For the first time, banks have been held accountable for mis-selling third-party products like insurance policies or mutual fund schemes. The Reserve Bank of India said it has widened the scope of its Banking Ombudsman Scheme 2006, to include deficiencies arising out of sale of third-party investment products by lenders. Under the amended scheme, a customer would also be able to lodge a complaint against banks for non-adherence to the RBI instructions with regard to mobile or electronic banking services.
After the amendment, the pecuniary jurisdiction of the ombudsman to pass an award has been doubled from Rs 1000,000 lakh to Rs 2000,000 lakh. The official is empowered to award compensation not exceeding Rs 100,000, for loss of time, expenses incurred, harassment, and mental anguish suffered by the complainant. There is also an option for the customers to go in for appeal in respect of closed complaints which wasn't available earlier. Up until now, if the buyer of an insurance policy or mutual fund was missold, he or she had to seek redressal from the insurance company or the mutual fund.
There are 20 ombudsmen in India, each holding a territorial jurisdiction. Aggrieved customers can lodge their complaints with them either through email or post. However, before filing a complaint, they have to approach the grievance redressal department of the bank and wait 30 days for a response. While no fees are required to be paid to an ombudsman, they have the right to refuse to hear a complaint if it is time-barred or already heard in another court.
The office of banking ombudsman received 103,000 complaints in FY16, of which 95 per cent was dealt with. The largest number of complaints (34 per cent) pertained to failing to meet commitments and non-observance of fair practices code, or banking standards code.
