Internal Ombudsman Scheme

   The Reserve Bank of India has advised all public sector banks and some private sector and foreign 
   banks to appoint an internal ombudsman. The internal ombudsman would be designated Chief          Customer Service Officer (CCSO), it has stated. The CCSO should not have worked in the bank in which he/she is appointed as CCSO. The Reserve Bank has taken this initiative to further boost the quality of customer service and to ensure that there is undivided attention to resolution of customer complaints in banks.
While all public sector banks will have to appoint a Chief Customer Service Officer, the private sector and foreign banks which have been asked to appoint the Chief Customer Service Officers (Internal Ombudsman) are ICICI Bank Ltd., HDFC Bank Ltd., Axis Bank Ltd., Kotak Mahindra Bank Ltd., IndusInd Bank Ltd., Standard Chartered Bank, Citi Bank N.A. and HSBC Ltd. These banks have been selected on the basis of their asset size, business mix, etc.
The Reserve Bank introduced the Banking Ombudsman Scheme (BOS) in 1995 to provide an expeditious and inexpensive forum to bank customers for resolution of their complaints relating to deficiency in banking services provided by commercial banks, regional rural banks and scheduled primary co-operative banks. From a total of 11 grounds of complaints, when the BO Scheme was introduced in 1995, today, BO Scheme provides for 27 grounds of complaints/deficiencies in bank services. The Reserve Bank operates the BOS, free of cost, so as to make it accessible to all. The bank’s internal ombudsman will be a forum available to bank customers for grievance redressal before they can even approach the Banking Ombudsman.
The Reserve Bank will shortly issue detailed operational guidelines to the banks.

RBI Shocker: Internal Ombudsman is for banks and not for customers.

In an astonishing disclosure, the Reserve Bank of India (RBI) has said that its much-touted Internal Ombudsman (IO) or his details do not need to be disclosed to the consumer. The IO can only be approached by the bank, which will make a representation without any obligation to inform the consumer. The scheme details, which were obtained by Moneylife  under the Right to Information (RTI) Act is fully of contradictions, lacks transparency and disclosure and seems like yet another hurdle to quick grievance redress for the consumer.  Unfortunately, this is sanctioned by the regulator. It is no wonder then, that even the new regulations by the RBI to protect against digital fraud get better results from consumer courts than from the RBI. 

Here is what the RBI actually says: "Arrangement of Internal Ombudsman is internal to the bank and there is no requirement for the complainant to access IO. RBI has advised banks to internally escalate all cases to IO for final decision where either the complaint is rejected or only a partial relief is provided to the complainant".

In response to our RTI query, the RBI has informed that  34 banks including, 26 public sector banks (PSBs), five private banks and three foreign banks have appointed IO. It has provided a list of names, which is attached below. 

The operating procedure of the Internal Ombudsman is spelt out in a “communication”, but its official sanctity is not clear. The RBI is emphatic at the IO “is internal to the bank and there is no requirement for the complainant to access the IO.  RBI has advised banks to internal escalate all cases to the IP for final decision where either the complaint is rejected or only a partial relief is provided to the complainant”.  

The RBI further says that the “final communication to the complainant shall mention that the complaint has been examined by the IO and still if he is not satisfied, he can approach the BO i.e. level VI”.  So far, we have not come across any complaints where there is such a communication about reference to the IO.  In fact, most complainants are in the dark about action taken. What is worse, the very sanctity of this ‘advise’ is unclear, since the RBI’s communication to banks’ does not seem a part of the master circular of the RBI, which has strict implications. 

Point 4.1 of the IO scheme, says that the “IO shall facilitate resolution/settlement/agreement of such grievances through conciliation and mediation between the Bank and the aggrieved part or by passing an Advisory in accordance with the scheme”. However, if the RBI itself has allowed banks not to communicate with the consumer, nor spelt out a process for this mediation and conciliation, it is unclear how a consumer will be approached at all. Again, we have no record of any consumer having had the benefit of action or mediation by an IO. On the contrary, they have had more success with the consumer courts. 

The scheme further says that the IO should ‘take into account the evidence placed before him by the parties'. However, the consumer seems to have no say in ensuring that all evidence is actually submitted to the IO. In fact, one senior citizen bank customer is running from pillar to post for his complaint of money fraudulently transferred from his savings account with a prominent bank. His communication, seen by Moneylife, nowhere shows if this is being escalated to the IO level.  This senior citizen managed to lodge a complaint with the Police, and has virtually been shut out by the bank, despite going through Moneylife Foundation, an NGO. The plight of other consumers is likely to be worse. 

The RBI with regard to the IO Scheme, says that if the customer" is not satisfied with level 5 or the IO level, then she can approach the BO at next level (level VI)”. This communication itself is proof of the extraordinary harassment that a consumer is subjected to through official sanction by the RBI.  Why should a consumer have to wade through six levels of filing complaints, with endless delays at each level? Since the RBI has flatly refused to impose punishment on banks for such harassment, it is no wonder that banking related disputes either get resolved in consumer courts or simply languish. 

In 1995, the Reserve Bank had introduced the Banking Ombudsman Scheme to provide an expeditious and inexpensive forum to bank customers for resolution of their complaints relating to deficiency in banking services provided by commercial banks, regional rural banks and scheduled primary co-operative banks.

The communication issued on 18 August 2016 , when Dr Raghuram Rajan was the Governor, changed nomenclature of existing Chief Customer Service Officer (CCSO) to IO. The escalation mechanism stated in the communication kept IO at level 5, preceded by Branch Manager at level 1, Circle Office at level 2, Zonal Head at level 3 and Principal Nodal Officer at level 4. If the customer is not satisfied with the IO decision, she is required to approach the Banking Ombudsman at level 6, appointed by the RBI. 

While the communication states that customer is not required to approach the IO directly, it allows the IO to facilitate resolution between bank and the customer. It says, "The IO shall facilitate resolution/ settlement/ agreement of such grievance through conciliation and mediation between the Bank and the aggrieved party or by passing an advisory in accordance with the Scheme."

In its press release issued on 11 May 2015, the Reserve Bank had stated, "The bank’s internal ombudsman will be a forum available to bank customers for grievance redressal before they can even approach the Banking Ombudsman."