Tasks before RBI consumer cell

While the RBI Ombudsman Scheme has fared well, it needs to adapt to complex products

The Annual Report of the Ombudsman Scheme 202223, released on March 11, 2024, is the first standalone report under the Reserve BankIntegrated Ombudsman Scheme (RBIOS), 2021 depicting the activities of the 22 Offices of the RBI Ombudsman (ORBIOs) during 202223.

The RBIOS came into being in November 2021 through the merger of three earlier ombudsman schemes, namely, Banking Ombudsman Scheme, 2006, Ombudsman Scheme for NonBanking Financial Companies, 2018, and Ombudsman Scheme for Digital Transactions, 2019. From September 1, 2022, RBIOS covered Credit Information Companies (CICs), too.

Since the complaints received at ORBIOs from the banking sector alone constituted the bulk of the total complaints received from the banking and nonbanking sectors, this article focuses on the former sector. As in the Annual Report, the threeyear period — 202021, 202122 and 202223 — is considered for discussion.

Table 1 presents the position for seven bank groups: (a) public sector banks (PSBs), (b) private banks (PvBs), (c) payment banks (PyBs), (d) small finance banks (SFBs), (e) foreign banks (FBs), (f ) regional rural banks (RRBs), and (g) urban cooperative banks (UCBs).

Within the banking sector, PSBs and PvBs constituted 90 per cent of the complaints, serially down from 94 per cent in 202021 and 93 per cent in 202122.

In aggregate, the YoY decline was steeper in 202223 (26.6 per cent) than in 202122 (16.4 per cent). All but FBs, and RRBs and UCBs revealed similar trends.

Table 2 presents categorywise position of complaints. Categorywise, serial numbers 1 to 5 constituted the top complaints accounting for 9395 per cent of the total complaints. Of particular concern were serial numbers 2, 3 and 8 which consistently increased with huge jumps recorded in 202223.

The Annual Report attributed 1, 4 and 5 to: (a) occurrence of fraudulent digital transactions due to absence of strong cybersecurity mechanisms in banks and gullible or financially illiterate customers disclosing confidential information; and (b) inordinate delay in reversal of failed transactions by banks.

Loansrelated complaints were due to: (a) banks’ inability to properly communicate the terms and conditions of loans to borrowers; (b) inordinate delay in updating CICs precipitating in wrong credit report; and (c) banks’ failure to educate their recovery agents on extant recovery guidelines.

Deposit accountsrelated complaints proliferated due to levying charges on nonmaintenance of minimum balance in accounts. The rise in parabanking complaints is largely due to prevalence of largescale misselling in nonbanking products.

The jump in serial number 9 in 202223 could be due to unavailability of smaller denomination notes/coins and/or inability of bank branches to exchange soiled notes.

NOTEWORTHY DEVELOPMENTS

In addition to the above, the following two points are noteworthy:

Over the years, increasing number of complaints were sorted out at banks’ levels, perhaps owing to the Internal Ombudsman Scheme.

Of the total maintainable complaints (i.e., the complaints which are not vague and fall within the functional perimeter of RB–IOS) disposed during 202223, a majority, of 58 per cent, was resolved through conciliation/mediation/issuance of advisories.

RBIOS has evidently performed well over time. However, the job of ORBIOs becomes increasingly critical, as the number of banking players multiply, more innovative and complex products evolve, and last but not least, customers become increasingly knowledgeable and informed. Therefore, the capacity of ORBIOs needs to be continuously augmented.

Moreover, as electronic transactions further widen and deepen, a techenabled, robust dispute resolution mechanism aimed at delivering speedy redressal on ‘least cost’ basis, especially to retail customers, would remain paramount. Increased financial literacy will be supportive.

Finally, RBI may consider bringing out the RBIOS Annual Report/s by December of the ‘reporting year’ instead of March of the next year. Besides, the ‘Complaints per branch’ data presented in Annex 1, if given per ‘complainant’ branch, instead of ‘total’ branch, it would be more meaningful, statistically.