Banking Ombudsman scheme and COPRA Act: All you need to know about

Banking Ombudsman scheme and COPRA Act: All you need to know about 

Dear bankers,

As we all know that  is Banking Ombudsman scheme and COPRA Act for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are providing the Banking Ombudsman scheme and COPRA Act (Unit-4), FUNCTIONS OF BANKS (Module B), Principle & Practice of Banking JAIIB Paper-1.

◊What is Banking Ombudsman

  • Banking ombudsman, a quasi-judicial authority is formed with an intent to resolve the complaints of the customers of the Bank.
  • Section 35A of the Banking Regulation Act, 1949 deals with Banking Ombudsman Scheme. It came into effect in 1995 and presently the Banking Ombudsman Scheme 2006 is in operation.
  • The scheme covers not just scheduled Commercial Banks but also Regional Rural Banks and Scheduled Primary Co-operative Banks. Recently, RBI also extended the concept of Banking Ombudsman to NBFC’s as well.

Areas of customer redressal available with the Ombudsman mechanism

  • Non-payment or unreasonable delay in the payment /collection/ issue of cheques, drafts, bills etc.;
  • Non-acceptance, without sufficient cause, of small denomination notes and coins tendered for any purpose, and for charging of commission in respect thereof;
  • Non-payment or delay in payment of inward remittances;
  • Non-adherence to prescribed working hours;
  • Delay/failure to provide any banking facility (other than loans and advances) which has been promised in writing by the Bank
  • Delay/ non-credit of proceeds to the respective parties’ accounts, non-payment of deposit or non-observance of the RBI directives, with respect to the rate of interest on bank deposits
  • Complaints from NRIs having accounts in India in relation to their remittances from abroad, deposits and other bank related matters;
  • Refusal to open deposit accounts without any valid reason for this refusal;
  • Levying charges without adequate prior notice to the customer;
  • Non-adherence to RBI instructions on ATM / Debit Card /Prepaid Card / Credit Card operations in India by the bank or its subsidiaries
  • Non-adherence to RBI instruction with regard to Mobile Banking / Electronic Banking service in India.
  • Non-disbursement or delay in disbursement of pension (to the extent the grievance can be attributed to the action on the part of the bank concerned, but not with regard to its employees);
  • Refusal to accept or delay in accepting payment towards taxes, as asked by Reserve Bank/Government;
  • Failure /Delay with regard to the issue, service or redemption of Government securities;
  • Forced closure of deposit accounts without any notice or without giving sufficient reason;
  • Refusal to close or delay in closing accounts;
  • Not following the fair practices code as adopted by the bank;
  • Non-observance of Reserve Bank guidelines on engagement of recovery agents by banks;
  • Non-adherence to RBI guidelines on allied-banking activities like sale of insurance or mutual fund or other investment products by banks
  • Any other matter relating to the violation of RBI directives

Limit on the amount of compensation

  • Limit on the amount of compensation (Award): The amount, to be paid by the bank to the complainant (The person registering the complaint) by way of compensation for any loss suffered by the complainant is the lower of
    • Loss suffered due to any act or omission of the Bank
    • ₹ 20 lakhs (₹ Two Million)
  • In case of mental agony and harassment: The Banking Ombudsman may award compensation not exceeding ₹1 lakh (₹ One Hundred Thousand) to the complainant.  While passing an award (giving compensation), the Banking Ombudsman will consider the following factors
    • Time lost by the complainant
    • Expenses incurred by the complainant
    • Harassment and mental agony suffered by the complainant
  • After a receipt of complaint, the Banking Ombudsman will try to settle the complaint through conciliation (agreement) between the aggrieved parties. If a complaint is not settled by an agreement within a period of one month, the Ombudsman proceeds to pass an award. However, before doing so, reasonable opportunity of being heard is given to the complainant and the Bank.
  • If one is unhappy with the decision of the Banking Ombudsman, an option is given to file an appeal with the Appellate Authority within a period of 30 days from the date of the receipt of award. Further, if the Appellate Authority is satisfied an extension of another 30 days may be given.

Ombudsman Scheme for Non-Banking Financial Companies, 2018

  • The RBI introduced an NBFC Ombudsman scheme to redress complaints with regard to NBFCs in 2018.
  • The NBFC Ombudsman is a senior official appointed by the RBI to redress customer complaints against NBFCs for deficiency in certain services covered under the grounds of complaint specified under Clause 8 of the Scheme. Four NBFC Ombudsman have been appointed with their offices located at Chennai, Kolkata, New Delhi and Mumbai.

◊Consumer Protection Act, 1986 (COPRA Act)

  • The Consumer Protection Act was passed in 1986 and it came into force from I July, 1987. The main objectives of the Act are to provide better and all round protection to consumers and effective safeguards against different types of exploitation such as defective goods, deficient services and unfair trade practices. It also makes provisions for simple, speedy and inexpensive machinery for redressal of consumer’s grievances.

Basic rights of consumers include

  • Right to be protected against marketing of goods and services that are hazardous to life and property
  • Right to be informed about the quality, quantity, standard, and price of goods or services so as to protect the consumer against unfair trade practices
  • Right to receive assured access, wherever possible, to a variety of goods and services at competitive prices
  • Right to be heard and to be assured that consumers interests will receive due consideration at appropriate forums.
  • Right to seek redressal against unfair trade practices.

The salient features of Consumer Protection Act (CPA), 1986 are as follows

  • It applies to all goods, services and unfair trade practices unless specifically exempted by the Central Government.
  • It covers all sectors-private, public or co-operative.
  • It provides for establishment of consumer protection councils at the central, state and district levels to promote and protect the rights of consumers and a three-tier quasi-judicial machinery to deal with consumer’s grievances and disputes.

To file the complaint

  • The complaint should be filed within two years of buying the product or using the service
  • It needs to be in writing. Letters should be sent by registered post, hand-delivered, email, or fax. Do not forget to take an acknowledgment
  • The complaint should mention the name and address of the complainant and the person/entity against whom the complaint is being filed. Copies of relevant documents must be enclosed
  • The consumer must mention details of the problem and the demand on the company for redressal. This could be a replacement of the product, removal of defect(s), refund, or compensation for expenses incurred, and for physical/mental torture. The claims, however, need to be reasonable
  • You should preserve all bills, receipts, and proof of correspondence related to the case. Avoid using voice mail or telephone because such interactions are normally difficult to prove
  • There is no compulsion to hire a lawyer. The main cost consists of correspondence and traveling to the consumer forum for the hearing
  • Maintain a complete record of the emails and documents sent and received

Appeal

  • An appeal is a legal instrument which enables persons dissatisfied with the findings of a consumer court to approach a higher court to present his case and seek justice. In the context of consumer forums:
  • An appeal can be made with the state commission against the order of the district forum within 30 days of the order, which is extendable for further 15 days (Section 15)
  • An appeal can be made with the National Commission against the order of the state commission within 30 days of the order or within such time as the National Commission allows (Section 19)
  • An appeal can be made with the Supreme Court against the order of the National Commission within 30 days of the order or within such time as the Supreme Court allows (Section 23)

Penalties

  • The consumer courts (district court, state commission, and National Commission) are given vast powers to enforce their orders. If a defaulter does not appear in court despite notices and reminders, the court may decide the matter in his absence. The forum can sentence the defaulter to a maximum of three years’ imprisonment and impose a fine of Rs10,000. Forums can issue warrants to produce defaulters in court. They can use the police and revenue departments to enforce orders.

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