The RBI has three Ombudsman schemes covering Banking, NBFCs, and Digital Transactions. Data from the RBI annual report indicates that the number of complaints to all these Ombudsmen increased by over 65% in 2019-20 compared to 2018-29. The number of complaints to the Banking Ombudsman increased by over 58%.
Recently, the Reserve Bank of India (RBI) in its Monetary Policy Statement released on 05 February 2021, announced that the existing Ombudsman Schemes would be merged and integrated into a single scheme that will be rolled out from June 2021. As of now, there are three separate ombudsman schemes– one for banks, one for non-banking financial companies (NBFCs), and one for digital transactions. The objective of integrating the three schemes into a centralized one is to improve the grievance redressal mechanism for bank customers by making it simpler and effective.
Annual report on ombudsman schemes for 2019-20 was released recently
In its Annual Report on the ombudsman schemes for the financial year 2019-20, the RBI covered the activities under the Banking Ombudsman Scheme (BOS), the Ombudsman Scheme for Non-Banking Financial Companies (OSNBFC), and the Ombudsman Scheme for Digital Transactions (OSDT). Furthermore, the developments in the area of consumer protection and the way forward have also been covered in the RBI report.
Ombudsman schemes for Banking, NBFCs, and Digital transactions are currently being implemented
The Banking Ombudsman Scheme (BOS) was notified by RBI in 1995 under Section 35A of the Banking Regulation Act, 1949. As of date, Scheduled Commercial Banks (SCBs), Scheduled Primary Urban Co-operative Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), and Payment Banks (PBs) are covered under the scheme. RBI administers the scheme through 22 Offices of Banking Ombudsman (OBOs) covering all states and union territories. Likewise, the Ombudsman Scheme for Non-Banking Financial Companies (OSNBFC) covering NBFCs both which are authorized to take deposits and those without, was notified by RBI in February 2018 and the Ombudsman Scheme for Digital Transactions (OSDT) that extends to Non-bank System participants regulated by RBI was notified in January 2019. The RBI makes amendments to the schemes regularly in order to be on par with the evolving payment systems.
Number of Complaints to the Ombudsman increased by 65% in the past one year
Over 3.3 lakh complaints were received in 2019-20 under all three schemes as compared to a little over 2 lakh complaints in 2018-19. In other words, the number of complaints to the Ombudsman increased by a whopping 65% in just one year. Complaints received against banks rose by almost 58% during this period. The complaints registered against banks went up from 1.64 lakh cases in 2017-18 to 1.96 lakh cases in 2018-19, and to 3.09 lakh cases in 2019-20, an increase of 89% in two years.
Between 2018-19 & 2019-20, the complaints against NBFCs grew by nearly 5 times which can be attributed to the increased awareness about the scheme. The number of complaints received at OSDTs increased from 470 in the five months of operation during 2018-19 to 2,481 in 2019-20.
Complaint Management System has simplified the process
The increase in complaints may also be because of the Complaint Management System (CMS) platform which was launched in June 2019. The platform brought all stakeholders, namely, the RBI, the Regulated Entities (REs) and complainants under a web-based platform and digitalized the entire process of grievance redressal by the RBI. Moreover, the platform is available throughout the day, making it easy & convenient for customers to file complaints.
Most complaints against Nationalised banks and SBI
The RBI report provides data on the number of complaints received against individual banks and bank groups. The bank groups as per the RBI report include SBI, nationalized banks, private sector banks, payments and small finance banks, foreign banks, RRBs/Scheduled Primary Urban Co-op banks, and others. Until 2018-19, the number of complaints registered against nationalized banks and SBI dominated the list. The share of complaints registered against nationalized banks and SBI alone was about 62% of the total complaints received by banking ombudsman in both 2017-18 and 2018-19. In 2019-20, the share of complaints against nationalized banks and SBI has reduced to a little below 60%.
Though there has been a 50% increase in number of complaints against nationalized banks in 2019-20 as compared to 2018-19, the share of complaints has dropped from nearly 34% in 2017-18 to 30% in 2019-20. Meanwhile, the share of complaints against private sector banks has increased from 26% to 32% in the three years. The number of complaints against private sector banks increased by a staggering 80% between 2018-19 and 2019-20.
Share of complaints against payments and small finance banks has also increased from 0.3% in 2017-18 to nearly 2% in 2019-20 while the number of complaints has gone up 11 times. Share of complaints against payments and small finance banks, foreign banks, RRBs, and others together constituted about 12% in 2017-18, 10% in 2018-19, and 8.4% in 2019-20.
Together, 12 Banks account for 73% of the all the Complaints against Banks
In 2019-20, complaints against SBI alone comprised 27% of all the complaints received by the banking ombudsman. HDFC Bank Ltd, ICICI Bank Ltd, Axis Bank, Punjab National Bank, and Bank of Baroda together accounted for another 31% of the complaints. The 12 banks in the following chart, against which more than 6000 complaints each have been received by the Ombudsman account for three-quarters of all the complaints against banks.
Most complaints are related to ATM/Debit cards
For the last three years, complaints pertaining to ATM/Debit cards accounted for the largest share of complaints. The share of complaints related to ATM/Debit cards has increased from 15% in 2017-18 to 22% in 2019-20 while the number of complaints has increased by 175%. The share of mobile/electronic banking-related complaints has gone up from 5% to 13% between 2017-18 and 2019-20. Complaints related to ATM/Debit cards, mobile/electronic banking, non-observance of fair practice codes, and credit cards, together accounted for about 56% of all the complaints. The share of these four types of complaints has increased from 50% in 2017-18 to 52% in 2018-19, and to 56% in 2019-20. The number of complaints pertaining to notes and coins, pension payments, and deposit accounts has come down over the past three years.
Rate of disposal is over 90%
The rate of disposal of complaints by the ‘Banking Ombudsman’ has decreased marginally over the years, as per the RBI report. In 2017-18, about 96.5% of the complaints were disposed, which came down to 94% in the following year, and to 92.4% in 2019-20. In 2019-20, no additional human resource was enrolled though the number of complaints went up considerably. Meanwhile, the disposal by ONBFCOs and OODTs was 95.34% and 99.4% respectively in 2019-20.
Need for greater awareness & improved efficiency
The increasing number of complaints calls for a more efficient grievance redressal mechanism. Though the report notes that number of non-maintainable complaints fell to 45.76% in 2019-20 as compared to 54.34% in 2018-19, it is still a very high number. More than 4 out of every 10 complaints being non-maintainable points to lack of awareness on the customer’s side about the scheme and the relevant grounds. There is an urgent need to step up the awareness on this front.
The RBI, as observed earlier, will be rolling out the integrated ombudsman scheme from June 2021, to ensure greater efficiency. The annual report states that the RBI has plans to improve the capabilities of the CMS portal as well as the Interactive Voice Response System (IVRS) content. Increased awareness through consumer education is the way forward.
Featured Image: Ombudsman schemes for Banking
