The Annual Report of the Ombudsman Scheme 2022-23, released on March 11, 2024, is the first standalone report under the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS), 2021 depicting the activities of the 22 Offices of the RBI Ombudsman (ORBIOs) during 2022-23.

The RB-IOS came into being in November 2021 through the merger of three earlier ombudsman schemes, namely, Banking Ombudsman Scheme, 2006, Ombudsman Scheme for Non-Banking Financial Companies, 2018, and Ombudsman Scheme for Digital Transactions, 2019. From September 1, 2022, RB-IOS 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 non-banking sectors, this article focuses on the former sector. As in the Annual Report, the three-year period — 2020-21, 2021-22 and 2022-23 — 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 co-operative banks (UCBs).

Within the banking sector, PSBs and PvBs constituted 90 per cent of the complaints, serially down from 94 per cent in 2020-21 and 93 per cent in 2021-22.

In aggregate, the YoY decline was steeper in 2022-23 (26.6 per cent) than in 2021-22 (16.4 per cent). All but FBs, and RRBs and UCBs revealed similar trends.

Table 2 presents category-wise position of complaints. Category-wise, serial numbers 1 to 5 constituted the top complaints accounting for 93-95 per cent of the total complaints. Of particular concern were serial numbers 2, 3 and 8 which consistently increased with huge jumps recorded in 2022-23.

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.

Loans-related 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 accounts-related complaints proliferated due to levying charges on non-maintenance of minimum balance in accounts. The rise in para-banking complaints is largely due to prevalence of large-scale mis-selling in non-banking products.

The jump in serial number 9 in 2022-23 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 2022-23, a majority, of 58 per cent, was resolved through conciliation/mediation/issuance of advisories.

RB-IOS 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 tech-enabled, 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 RB-IOS 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.

Das is a former senior economist, SBI. Views are personal.

As electronic transactions further widen and deepen, a tech-enabled, robust dispute resolution mechanism aimed at delivering speedy redressal on ‘least cost’ basis would remain paramount.