JAIIB PPB Paper-2 Module-A Unit 19: Grievance Redressal & RBI Integrated Ombudsman Scheme 2021

JAIIB Paper 2 (PPB) Module A Unit 19: Grievance Redressal & RBI Integrated Ombudsman Scheme 2021 (New Syllabus) 

The Institute of Indian Banking and Finance (IIBF) has recently announced the revised syllabus and exam format for the JAIIB Exam 2023. The upcoming exam will comprise of four papers, with Paper 2 (Principles & Practices of Banking) covering Unit 19: Grievance Redressal & RBI Integrated Ombudsman Scheme 2021. This particular unit holds significant importance for candidates, as it will greatly impact their performance in the exam.

To assist candidates in comprehending the topic, we will provide all the necessary details related to Unit 19: Grievance Redressal & RBI Integrated Ombudsman Scheme 2021 of JAIIB Paper 2 (PPB) Module A: General Banking Operations. We strongly recommend candidates to refer to this article and also utilize our Online Mock Test Series to enhance their understanding of Foreign Currency Accounts for Residents and other related aspects.

For candidates appearing for the JAIIB Certification Examination 2023, it is essential to comprehend each unit in the syllabus, including the Marketing unit. This unit holds great importance in the banking industry, and candidates must prepare thoroughly to excel in the exam and establish a successful career in the banking sector.

Grievance Redressal Policy

  • The Banking Ombudsman Scheme was introduced in 1995 to serve as an alternate grievance redress mechanism for customer complaints against banks.
  • In 2019, Reserve Bank also introduced the Complaint Management System (CMS)available 24×7 for customers to lodge their complaints with the Banking Ombudsman (BO).
  • To further strengthen the customer grievance redressal mechanism in banks, in January 2021 RBI has put in place a comprehensive framework.

Model Policy On Grievance Redressal

The Model Policy on Grievance Redressal is based on the under-noted principles:

  • Customers will be treated fairly at all times.
  • Complaints raised by customers will be dealt with courtesy and in time.
  • Customers will be informed of avenues to escalate their complaints/ grievances within the organization and their rights to alternative remedy, if not fully satisfied.
  • Bank will treat all complaints efficiently and fairly
  • Employees will work in good faith and without prejudice to the interests of the customer.

Internal Machinery To Handle Customer Grievances

Customer awareness and facilitation

  • Information to customers
  • Complaint/suggestion box
  • Complaint book/register
  • Complaint Form

Complaint redressal mechanism in banks

  • If a matter cannot be resolved at the branch level, it should be referred, along with comments/suggestions to the Regional/ Zonal Office, within 7 days of receiving complaint. If not resolved at Regional/ Zonal Office it will be referred to Customer Service Section, Head Office along with their comments/explanations.
  • A complaint redressal letter is sent to the complainant from Head Office and suitable instructions are passed on to the branch/ Regional/ Zonal Office, for taking necessary action in the deficient areas.
  • It should also be stated that the customer, if not satisfied with the bank’s response, has the right to approach the Ombudsman within one year of the date of receipt of the communication. The particulars of the Ombudsman should also be mentioned in the letter.
  • Where the complaints are not redressed within one month, the concerned branch/ Controlling Office should forward a copy of the same to the concerned Nodal Officer under the Ombudsman Scheme and keep him updated regarding the status of the complaint.

Online Dispute Resolution (ODR) System

  • In August 2020, RBI advised authorized Payment System Operators (PSOs) – banks and non-banks – and their participants (PSPs) to put in place system/s for Online Dispute Resolution (ODR) system for resolving disputes and grievances of customers related to failed transactions in their respective payment systems.
  • If the grievance remains unresolved up to one month, the customer may approach the Reserve Bank – Integrated Ombudsman Scheme, The PSO and its PSPs shall provide the customers an access for lodging the disputes and grievances for all transactions whether on-us or off-us.

 Complaints of Unauthorized Electronic Transactions

  • In the SMS and email alerts sent to customers regarding electronic banking transactions, facility to enable customers to instantly respond by “Reply” should be provided for notifying any objection.
  • Complaints should be resolved and liability of the customer, if any, established within the timeline specified in the bank’s Board approved policy, but not exceeding 90 days from the date of receipt of the complaint. If the complaint is not resolved within 90 days, the customer should be compensated as per the RBI norms.

Credit Facilities Related Complaints

  • The disputes arising out of the lending decisions should be heard and disposed of at least at the next higher level.

Strengthening of Grievance Redress Mechanism in Banks

With a view to strengthen and improve the efficacy of the grievance redress mechanism of banks and to provide better customer service, in January 2021, RBI put in place a comprehensive framework  comprising certain measures.

Disclosures related to complaints:

  • RBI had advised that banks must place a statement of complaints before their Boards/ Customer Service Committees along with an analysis of the complaints received.
  • These disclosures are intended to provide to the customers of banks and members of public greater insight into the volume and nature of complaints received by the  banks from their customers and the complaints received by banks from the OBOs, as also the quality  and turnaround time of redress.

Recovery of cost of redress of complaints from banks 

  • With a view to ensure that banks discharge this responsibility effectively, RBI has decided that the cost of redress of complaints be recovered from those banks against whom the maintainable complaints in the OBOs exceed their peer group average.

Intensive Review of Grievance Redress Mechanism

  • RBI will undertake annual assessments of customer service and grievance redress in banks based on the data and information available through the Complaint Management System, and other sources

Principal Nodal Officer 

  • Banks are required to appoint a Principal Nodal Officer under the Ombudsman Scheme, not below the rank of a General Manager. The name and address of the Principal Nodal Officer may be forwarded to the Chief General Manager, Customer Education and Protection Department, Reserve Bank of India. Contact details of the Principal Nodal Officer needs to be prominently displayed in the portal of the bank.

Review of Grievances Redressal Machinery in Public Sector Banks

Chief Customer Service Officer at Select Banks

  • In May 2015 RBI advised a few banks to appoint an internal ombudsman (IO) designated as Chief Customer Service Officer (CCSO). The bank’s internal ombudsman is a forum available to bank customers for grievance redressal before they approach the Ombudsman
  • In September 2018, RBI issued revised Internal Ombudsman Scheme, 2018. Scheduled banks having more than ten banking outlets (excluding RRBs), are required to appoint IO in their banks.

The RBI – Integrated Ombudsman Scheme 2021

  • The Banking Ombudsman Scheme of RBI in operation since 1995. RBI had also introduced two more ombudsman schemes, viz. The Ombudsman Scheme for Non-banking Financial Companies, 2018 (for customers of larger NBFCs), and Ombudsman Scheme for Digital Transactions, 2019 (for grievances related to digital transactions).
  • In November 2021, RBI integrated all the three Schemes into one omnibus Ombudsman Scheme, viz. The Reserve Bank – Integrated Ombudsman Scheme, 2021 (IOS 2021) to cover all entities regulated by RBI.
  • This Scheme provides cost-free redress of customer complaints involving deficiency in services rendered by the entities regulated by RBI, if not resolved to the satisfaction of the customers or not replied within a period of 30 days by the regulated entity.
  • The Scheme also includes under its ambit Non-Scheduled Primary Co-operative Banks with a deposit size of Rs. 50 crore and above. The Scheme adopts ‘One Nation One Ombudsman’
  • The Ombudsman is a senior official appointed by RBI to redress customer complaints against deficiency in certain banking services. As of November 2021, 22 Ombudsmen were appointed with their offices located at the RBI offices mostly in the state capitals.

Organizational Aspects-Ombudsman

  • Appointment of Ombudsmen: RBI may appoint its officers as Ombudsmen to carry out the functions under the Scheme. These appointments can be for maximum three years at a time.
  • Central Receipts and Processing Centre (CRPC): All complaints under IOS 2021 are received at the CRPC, Chandigarh. The CRPC forwards the complaint to the concerned Ombudsman.
  • Powers and Jurisdiction: RBI specifies the territorial authority of each Ombudsman.
  • Modes of satisfaction of complaints: The ombudsmen facilitate resolution of complaints preferably by agreement or through conciliation and mediation between the bank and the aggrieved parties. Failing a mutual agreement, the BO settles the complaint by passing an Award as per the provisions of the Scheme,

Processing Of Complaints

Scrutiny at CRPC: Based on a preliminary scrutiny the CRPC determines the validity of the complaint. The complaints found to be valid and maintainable are assigned  to the concerned Ombudsman for further examination, under intimation to the complainants, and copies to the respective regulated entities with direction to submit their written versions.

Resolution at Ombudsman office:

  • Agreement through Facilitation
  • Agreement through Mediation and Conciliation
  • Passing an Award

Proceedings at Ombudsman Office

  • The concerned regulated entity on receipt of a complaint from the CRPC is required to promptly file with the concerned ombudsman its written response, along with copies of the documents in support, within 15 days.
  • The ombudsman furnishes the written version and the relevant documents filed by one party to the other party and provide additional time to it for submitting its counter response to these. Thereafter, the ombudsman commences the process for resolution of the complaint
  • If a regulated entity does not file its written version within the stipulated/ extended time: a) The ombudsman proceeds ex-parts based on the evidence available and pass appropriate Order or issue an Award. b) The regulated entity loses the right of appeal in respect of the Award.

Award By Ombudsman

The Award shall contain following rulings: 

(i)Direction to the regulated entity for specific performance

(ii)Amount to be paid by the regulated entity to the complainant as compensation for loss suffered.

Following ceilings apply to payments by the regulated entity to the complainant:

(i) Actual amount involved in the dispute – without any ceiling.

(ii) Compensation for consequential loss (directly out of the act or omission of the bank) – to the extent of actual loss, with ceiling of Rs. 20 lakh

(iii) Compensation for loss of time, expenses incurred, harassment and mental anguish suffered – up to the ceiling of Rs. 1 lakh.

  • A copy of the Award is sent to the complainant and the regulated entity. The complainant should give a letter accepting the Award in full and final settlement to the regulated entity, within 30 days of receiving the award copy.
  • The regulated entity should comply with the Award and intimate compliance to the ombudsman, within 30 days of receiving acceptance letter from the complainant.
  • The Appellate Authority (AA) is the Executive Director in-Charge of the RBI Department administering the Scheme. An appeal can be made by either of the parties against the award or an order of rejection made by the Ombudsman. A Regulated Entity can appeal only with prior sanction of the Chairman or the MD/ CEO or, in their absence, the ED/Official of equal rank.
  • The AA may allow a additional period not exceeding 30 days for filing an appeal, if satisfied about the reasons. After review of the matter and giving the parties a reasonable opportunity of being heard, the AA may pass its order.

Grounds for non-maintainability of a Complaint 

Any complaint for deficiency in service in following matters will not be covered:  (a) commercial decision of a Regulated Entity;  (b) a dispute between a vendor and a Regulated Entity in an outsourcing contract;  (c) a grievance not addressed to the Ombudsman directly;  (d) general grievances against Management or Executives of a Regulated Entity;  (e) a dispute in an action in compliance with orders of a statutory or law enforcing authority; (f) a service not within the regulatory purview of RBI;  (g) a dispute between Regulated Entities; and  (h) a dispute involving the employee-employer relationship of a Regulated Entity.

Rejection of a Complaint by the Ombudsman

Deputy Ombudsman or Ombudsman may reject a complaint, at any stage, if it appears to be:

  • Non-maintainable
  • In the nature of offering suggestions or seeking guidance or explanation.

The Ombudsman may reject a complaint at any stage if

  • In his opinion there is no deficiency in service
  • The compensation sought for the consequential loss is beyond the power of the Ombudsman
  • The complaint is not pursued by the complainant with reasonable diligence
  • The complaint is without any sufficient cause
  • The complaint requires consideration of elaborate documentary and oral evidence and the proceedings before the Ombudsman are not appropriate for adjudication of such complaint
  • In the opinion of the Ombudsman there is no financial loss or damage, or inconvenience caused to the complainant.

Powers and Functions of Ombudsman

  • The Ombudsman has the power to address and close all complaints. The Deputy Ombudsman has the power to close those complaints that are not maintainable and complaints settled through facilitation. The Ombudsman has powers to pass an Award for complaints not settled through facilitation.
  • The Ombudsman sends to the Deputy Governor, RBI a report, as on March 31st every year, containing a general review of the activities of the office during the preceding financial year, and also furnishes any other information required by RBI. The RBI has the powers to publish the report and the information received from the Ombudsman in consolidated form or otherwise, as it may deem

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