analysis.
Among the cases filed with the Ombudsman, cases related to mobile/electronic banking were the highest in 2022-23, closely followed by cases related to loans and advances, with more than 39,000 cases reported in each category. More than 33,000 cases related to deposit accounts were reported too. Altogether, the 3 categories contributed to 57% of the cases in 2022-23.
In the last two years, the number of cases related to deposit accounts doubled while that related to loans and advances increased by 61%. Cases related to Para banking doubled between 2020-21 and 2022-23.
On the other hand, the cases related to ATM/Debit cards fell to a five-year low in 2022-23. Cases related to pensions and remittances also dropped to the lowest in 2022-23 since 2017-18.
Overall, the data indicates that cases have increased significantly in the six years considered in mobile/electronic banking, loans and advances, and deposit accounts. It also reveals fluctuations in other areas such as credit cards. Cases related to ATM/ Debit Cards have declined in recent years, but the number is still significant.
Complaints disposal rate of ORBIOs is high
Across all types of complaints dealt with, ORBIOs have a healthy disposal rate. It was almost 98% in 2021-22 and 2022-23. There was a significant decline in the number of complaints pending beyond 30 days, from 0.26% as of 31 March 2022 to 0.04% as of 31 March 2023.
The Customer Education and Protection Department (CEPD) aggregates Root Cause Analyses (RCAs) from the ORBIOs and Customer Education and Protection Cells (CEPCs) to pinpoint and rectify service deficiencies. These analyses serve as policy inputs. It revealed key issues such as unauthorized digital transactions due to weak fraud prevention, delays in transaction reversals from insufficient daily reconciliation, communication gaps on loan terms, centralized pension issue resolution absence, fees for low deposit balances due to policy gaps, product mis-selling from information asymmetry, delayed credit report updates, and uneducated recovery agents on regulatory guidelines. These findings highlight areas needing improvement in customer service and regulatory compliance across financial institutions.
Measures identified by RBI for 2023-24 to improve customer service
The Reserve Bank aims to enhance its customer service and grievance redressal mechanisms through several initiatives. Firstly, it plans to review, consolidate, and update its regulatory guidelines on customer service. Additionally, the internal ombudsman schemes for different types of regulated entities will be reviewed and integrated to ensure comprehensive coverage. Moreover, the Reserve Bank will establish two new Contact Centres in local languages, equipped with disaster recovery and business continuity facilities, to improve accessibility and support for customers. Furthermore, the RBI also has plans to explore leveraging Artificial Intelligence in the Complaint Management System to enhance complaint categorization, decision-making support, and overall customer experience, with a focus on strengthening customer protection and expediting grievance redressal.
