Banking Ombudsman

The Banking Ombudsman is a quasi-judicial authority established by the Reserve Bank of India (RBI) to redress customer grievances against banks in India. It provides an inexpensive, impartial, and efficient mechanism for resolving complaints related to banking services. The institution plays a vital role in strengthening consumer confidence in the banking system and promoting fair practices in financial services.

Background and Establishment

The Banking Ombudsman Scheme was first introduced by the Reserve Bank of India (RBI) under Section 35A of the Banking Regulation Act, 1949, in 1995. It was designed to provide a forum for customers to lodge complaints about deficiencies in banking services without the need for expensive and time-consuming legal proceedings.
Over time, the scheme was revised several times — notably in 2002, 2006, and 2017 — to expand its scope and simplify the complaint procedure. In 2021, the RBI further consolidated various ombudsman schemes under the Integrated Ombudsman Scheme (RBI-IOS), 2021, creating a unified redressal system for all entities regulated by the RBI, including banks, non-banking financial companies (NBFCs), and payment system operators.

Legal Framework and Administration

The Banking Ombudsman operates under the Banking Ombudsman Scheme, issued and administered by the Reserve Bank of India. The Ombudsman is appointed by the RBI and functions independently, although within the framework prescribed by the Bank.
Each Ombudsman has territorial jurisdiction over specific states or regions and handles complaints related to scheduled commercial banks, regional rural banks, and certain cooperative banks.
Under the Integrated Ombudsman Scheme (2021), the entire system was brought under a single portal — the Complaint Management System (CMS) of the RBI — accessible at https://cms.rbi.org.in.

Objectives of the Scheme

The primary objectives of the Banking Ombudsman Scheme are:

• To provide a cost-free and speedy redressal mechanism for bank customers.
• To promote transparency, accountability, and fair practices in the banking industry.
• To encourage amicable settlement between customers and banks.
• To reduce the burden on courts by providing an alternative dispute resolution forum.

Grounds for Complaints

A customer can approach the Banking Ombudsman for redressal of grievances related to a wide range of banking services. Common grounds include:

• Non-payment or delay in payment or collection of cheques, drafts, or bills.
• Failure to issue or delay in issuing drafts, pay orders, or banker’s cheques.
• Non-acceptance of small denomination notes or coins without valid reason.
• Non-adherence to working hours or unfair banking practices.
• Failure in providing banking facilities promised in the account or loan agreement.
• Wrong debits, unauthorised transactions, or ATM-related complaints.
• Non-issue or delay in providing credit/debit cards.
• Deficiencies in Internet banking, mobile banking, or UPI services.
• Non-observance of RBI guidelines on interest rates, charges, or account closure.
• Improper handling of loans or recovery proceedings.
• Non-compliance with fair practices codes adopted by banks.

The scheme also covers complaints arising out of non-adherence to the provisions of the Banking Codes and Standards Board of India (BCSBI).

Procedure for Filing a Complaint

The complaint process under the Banking Ombudsman Scheme is designed to be customer-friendly and efficient.

1. Initial Complaint to the Bank:
   • The customer must first lodge a written complaint with the concerned bank branch or its customer grievance cell.
   • If the bank fails to respond within 30 days, or if the response is unsatisfactory, the customer can escalate the matter to the Ombudsman.
2. Filing the Complaint:
   • Complaints can be filed online through the RBI CMS portal, by email, or in physical form to the respective office of the Ombudsman.
   • The complaint should include details such as the customer’s name, address, bank details, nature of grievance, and supporting documents.
3. Processing by the Ombudsman:
   • The Ombudsman examines the complaint and may call for additional information from both parties.
   • In most cases, the Ombudsman encourages conciliation or mediation between the customer and the bank.
4. Award or Order:
   • If mediation fails, the Ombudsman issues an award or decision, which is binding on the bank if the complainant accepts it within 30 days.
   • The award may include compensation for actual loss, mental agony, or harassment, subject to a ceiling of ₹20 lakh, and in cases involving credit card complaints, ₹1 lakh for mental anguish.

Appeals and Review

If either party is dissatisfied with the Ombudsman’s decision, an appeal can be made to the Appellate Authority — the Deputy Governor of the RBI in charge of the department — within 30 days of receiving the award.
Under the Integrated Ombudsman Scheme (2021), customers can also request a review or escalate unresolved complaints through the same online portal, ensuring seamless grievance tracking.

Features of the Integrated Ombudsman Scheme (RBI-IOS), 2021

To simplify and strengthen the grievance redressal framework, the RBI merged three existing schemes — Banking Ombudsman Scheme, Ombudsman Scheme for NBFCs, and Ombudsman Scheme for Digital Transactions — into a single framework effective from 12 November 2021.
Key features of the Integrated Scheme include:

• One Nation, One Ombudsman: Uniform application across all regulated entities.
• Centralised Complaint Portal: A single platform for submission and tracking of complaints.
• No Territorial Restrictions: Customers can file complaints irrespective of their location.
• Broader Scope: Includes complaints against NBFCs, prepaid instruments, and payment system operators.
• Time-bound Disposal: Complaints to be resolved within a stipulated timeframe (generally 30 to 60 days).
• Faceless Resolution: Most complaints are handled online or through digital communication.

Powers and Functions of the Ombudsman

The Banking Ombudsman possesses powers equivalent to those of a civil court in certain matters, such as:

• Summoning witnesses and examining them on oath.
• Calling for the production of documents.
• Conducting investigations and inspections.

However, the Ombudsman functions primarily as a conciliatory and recommendatory authority rather than a punitive one.

Limitations of the Scheme

While the scheme has been instrumental in providing justice to banking customers, certain limitations persist:

• Monetary cap on compensation limits redressal in large-value cases.
• Limited jurisdiction over purely commercial decisions of banks.
• Lack of awareness among rural customers about the Ombudsman facility.
• No appeal beyond RBI — decisions of the Appellate Authority are final.

Nevertheless, the RBI’s regular updates and digital integration have greatly improved accessibility and efficiency.

Achievements and Impact

Since its inception, the Banking Ombudsman Scheme has resolved thousands of complaints annually, covering issues from ATM failures to loan mismanagement. It has been instrumental in:

• Enhancing customer confidence in the banking system.
• Promoting responsible banking conduct through accountability.
• Reducing litigation burden on courts and consumer forums.
• Contributing to the development of a customer-centric regulatory environment.