Are current methods of customer grievance redressal in RBI regulated entities adequate to redress the concerns of consumers?

 Important note to readers and Background

The write-up is a bit lengthy but I am sure it will serve as one source of reference to millions of consumers dealing with Banks, NBFCs, and in the Digital Transactions space.

While I was in the process of writing this write up RBI introduced a new 'integrated ombudsman scheme' to cover all RBI regulated entities and claimed it to address grievances of consumers dealing with Banking, NBFC, and Digital financial transactions space at one place.

Yesterday's newspapers carried headlines: PM inaugurates two customer-centric schemes. One of which was the Integrated Ombudsman Scheme, 2021. It is projected as if it is going to address customer grievances in the quickest possible time. It was felt wemay see what is new in it.

I felt except the process of receiving grievances meant for three ombudsmen (hitherto) at one place, centralized primary scrutiny, and ambition to reduce redressal of grievances in 30 days within 2 years down the line nothing significantly different in it.

The integrated ombudsman scheme 2021 would be available for grievances lodged after 12th November, old complaints would be covered under their respective old schemes. Hence, both aspects have been covered in this article with a focus on the new.

Though apparently, Integrated Ombudsman appears on the top of the pyramid I feel CEPD (RBI) Regional Offices and Central Office, Enforcement Department (ED, RBI), Consumer Disputes forums, CPGRAMS, Civil and Criminal litigation in courts, Public Interest Litigation (PIL) are other institutional grievance/complaints redressal channels will have a significant role to play and are available to the complainant. I shall not be writing on PIL and civil and criminal suit aspects of disputes resolution to contain the length of this writeup.

I felt unless I cite some instances of grievances,similar to instances many consumers would have faced, the discussion below cannot be comprehended by many hence an attempt has been made to mention some, in brief at the cost of length.

Internal Ombudsman Scheme,2018(which did not take off well) and its proper functioning is not monitored by RBI(will exist even after the introduction of an Integrated Ombudsman scheme,2021) isalso adequately covered. I feel if effectively used it would reduce the need to take grievance redressal to different forums mentioned above. Many affected consumers, academicians may like to peruse it and use it to get the grievance redressed quickly.

Positive points as well as Lacunas of old and latest integrated ombudsman scheme, as I perceived are mentioned in the write-up to throw open for a meaningful debate in the public domain.

To add utility PDF of RBI Circular (documents) on Internal Ombudsman Scheme,2018 and Integrated Banking Ombudsman Scheme,2021 attached.

The names of entities given in cases/examples are supported by active two-way communications between me and such entities(without any reference to it, I felt matter cannot be conveyed appropriately). The object is not to defame/mock or discredit such entity/ies but to bring home the broad/general/common issues, to the notice of readers.

Before accessing the adequacy of the grievance redressal mechanism, it is necessary to peruse a couple of cases. Efforts have been made to list a few recent cases, I had experienced.

Case 1

Experience with Banks, NBFC making a complete illegitimate/fraudulent statement casually

"This letter/Report Advice is computer generated and therefore does not require any signature"

In every walks of life, we come across a situation where we receive an unsigned business letter/Receipt/Advice which bears the legend “This letter/Report Advice is computer generated and therefore does not require any signature”, or similar to that.

This has become rampant practice to use this tagline across industries, without understanding the technical intrigues of the Information Technology Act and the process. Due to the practice of reading this myth/legend, people assume the tag line as supported by law of the land (is in sync) and treat it on par for full face value with a properly signed (manually) or document digitally signed under IT Act and is legally valid business communication.

I wonder, who told banks, NBFCs, corporates that computer-generated paper does not require a signature.

The mere fact of a generation of letter/intimation/advice or confirmation on the electronic system (computer) does not confirm the authenticity of the document as such does not prima-facie bind its originator. Standalone letter/intimation/advice cannot become a valid legal document, as it is not, 'duly executed'.

The unsigned computer-generated document has no evidentiary value.

In this connection, I had been actively communicating with many related regulators and Govt of India for over 2½ years. None except legal dept RBI replied (to me) on 14th Aug 2019 through an email (repeated it on many occasions) as under:

“We advise that Reserve Bank has not issued any instruction to banks on the above matter, as such matters are governed by 'Statutes' which are not within the purview of RBI. The customers can obtain signed copies of statements, other advice, etc. from banks if they have a specific requirement.”RBI kept on repeating the same to me every time it received the advice from Law Ministry, MoF, GoI(with a copy to me) to address this matter.

I expected RBI etc to flag the matter to other financial market regulators and take up with the govt for formal appropriate directions and/or formulation of legislation. Least, RBI could have directed RBI-regulated entities appropriately. It communicated to me casually (not to the public in general, through an appropriate communication channel). I have written to PMO and MoF following on this. Both had directed through letters and emails to RBI to take action on this. RBI is not budging even to the extent it is possible to implement for its regulated entities (under its domain) nor telling Govt bluntly that you must address this general concern.Govt also sitting on the fence and repeating its advice to RBI.

While a computer-generated hard copy of a letter without signature may be accepted in ordinary communications, on general matters, any hard copy of the document that requires authenticity should be validated by 'manual / wet-ink signature' and e-document that requires authenticity should be validated by 'digital signature' or by 'e-signature' (wherever permitted and is created in the manner prescribed).

None of the above agencies entertained a formal grievance on this matter though it persists for decades and each one of us is affected due to this absurdity.

Case 2

Experience on E-FDs

Without any legal basis, in gross violation of established norms and without the backing of any law many banks, Deposit-taking NBFCs have started new products like e-fixed deposit and started e-mailing e-FD receipts (PDF) as attachments to depositors/recipients using password protection mechanism provided by software vendors for email attachments. Many NBFC's have joined banks and started issuing e-FD deposits, eFD advice, etc. Banks/NBFs contemplate that password-protected email attachments (mostly PDF)be e-signed/electronically signed documents. Gullible depositors get misdirected/confuse it with an 'electronic'and/or 'digital signature'.

In response to my RTI query RBI informed me that in past RBI wrote to IBA to explore the possibility of the issue of 'FD advice' in place of 'FD receipt' and RBI has no information about the issue of e-FD/e-FD receipt etc. RBI should have directed banks on this matter. RBI cannot be a mute spectator to all these happenings when FD form 65%-75% of the banking sector's deposits and should ensure that sound banking practices are observed (not hijacked by modern tech-savvy bankers, NBFCs,etc which help them in reducing their overheads).

RBI and other financial market regulators, Govt must examine the matter thoroughly to ensure that practices of banks/NBFCs,etc stand to test the law.

Case 3

Is KYC for each Account or relationship with the entity?

My friend an RTI activist from Pune shared his experience with one nationalized bank (I have also faced a similar one with two banks recently namely Axis Bank and ICICI Bank):

He and his wife ('He' and 'She') had joint savings account with PSU bank (with active/valid KYC). Both wanted to open another joint account with the same branch of the same bank, in the reverse order ('She' and 'He'). The bank insisted submission of all KYC papers again. He and She complied.

With Axis Bank and ICICI Bank, I faced a similar scenario. I had asserted and complained to the top management of these banks. Both first supported the branch action, after a strongly worded communications to top management Axis Bank budged and instructed the branch not to insist on KYC (OVDs) again, to use customer ID, ICICI bank is yet to 'come down to the ground level.KYC has become ground customers harassment (without knowing its objective and safer & simper ways to comply with it)

Case 4

Grievance on CKYC implementation

Enabling provision to share KYC information with Central KYC Records Registry (CKYCR) exist since 26th Nov 2015. Regulated Entities (RE)are required to upload data on the designated website from Jan 2017. It was expected that where a customer, to establish an account-based relationship, submits a KYC Identifier to a RE, with explicit consent to download records from CKYCR, then such RE shall retrieve the KYC records online from the CKYCR using the KYC Identifier and the customer shall not be required to submit the same KYC records or information or any other additional identification documents or details,

As per Reserve Bank of India (RBI) notification dated December 18, 2020, on Amendment to Master Directions, 2016, Banks are required to file the electronic copy of the customer's KYC records with the Central KYC Registry. Central KYC Registry issues unique KYC identifiers for any future KYC reference. This is called a KYC identifier or CKYC number [14 digits (KIN)]. The KYC identifier(KIN) can be used as a KYC reference for any banking or financial relationship with any Bank, Financial Institution, SEBI regulated entity (for Demat, Broking Account, etc). SEBI and other Financial Market Regulators have issued directions to their regulated entities on these lines.

In clear terms, as per law of the land and regulatory directions,there is no need to submit KYC papers again to any bank, FI, SEBI regulated entity if KYC is done with 'anyone' and 'KIN' is available with the client. RBI Circular DOR.AML. BC. No.31/14.01.001/2020-21 December 18, 2020,

Case 5

Insisting opening of new/additional account on 'TAB' and absence of CKYC mode

In Aug 2021 I had visited ICICI Bank to open one additional account with it. Bank insisted Aadhaar based opening account with 'TAB' (Bank stated that it won't open using physical form filling mode etc). Bank has my valid customer data (customer since 1999), refused to use the valid KYC data (available at its disposal), or open an additional account based on CKYC (KIN) also. 

Insisting Aadhaar (pre-requisite for 'TABLET' based account opening) for non-govt benefit transfer account (Non-DBT A/C) is contempt of Supreme Court of India's pronounced directions,

The bank informed that it has stopped the opening of any new account even for the existing relations without a TAB. After registering the grievance the bank agreed to open a paper-based application with a new set of KYC papers. Bank till now did not acknowledge the difference between a customer/style of account' and 'another account of the same relationship'.

The bank informed us that it has not yet introduced the CKYC mode of opening an account for a new customer. It did not indicate a timeline to implement CKYC. Disregarding CKYCis a violation of the Law of the Land and also directions of RBI on CKYC (KIN) issued in Dec,2020.

Initially, ICICI Bank's corporate office partially budged but attempted to dodge the grievance. (Currently under reference to BO and CEPD,CO, RBI) as the case falls outside the domain of the Banking Ombudsman under new as well as old schemes. CEPD,RBI remained silent throughout the process of references.

If I may make another bold statement that just likes the customer education segment in CEPD, in RBI there is a need for the regulator to start a new segment to educate the junior bankers (their seniors too need proper advice/guidance at times), also take action against silent senior officials of the banks for disregarding and non-adherence to mandatory directions. It appears non of: EFD, DoR, DoS,CEPD (all RBI departments), Ombudsman, CPGRAMS,GOI is keen to address junior bankers 'deficiencies.

Case 6

Bank insisting on nominee signing 'indemnity undertaking' and 'receipt',with a built-in undertaking for unquestioned return/refund of the money so received by nominee, 'on demand', so to settle his/her demand/claim of money lying in the deposit account of a deceased customer

a. ICICI Bank claim application under nomination the last paragraph of Annexure- 1 (page 2)is titled as 'indemnity':

As per Sec 45ZA of Banking Regulation Act and Banking Companies Nomination Rules 1985 a Bank stands fully discharged upon payment to the registered Nominee.The bank is not liable to any claim from the legal hair or executor, post-settlement of the claim in favor of the nominee.

The law made it amply clear that the Nominee receives the money as a Trustee of the legal heirs and the bank too added this clause (smartly) as the first paragraph of document. Even if the nominee fails to comply with their role as a trustee, the Bank in no manner is liable to pay already discharged liability.

To settle the claim ICICI bank compels nominees to sign (illegitimately designed indemnity undertaking, disregarding the law of the land, and many needy or gullible customers do sign it. This grievance when referred to the Principal Nodal Officer of the bank, got dismissed (reply from some junior from PNO's office) stating that Internal Ombudsman also approved the response (the no concern was not replied) and you may approach the banking ombudsman.

b. ICICI Bank seeking Receipt (to be signed by nominee) contentious clause:

The last paragraph of the 'receipt 'confirming the amount of deposit claim received required to be signed by the nominee contains a promise by the nominee (foregoing his/her legitimate rights) promise to pay back the money to ICICI Bank on-demand without asking any reason.

While the bank would always try to push onerous things to the customer bench and overprotect/secure itself (illegitimately) saying that it is as per their legal advice, the bank should know that its act should not in any manner hit the legitimate rights of the counter party. It is the case of restrictive (banking) practices (a monopoly-like act).

Bank had insisted on signing/consent to onerous clauses (not expected to be imposed) to settle the death claim under nomination [using your bank's dominant post in the market and financial need of a nominee claimant). 

Format of receipt by the nominee as sought by SBI, Canara Bank, Kotak Mahindra Bank, IndusInd Bank was submitted to it. Both 'internal ombudsman',

This Bank insisted on re-furnishing my KYC papers again (as a nominee) along with the claim papers (I have been banking with it for22 years- banker customer relationship with the bank including as senior official of ICICI bank), with active banking accounts with valid KYC on a given date.Bank, had my KYC details ona click. Is this act is not only not harassment + duplications of papers, wasting the country's scarce resources, time.

Bank was not happy with CKYC details (as per the law framed by Govt of India and as directed by RBI), had no belief on own database of the customer (profiles), KYC or its updated records, etc.

c. This Bank wanted the death certificate(DC) to be attested by a claimant/nominee (lucky that the bank did not seek the deceased to self-attest it). Don't you think it is the highest degree of stupidity to insist suchattested by a nominee client?

I had provided them with an original DC and a copy. It was expected that the official verifying it could satisfy the authenticity of the photocopy submitted {as evidence/record) and accordingly, put a stamp/seal with his name (countersign it is required for its records) as verified by rather than pushing responsibility to the claimant. 

Self-certification directed by Govt of India vide Notification 558/1/203-DGDGHRD pt1 dt:31-07-2014 [citizens not required to get documents attested by a gazetted officer or file affidavits for government or related work, with the 'Centre' deciding to settle for self-attested documents such as birth certificate and mark-sheets, abolished many affidavits and in place introduced self-certification Affidavits]. Self-attestation of original documents has no relation to this action.

This Bank was found to be adamant and seemed to not understand simple things and rejected legitimate requests.

I informed the bank that many customers/claimants may sign out of need/compulsion/ necessity or lack of knowledge and is an unjust clause.

This situation would have been or could be faced by many customers/claimants some banks may follow the practice/format of this leading private bank.

PNO remained completely silent over the concerns/complaints. I brought it to notice of CEPD as I was sure that Ombudsman would dismiss the case on a ground that it is commercial judgment/commercial decision of a Regulated Entity or Complaint requires consideration of elaborate documentary and oral evidence and the proceedings before the Ombudsman are not appropriate for adjudication of such complaint or similar.

No grievance, in particular, was responded to by the internal ombudsman of the bank. Jr officer wrote (for head service quality) in two-liner reply that response to the grievance has the approval of the 'internal ombudsman IO)'. Documentary evidence with me shows that the Bank has mocked the IO mechanism and this was fact was formally brought to the notice of the redressal agencies at RBI.

Bank was probably well aware that:

Under the old scheme banking ombudsman would dismiss the matter [using BO Scheme clause 8 or 13(d) or 13(g)].

Under the new integrated scheme also case will be dismissed using the following:

No complaint about deficiency in service shall lie under the Scheme in matters involving:

• A commercial judgment/commercial decision of a Regulated Entity OR
• It is like offering suggestions or seeking guidance or explanation OR
• It is his opinion there is no deficiency in service OR

The complaint requires consideration of elaborate documentary and oral evidence and the proceedings before the Ombudsman are not appropriate for adjudication of such a complaint

Thus bank must be also sure that Ombudsman would dispose of the case and it will continue with its approach customer will not go to Competition Commission against the restrictive practice.

Case 6

Axis Bank's on CKYC norms asked KYC (OVDs) for additional different accounts of existing clients (having valid KYC with the said bank)

Just as in the case of ICICI Bank Axis Bank also asked KYC (OVDs) from me for opening an additional account (customer of Axis Bank) though I have active accounts and valid KYC with it. It has not yet implemented the CKYC mode of opening an account for a new person desirous of opening an account (new relationship with the bank) and was casual in responding that it has no CKYC mechanism in force.Upon insistence,the bank stated that it propose to launch it in Dec 2021 (1 year after RBI directed the banks to implement it). Even tiny 'small finance banks' have implemented it long ago. They just take the existing customer ID.

This is the audacity of Bank

A customer who wanted to open is a joint account with the bank insisted on the submission of officially valid documents once again. To facilitate search we had informed the bank that we will give our customer ID and since KYC is knowing about the customer and since you have the full data available with you there is no need to submit. The corporate office of the bank was also reluctant and took two months to budge and decide on this standalone case. Bank did not commit till now that it will desist from asking OVDs for opening new accounts of existing customers who have valid KYC with the bank.

In the second case opening of joint account with a non-Axis Bank customer with CKYC, number Axis Bank informed that sometime towards the end of December 2021 CKYC could be implemented.Bank seems to have no wind of RBI's directions, enactment existing since 4 years and did not take any active steps to implement law of the land and RBI directives.

Case 7

Axis Bank wrongful closure of deposit just fell due

My mother had named me as a nominee for one of the fixed deposits she had placed with Axis Bank. As contractually mentioned, consistent with the deposit policy of the bank, Axis Bank has been renewing this deposittime and again. Without any intimation, without seeking the customer's express consent or without Express directions from the customer (who now ceases to exist) bank closed this fixed deposit and issued DD, sent it to the last known address (10 years old), and got it back undelivered.

Bank attempted to misdirect the nominee (me), the complainant, on some flimsy pretext and could not support its absurd and misdirecting responses. If for some reason bank did not renew the deposit it should have kept it under 'overdue deposit' (no bank likes to put under this head, these days, for ALM reasons) or renewed it as was done in the past according to its deposit policy so that the nominee's rights remain unaffected as long as its nomenclature remains as a deposit account (does not undergo a change from a deposit or overdue deposit account) to other liability.Also, a nominee/claimant is entitled to overdue interest or interest for the tenure deposit run (without penalty). These benefits cease once the deposit ceases to exist as one (move to DD payable liability).

Instead of agreeing to lapse, regretting agony, and seeking the cooperation of a legitimate owner of money/complainant, Axis Bank chose the feeble/flimsy defense route.

As this problem had many dimensions and it is beyond the level of the branch to resolve it amicably expected PNO and IO's team to get actively involved.

Though the bank was in a fix, its involved officials tried to misdirect and close the matter showering easy settlement as a gesture. From a series of communications, I learned the bank does not have a proper grievance mechanism set up. PNO/NO do not respond (at all) and some junior officers from MD's secretariat respond to any escalations (inconsistently). It appears the bank does not have a post of 'Internal Ombudsman' or is not involved at all. Bank remained silent when I sought the formal decision of PNO and views of the Internal Ombudsman for me to approach BO (now the integrated ombudsman). The bank is evading.

RBI has directed the banks to appoint an internal ombudsman an experienced and qualified senior person and make a final formal reference to the internal ombudsman and seek IOs views and implement. If not, there is a laid down process for the bank to follow and appraise the complainant.

Many like me had experienced that references is a waste of time and the banking ombudsman dismisses the cases ignoring the larger interest of the customer community and implementation of governments directions and RBI is on directions by giving reference to clause 8 of banking ombudsman scheme 2006 last updated on 1st July 2017. Ombudsman may dismiss it using clauses13(d) and 13(g) of the BO Scheme. The newly introduced scheme also has many clauses similar to it (covered in later paragraphs).

What do you think will be the response from all grievance redressing entities including DoS (RBI), CEPC/D(RBI)?

Many cases like this indicate that the system is being mocked/cheated and gullible customers are harassed, misdirected as entities have no fear of getting punished by the regulator [the Enforcement Department (RBI), DoS (RBI)] who do not look at them if directly received from consumers. CEPD, RBI earlier used to forward cases to BO now under centralized set us its role is not clear.CPGRAMS channel of grievance redressal ultimately operates through cms. CEPD (nobody will spend time to reach the channel of a civil suit or PIL). These grievances will continue.

Role of Enforcement Department (EFD),RBI to address serious grievances of regulatory breaches (refer to case 1 to 7 above)

I feel EFD should function more aggressively

As we know RBI has powers to impose penalties under various laws affecting the banking and financial sector, viz., Banking Regulation Act, 1949 [BR Act]; Reserve Bank of India Act, 1934 [RBI Act]; Payments and Settlement Systems Act, 2007 [PSS Act]; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI Act]; Factoring Regulation Act, 2011 [FR Act]; Credit Information Companies (Regulation) Act, 2005 [CIC (R) Act]; etc.

Regulation, surveillance, and enforcement are three pillars of RBI's oversight mechanism.

Regulations determine the framework in which financial entities function and customer and public interests are protected on the other.

Surveillance is the process through which adherence to the regulations is monitored.

Ascertainment of cases of non-compliance with regulations noticed either through the surveillance process or otherwise and taking appropriate penal action falls within the domain of enforcement.

An effective system of supervision depends, on effective enforcement of supervisory policies which, in turn, needs a unified and well-articulated enforcement policy and institutional framework.

As per the information in the public domain, initially, taking into account the systemic importance of commercial banks, EFD was tasked with the responsibility of imposing monetary penalties for violations by the Scheduled Commercial Banks (SCBs) under Section 47A of the BR Act, rules framed and directions/regulations issued thereunder and violations falling under the Prevention of Money Laundering Act, 2002 where directions have been issued by RBI. Subsequently, enforcement work about Co-operative Banks and Non-banking Financial Companies (NBFCs) was also brought under the purview of EFD, with effect from October 3, 2018.

I understand that EFD takes matters of regulatory violations coming out of Inspection/scrutiny reports received from supervisory departments and references from regulatory departments; Market intelligence reports received from other departments, and References by Reserve Bank's Top Management do not look at bulk references coming from consumers or consumer organizations.

Is Internal Ombudsman Scheme,2018 (IO)implemented by banks or mocked/ridiculed/satirized? (Attached at the end of the article)

I feel many cases could get addressed if Integrated Ombudsman Scheme,2018properly implemented and monitored and 'IO' provided the liberty as mandated by RBI under Banking Regulations Act is given by regulated entities.

Executive summary

Internal Ombudsman

An Internal Ombudsman provides residents, community members, ratepayers, local businesses, staff, Councillors, and other Council Stakeholders with an “independent ear” regarding complaints:

“All Scheduled Commercial Banks in India having more than ten banking outlets (excluding Regional Rural Banks), are required to appoint Internal Ombudsman (IO) in their banks. The IO shall, inter alia, examine customer complaints which are likea deficiency in service on the part of the bank, (including those on the grounds of complaints listed in Clause 8 of the Banking Ombudsman Scheme, 2006 (BO) that are partly or wholly rejected by the bank,” RBI said in a statement on its website.

“As the banks shall internally escalate all complaints, which are not fully redressed to their respective IOs before conveying the final decision to the complainant, the customers of banks need not approach the IO directly,” the central bank's statement said.

The IO mechanism was set up to strengthen the internal grievance redressal system of banks and ensure the complaints of the customers are redressed at the level of the bank itself.

The implementation of the IO Scheme, 2018 will be monitored by the bank's internal audit mechanism apart from regulatory oversight by RBI.

The Scheme covers appointment/tenure, roles, and responsibilities, procedural guidelines, and oversight mechanisms for the IO, among other things.

As a part of this customer-centric approach to enhance the independence of the IO while simultaneously, strengthening the monitoring system over the functioning of the IO mechanism,

RBI had reviewed the arrangement and issued revised directions in the year 2018 under the Banking Regulation Act with the following objects:

To enhance the customer confidence in the Bank's systems and to hasten the process of grievance redressal, making it more transparent.

To enable customer grievances to be considered by an independent body, instead of B.O. Other grievances outside the purview of Clause 8 of the BO scheme can also be dealt with by the IO, but only after they have been examined by the Bank's Internal Grievance Redressal Mechanism and left unresolved/unredressed to the satisfaction of the complainant.

The IO shall exercise general powers of superintendence and control over his office and shall be responsible for the conduct of business thereat.

The Bank shall examine the grievances as per its Internal Grievance Redressal Mechanism and in case the Bank decides to reject or to provide only partial relief to the complainant, it should invariably forward such cases to the IO for further examination.

The advice to the complainant after examination by IO in such cases should necessarily have a clause that the grievance has also been examined by the IO.

The decision of the IO shall be binding on the Bank and Bank is required to accept it. In case the Bank disagrees with the decision of IOsuch cases should be reported to RBI by the IO as well as by the Bank with a copy to the respective BO.

IOs, are independent authorities placed at apex position in the Internal Grievance Redressal Machinery and work as a precursor to the BO. Therefore, the reference made by the Bank to IO for the examination should emanate primarily from the highest level of the Bank's Internal Grievance Redressal Machinery only i.e. PNO, who is the General Manager (Customer Care).

The IO shall take into account the evidence placed before him by the parties, the principles of banking law and practice, directions, instructions, and guidelines issued by the Reserve Bank from time to time, and such other factors which in his opinion are relevant to the complaint.

The proceedings at Internal Ombudsman (IO's) office shall be summary in nature and the. Advisory shall be reasoned and speaking one

The decision passed shall contain the direction/s, if any, to the Bank for specific performance of its obligations and in addition to or otherwise, the amount, if any, to be paid by the Bank to the complainant by way of compensation for any loss suffered by the complainant, arising directly out of the act or omission of the Bank maximum upto Rs.50,000/- or actual loss whichever is lower.

A copy of the decision shall be sent to the complainant and the Bank*.

The customer can approach the BO only after IO decides the complaint*.

However, in reality, there is no mandatory mention of this*: Any person aggrieved by the decision of the IO on the complaint may move to BO within 30 days from the date of receipt of communication of decision from IO. As the system allows the filing of a complaint on the Ombudsman website without IO's response no one bothers.

RBI has not made effective use of this 'person' and made this tool responsible entities started flouting/short-circuiting the processes. Entities started mocking the IO and started writing for/on behalf of this 'statutory authority created under the Banking Regulation Act.

Entities have coined a convenient term 'Office of the PNO' (to facilitate junior officers from entity to write for the post unmindful of fact the reference has to be responded to by a person at the rank of GM or equivalent). The monitoring agencies seem to not be concerned about this.

Integrated Ombudsman Scheme Launched 12^th Nov 2021.(full scheme pdf document attached to the writeup). This is different from Internal Ombudsman Scheme 2018 (which co-exist with Integrated Ombudsman Scheme,2021)

Executive summary

The Banking Ombudsman Scheme (BOS) was launched in 1995. It has undergone five revisions and also forms the basis for the launch of the Ombudsman Scheme for Non-Banking Financial Companies (OSNBFC) in 2018 and the Ombudsman Scheme for Digital Transactions (OSDT) in 2019. The new integrated scheme was prepared based on the recommendations of the Committee set up by RBI to Review the Ombudsman Schemes

The Reserve Bank-Integrated Ombudsman Scheme, inaugurated by Prime Minister Narendra Modi, merges regulated authorities such as banks, Non-banking Financial Companies (NBFCs), and digital payments system operators, and brings them on a single platform aiming consumers to get speedy solutions to their grievances

Old pending complaints, appeals, and execution of the Awards already passed, as on the under shall continue to be governed by the provisions of the respective (old) Ombudsman Schemes

Consumer aggrieved by an act or omission of a Regulated Entity resulting in a deficiency in service may file a complaint under the Scheme (against currently 1955 entities (listed by RBI's) online on the portal (https://cms.rbi.org.in) or Complaints in electronic mode (E-mail) crpc@rbi.org.in or physical form, including postal and hand-delivered complaints, shall be submitted for initial processing centrally at processing Centre Chandigarh

['Deficiency in service' means a shortcoming or an inadequacy in any financial service, which the Regulated Entity is required to provide statutorily or otherwise, which may or may not result in financial loss or damage to the customer]

Initial Scrutiny of Complaints

Complaints which are like offering suggestions or seeking guidance or explanation shall not be treated as valid complaints under the Scheme and shall be closed accordingly with a suitable communication to the complainant.

As per the scheme document, no complaint about deficiency in service shall lie under the Scheme in matters involving:

1) Commercial judgment/commercial decision of a Regulated Entity*;

2) General grievances against Management or Executives of a Regulated Entity*;

3) A dispute in which action is initiated by a Regulated Entity in compliance with the orders of a statutory or law enforcing authority*;

4) A service not within the regulatory purview of the Reserve Bank*;

5) A matter pending before any Court, Tribunal or Arbitrator or any other Forum or Authority; or, settled or dealt with on merits, by any Court, Tribunal or Arbitrator or any other Forum or Authority, whether or not received from the same complainant or along with one or more of the complainants/parties concerned;

6) A complaint is not abusive or frivolous or vexatious;

For the remaining complaints, Ombudsman may examine either party to the complaint and record their statement. A copy of the Award shall be sent to the complainant and the Regulated Entity.

Rejection of Complaints

As per the scheme document Deputy Ombudsman or the Ombudsman may reject a complaint at any stage if it appears that the complaint made:

• is non-maintainable under clause 10;or
• is like offering suggestions or seeking guidance or explanation*
• in his opinion there is no deficiency in service;or
• the compensation sought for the consequential loss is beyond the powerof the Ombudsman to award the compensation as indicated in clause 8(2);or
• the complaint is not pursued by the complainant with reasonable diligence; or
• the complaint is without any sufficient cause;or
• the complaint requires consideration of elaborate documentary and oral evidence and the proceedings before the Ombudsman are not appropriate for adjudication of such complaint;or
• in the opinion of the Ombudsman, there is no financial loss or damage, or inconvenience caused to thecomplainant.

Further from the annexure of the scheme document,it is clear that

1.Any case sub-judice/under arbitration Or

2.That has been already been dealt with or is it under process on the same ground with the Ombudsman Or

3.Is like general complaint/s against Management or Executives of a Regulated Entity

Other Directions under integrated ombudsman Scheme

The Regulated Entity shall appoint a Principal Nodal Officer at their head office who shall not be a rank less than a General Manager or an officer of equivalent rank and shall be responsible for representing the Regulated Entity and furnishing information on behalf of the Regulated Entity in respect of complaints filed against the Regulated Entity.

The Regulated Entity may appoint such other Nodal Officers to assist the Principal Nodal Officer as it may deem fit for operational efficiency.

Scheme Document further states: The Regulated Entity shall display prominently for the benefit of their customers at their branches/places where the business is transacted, the name and contact details (Telephone/mobile number and E-mail ID) of the Principal Nodal Officer along with the details of the complaint lodging portal of the Ombudsman (https://cms.rbi.org.in)

The Regulated Entity to which the Scheme is applicable shall ensure that the salient features of the Scheme are displayed prominently in English, Hindi, and the regional language in all its offices, branches, and places where the business is transacted in such a manner that a person visiting the office or branch has adequate information on the Scheme.

The salient features of the Scheme along with the copy of the Scheme and the contact details of the Principal Nodal Officer shall be displayed and updated on the website of the Regulated Entity.

The Regulated Entity shall ensure that a copy of the Scheme is available in all its branches to be provided to the customer for reference upon request.

My observations on the newly launched scheme

1. It is not clear how merged regulated authorities such as banks, Non-banking Financial Companies (NBFCs), and digital payments system operators, when brought on a single platform would help consumers to get speedy solutions (curtailment of time taken to dispose of cases) to their grievances unless:

There is a material change to approach (except centralized processing), Drastic changes in rules of the game, mechanism of PNO. Internal Ombudsman (IO) mechanism needs to install at many banks, strengthened and functioning of the 'internal ombudsman'are closely monitored for its efficient functioning. This will ensure quality cases will flow to the integrated ombudsman.

2. The term 'deficiency in service has been loosely' defined in the scheme and kept highly subjectivehence there is always a risk of subjectivity.
3. On careful look at the 'negative' or 'exclusions' list (in bold font), many qualifying cases would be rejected on flimsy grounds
4. Will switching over from 22 Ombudsman offices located across the country to integrated one centralized processing for all the 3 merged schemes reduce the chaos and make the grievance redressal process simpler and more efficient?
5. The integrated mechanism may be beneficial in addressing individuals routine complaints in payment related to pre-paid instruments (PPIs), debit - credit cards and digital wallets, technical declines, and transactional failures in UPI”
6. The revamped website does have good demo videos guiding how to file a complaint with the Integrated Ombudsman, how to track the status of grievance, how to file an appeal etc
7. clauses in the new Integrated Ombudsman Scheme, 2021 that can be conveniently used (!) at any time for disposal/dismissal of complaints (as was done hitherto) as non-maintainable to meet 'the ambitious' TAT.

A lot of hype is done while announcing the integrated scheme and projected as it would be a game-changer and consumers would get quick redressal of their complaints. However,if one peruses the grounds listed for rejection in the new policy one will find they are many and are subjective. A few of them are listed below with one-liner observation from the consumer's point of view,one line in a bracket.

1. Commercial judgment/commercial decision of a Regulated Entity*;

(That means any commercial decision of entity will not be subject to scrutiny)

2. General grievances against Management or Executives of a Regulated Entity*;

(In case of Axis Bank case bank may not have Internal Ombudsman or he is not involved in the process though it is mandatory)

3. A dispute in which action is initiated by a Regulated Entity in compliance with the orders of a statutory or law enforcing authority;

(In example Axis Bank CKYC case in Sept2021 the Bank mentioned that it proposes to implement CKYC in Dec2021. Having said that bank will escape actions from Integrated Ombudsman. Any entity can say it will start the process of implementation of particular direction and the case will be disposed) ;

4. A service not within the regulatory purview of the Reserve Bank*;

[e.g case 1 of unsigned computer-generated papers RBI claims it to be outside its purview. It has admitted reference as an illegitimate practice but not decided the case (even for entities regulated by it). In none of the referred Banking Ombudsman/CEPD/DoR/EFD directed concerned banks to sign such papers and stop printing the illegitimate legend. Thus the grievance of billions of consumers of the country remains unresolved for many years (since its reference)

5. It is like offering suggestions or seeking guidance or explanation*

6. An Ombudsman's opinion there is no deficiency in service*; or

7. The complaint is not pursued by the complainant with reasonable diligence*; or

8. The complaint is without any sufficient cause; or

(5, 6,7 8 above are highly subjective (based on individual's perception).

My experience makes me believe it will be a good ground to dismiss cases, ab initio)

9. A complaint requires consideration of elaborate documentary and oral evidence and the proceedings before the Ombudsman are not appropriate for adjudication of such complaint;

(Major complaints with many documents etc would be out)

10. In the opinion of the Ombudsman, no financial loss or damage, or inconvenience  was caused to the complainant.

(It is highly subjective (based on individual's perception)

11. The complaint is not abusive or frivolous or vexatious

12. The complaint should not be older than 1 year from the date of final reply to it from the regulated entity or 1 year 30 days from the date of complaint (if no reply is received). It can be filed after 30 days from the date of lodgment of a complaint or after the date of dismissal rejection of the case

13. Above all these matters should be a deficiency in service 'as defined in the scheme document'

If one peruses all these in the context of the complaint, what is left on the table of the Integrated Ombudsman will be a bulk of routine complaints on:

Operation in Deposit Account, KYC, nominations, Non-honouring of Bank Guarantee, Remittances related Complaints, Complaints relating to Loans, delays, non-adherence fair practices code, Prepaid Payment Instruments, Mobile / Electronic Fund Transfers, Non-adherence to instructions of Reserve Bank / respective System Provider to System Participants, on payment transactions through Unified Payments Interface (UPI) / Bharat Bill Payment System (BBPS) / Bharat QR Code / UPI, ATM Charges and Refunds, non-payment or inordinate delay in the payment of interest on deposits by deposit-taking NBFCs, non-adherence to the Reserve Bank directives, if any, applicable to rate of interest on deposits and all these hitherto were addressed by ombudsman under 3 schemes.

CEPD & Banking Ombudsman's Ping Pong Game

After many years of close interaction with RBI's senior functionaries/departments, I may conclude that though not intended RBI's departments play table tennis or a game of ping pong with 'gullible customer' as a Ping Pong ball'.

Enforcement Department (ED), Consumer Education and Protection Department (CEPD) of RBI, and demi official set up of RBI, Office of the Banking Ombudsman are the three active players while other departments like Department of Regulation (DoR), Legal Department, DOS, DPSS do sometimes a guest appearance.

CEPD and Banking Ombudsman both are usual players who appear to toss the customers/consumers grievance and ultimately push it to a situation of 'no solution/redressal', finally customer relents. It may also be due to boundaries created by the mechanism.

In a case referred above: ICICI Bank autocratic attitude on breaching CKYC norms, disregard to Honorable Supreme Court of India's directions on the usage of Aadhaar for opening a banking account (insisting on account opening only through TAB banking), Bank insisting Officially Valid Document (OVDs) from an existing relationship with a valid KYC (available with ICICI Bank), do not exactly come under 'standard parameters of Banking Ombudsman Scheme' (fair practices code) as per the BO's website module, hence any attempt to lodge grievance will be dismissed/disposed at BO module.

Before12th Nov2021 had the complainant agreed itcould get directed to CEPD RBI. If one lodged the same set of grievances to CEPD, RBI would have routinely forwarded it to Banking Ombudsman. The Banking Ombudsman used to respond and directs to lodge a formal complaint on the website and if complainant visits the website with required data and chooses to file a complaint on BO's website, selects the most relevant criteria available on the domain, it direct as per screenshot (below). Thus, it is tossed like a ball in a ping-pong game. No one wants the case to rest on his/her side of the court.

As most of the banks were aware of this 'Ping Pong' game between Banking Ombudsman and CEPD (where RBI & BO both are not actively committed to resolving the grievancematters of masses).

Their focus has been on individuals in specific routine cases.

Many regulated entities know about it and take complete advantage (do not look at the grievance of the customers) with no fear of any penal action.

The screenshot was taken on 09-11-2021:

• "The ground of complaint: Not on the list
• Complaint Category: Others
• Description: Not on the list
• Upon hitting the Next button: the message displayed as under
• As the Entity complained against or the Ground of Complaint is not covered under the Scheme, your complaint will be redirected to Consumer Education and Protection Cell (CEPC), RBI.Do you want to proceed?
• If you click Yes, then your complaint will be redirected to CEPC Office RBI as per your region.
• If you click No, you can not proceed further"

When a grievance redressal mechanism in a regulated entity fails to stand on transparency or when it compromises 'with its interest' there is a need for the regulator to 'step in' and give firm directions to erring entity to resolve the grievance forthwith and remind 'the system' that there is a regulator, who is watching and can penalize irresponsible actions, restrictive practices would not be tolerated. If this message does not reach all the concerned timely and properly the system deteriorates as happening these days.

'Kick the can' attitude needs to be changed

As mentioned elsewhere in the writeupit is not clear whether the new (integrated) scheme will have CEPD's active role. Will CEPD deal with the complaints not coming under the purview of the integrated ombudsman? Will,Internal Ombudsman EFD's role gets enhanced to address serious (that are not standalone routine individual) grievances?

Many banks do not have an 'internal ombudsman' position, appointed (as per specified pre-qualifications and recruitment terms in terms of RBI circular dt:03-09-2018), Grievance redressal is recklessly handled and simply direct customers to approach the Banking Ombudsman (as banks know that the case will 'hit the wall' and bounce back to the complainant unresolved).

The old Banking Ombudsman website does not work properly on the 'Chrome' browser. Hope website tuned for integrated ombudsman scheme effective 12th Nov 2021 would have set to overcome all browser-related glitches.

I am not optimistic that 'RBI Ombudsman'(integrated ombudsman for RBI regulated entities) will look at this grievance wholesomely. Depending on the volume of complaints, human bandwith, expertise, the time it may have to push some complaints to trash (on enormous technical grounds mentioned above). However if pre-condiditon of a decision from 'internal ombudsman of regulated entity' is made mandatory pre-cursor and monitored its implementation closely case count can be controlled.

However, to complete the formality of lodging a complaint to the consumer forum or PIL one may look to this channel. I expect the integrated ombudsman to direct Axis Bank,ICICI Bank in cases cited as an example and formally under reference.

Summing up

I feel having regulations in place, is not just adequate and cannot guarantee its adherence. Customers/consumers also should be aware of their rights, know the right channel and right way to assert, lodge the complaint in the simplest manner and do an active follow-up as there are many overlapping options.

I suggest providing a simple tip to every customer who experiences harassment and non resolution of grievance at the basic level.

Every regulated entity ought to have a complaint register at its office. An aggrieved consumer can write a four-line complaint about grievance[like insisting on KYC documents to operationalize the inoperative account or not accepting CKYC (KIN), insisting on ID proof, address proof, photo, etc, insist on TAB banking (using Aadhaar), asking OVD for each relationship of the same customer with the same bank, the issue relating to ATM, interest on deposit, remittances, etc]. This simple four-line complaint is to be registered at the office. Doa close follow-up. Escalate to PNO, Internal Ombudsman. Most of the time entity would address the issue (by escalating it within the organization in a time-bound manner). It will cost nothing to the prospective customer/existing customers. With growing complaints, if not ombudsman regulators will be compelled to take action and over some time the systems will be tuned to follow the 'law of the land'.

I feel Autocratic, restrictive practices of some entities, insisting on adherence to illegitimate terms of resulting in 'mocking the law of the land' and wasting country's resources should be dealt with a hard hand. I wish that customers can join this crusade, to help the regulators to enforce its' directions. Many times regulators issue directions but do have active setup/machinery to enforce it, which results in this situation.

Such matters should be actively taken up by consumer organizations with EFD (RBI) as Integrated Ombudsman, CPGRAMS (ultimately operates through cms-CEPD), asindividuals cannot spend inordinate time, money on PILs and waste the time of judicial machinery on this.

I feel the grievance redressal mechanism has adequate agencies (in fact there are more than enough options from branch level to HO level redressal, Internal Ombudsman level, Banking Ombudsman level/ CEPD RO/CO, EFD(RBI)/DoR(RBI), CPGRAMS, Consumer Forum,PIL, Media,etc).It is a well-articulated mechanism at the same time it is least focussed on effective monitoring, functioning.

Fine-tuning the mechanism, cutting the period to decide, stern supervisory action by regulator ensuring the internal redressal mechanism is properly working,the quality of addressing the grievance by internal ombudsman (well created but least functional post in many banks). The regulator should monitor that complainants don't get tossed between different authorities.

For grievances on 'restrictive practices' by certain entities, a gross violation of law of land like CKYC, Not signing the computer-generated paper, Insisting the Re-KYC in the pandemic period contrary to regulatory directions, non-implementation of the internal ombudsman scheme, and such grievances impacting many and need to be addressed without long delays.

There is a need to have an institutional mechanism whereby matters of masses taken up by depositors association, consumers informal forums could be taken up by EFD, DOS(RBI) for further scrutiny and redressal. Otherwise, the grievance redressal mechanisms stated above would only deal with small/standard matters of individual grievances in the area of deficiency in service and large grievances of non-standard nature remain aside.

CPGRAMS (GoI portal) is a faster mechanism than Ombudsman as a normal decision is received within 10 days (actually cms.CEPD (RBI) coordinates the matter) and may continue to be faster in the redressal of individual's grievances even under Integrated Ombudsman regime

I feel unless the grievance redressal personnel/mechanism is authorized to look at grievances wholesomely, without fixed boundaries neither internal ombudsman nor integrated ombudsman would be able to do justice to its role. The mandatory posts created will tend to push case/s using one of the handy and subjective provisions (to dispose ofit) and concerns of the public at large will get mounted, never to get addressed.

Last but not least, overlapping mechanisms need clear functional demarcation, proper bandwidth,set of dedicated and experienced professionals.

Download Now: Reserve Bank - Integrated Ombudsman Scheme, 2021