Empowering The Neutral Umpires

Indian banks can rarely be commended for their standards of service and efficiency. Given that, the Banking Ombudsman Scheme, which the Reserve Bank of India (RBI) launched in June 1995 to address the issue of customer grievance redressal, should have been wildly popular. Two years after the launch, however, statistics show that the scheme has not lived up to expectations in terms of redressal figures and sheer geographical spread (see box: Promise and performance).

In an industry with 99 banks, 60,000 branches, lakhs of employees and millions of customers, it is obvious that the number of complaints received by ombudsmen hardly reflects the full dimensions of dissatisfaction with the quality of banking services.

 

The ombudsman concept is still new to India, though it has been functioning for many years in the UK, New Zealand and Australia. An ombudsman is an independent arbiter dealing with customers complaints against an establishment. A close analogy is the concept of neutral umpires in cricket matches.

Chief among the host of reasons for the slow start to Indias bank ombudsman scheme are its form and the lack of publicity. The scheme now covers all scheduled commercial banks and may eventually cover the regional rural banks and co-operative banks, too. RBI eventually plans to appoint enough ombudsmen for different states to span the entire country. They are expected to be either bankers or judges.

Ombudsmen have been empowered to deal with customer complaints covering banking services and loans and advances in the context of violation of RBI norms. The areas that have been kept out of the purview of the scheme concern loan sanctions that require commercial judgement of bankers (known as maintenable loans) and areas that require legal intervention.

This kind of differentiation often leads to strange results. For example, a decision by a bank not to grant a loan to an applicant is not a maintenable complaint, but a delay in a decision on this account certainly is. That is because the RBI has specified the time that a bank could take in decision-making. Delay here would mean inadequate service to the customer, who then can legitimately complain to the ombudsman, explains B N Shetye, banking ombudsman for Maharashtra and Goa.

Another inhibitor has been that customers prefer to go to the ombudsman only as a last resort. The mechanism provides that a customer should first approach the bank with his complaint and give it two months to redress the grievance before approaching the ombudsman. Few businessmen opt for this last resort because they know that they will be at the mercy of the bank manager in the future.

It is also true, however, that the efficacy of the ombudsman scheme has been limited by a lack of awareness about them. R V Gupta, RBI deputy governor, admits that the scheme could do with some publicity. Banking ombudsmen have been authorised to incur expenditure towards publicity. The Indian Banks Association has published a booklet outlining the scheme, Gupta adds.

Gupta argues that the scheme, which is an additional forum, does not replace the existing machinery for redressal of customer complaints. This logic does not hold because the need for ombudsmen arose out of the inefficiencies of the existing establishment.

In fact, the appointment of ombudsman has gone some way towards redressing that. Shetye points out that banks grievance cells have become more active than before since the ombudsmen came into the picture, says Shetye.

With ombudsmen being given the power to award compensation upto a limit of Rs 10 lakh, bank managements are worried about financial awards going against them, he reasons.

Two years is sufficient time to derive appropriate lessons from the experiment and suitably modify the scheme to make it more effective. Says Gupta: We must recognise that banking is a service

industry and even if technology takes care of most of the routine functions, human intervention can not becompletely wished away. HRD needs to improve.

As a non-judicial body, the ombudsmans office has no powers to either issue warrants or order the arrest of a violator. It is through gentle pressure and a conciliatory approach that banking ombudsmen have been working. And in the complex banking industry in India, this constraint could only result in a mixed bag of successes and failures.As it has.

Abhijit Doshi