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“Law Master’s”
Grievance Redressal and Debt Recovery Prof. Santosh D. Bhosale
(..4..)
Grievance Redressal and Debt Recovery
QUESTION BANK
1. Banking ombudsman plays vital role in settlement of the disputes between banker and
customer. What are the powers and functions of Banking ombudsman?
2. Banking Ombudsman is an alternative mechanism to resove the disputes speedily.
Explain in detail the powers and functions and function of Banking Ombudsman.
3. What is the role of RBI in grievance redressal mechanism?
4. Discuss the rational behind appointing Banking Ombudsman and explain jurisdiction,
porceduer of filing complaint and award assed by Banking Ombudsman.
5. Write a detailed note on salient features of Recovery of debts due to banks & financial
institutions Act 1993.
Table of Contents
I. Introduction:-
Banks play a crucial role in the financial system, providing essential services such
as loans, deposits, and payments. However, as with large organisations, customers may
have complaints or disputes with their banks. In such cases, a robust grievance redressal
mechanism is essential to address customer concerns promptly and fairly. Additionally,
banks must adhere to strict guidelines for debt recovery practices to protect the rights of
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Grievance Redressal and Debt Recovery Prof. Santosh D. Bhosale
“Law Master’s”
borrowers.
II. Grievance Redressal Mechanism:-
Protecting customers' rights is an important task. A grievance redressal mechanism
is a formal process for handling customer complaints. It should be easily accessible,
transparent, and efficient. Customers should have multiple channels to raise their
grievances, such as email, phone, or in person. Banks should also have a dedicated
grievance redressal officer to handle complaints promptly and impartially.
To enable the customers to voice their grievances or offer suggestions for
improvement in customer service, “Customer Day” is observed at all the offices of the
Bank, covering branches, Zonal offices, and the Head Office, on the 15th of every month
(If 15th is a Holiday, then on preceding working day).
a. In case of any complaint, the matter may first be brought to the notice of the concerned
Branch Manager for immediate redressal.
b. If the complaint is not redressed to the customer's satisfaction, the matter may be taken
up with the Zonal heads concerned.
c. If the complainant still feels unsatisfied with the responses received, he/she can address
the complaint to the Bank’s Principal Nodal Officer at Head Office designated to deal with
customers’ complaints/grievances giving full details of the case.
After exhausting all the above machinery/channels, if the customer is still not
satisfied, he/she may write to the Chairman and Managing Director of the Bank. In any
case, if the complaint remains unresolved for more than a month or if he/she is not satisfied
with the reply given by the Bank, the Complainant is free to take recourse to the following:-
a. The Banking Ombudsman located in State Capitals under RBI Ombudsman
Scheme, 2006 (read detailed note at the bottom)
b. Directorate of Public Grievances, Government of India, Cabinet Secretariat,
Sansad Marg, New Delhi.
Consumer forums play a crucial role in resolving disputes between bank customers
and banks by providing a fair and impartial platform for adjudication. They are independent
quasi-judicial bodies established under the Consumer Protection Act of 1986, with the
primary objective of protecting consumers' interests.
Benefits of Consumer Forums for Bank Customers:
Bank customers benefit from filing complaints to the Consumer forum.-
1. Accessibility and Affordability:-
1 https://bankofmaharashtra.in/complaints-grievances
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Grievance Redressal and Debt Recovery Prof. Santosh D. Bhosale
“Law Master’s”
Consumer forums are easily accessible to customers across the country. The filing
fees are minimal, making it an affordable option for seeking redressal.
2. Expeditious Resolution:
Consumer forums strive to resolve disputes promptly, aiming for a speedy and
effective outcome.
3. Fair and Impartial Adjudication:
Consumer forums are independent bodies ensuring fair and impartial adjudication
of disputes.
4. Effective Enforcement of Orders:
Consumer forums can enforce their orders, giving customers strong backing to their
claims.
5. Protection of Consumer Rights:
Consumer forums play a crucial role in safeguarding consumer rights and ensuring
banks adhere to fair practices.
III. Debt Recovery:-
Debt recovery is the process of collecting outstanding loans from borrowers. Banks
must follow fair and ethical practices when recovering debts. These practices include:
a. Prior notice: Banks must provide borrowers with prior notice of any debt recovery
action.
b. Avoidance of harassment: Banks must not harass or intimidate borrowers.
c. Respect for privacy: Banks must respect the privacy of borrowers.
d. Compliance with legal requirements: Banks must comply with all applicable laws and
regulations.
e. Regulatory Framework:
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Grievance Redressal and Debt Recovery Prof. Santosh D. Bhosale
“Law Master’s”
In many countries, regulatory frameworks oversee bank grievance redressal and
debt recovery practices. These frameworks typically involve setting guidelines, conducting
audits, and imposing penalties for non-compliance.
f. Debt Recovery Tribunals (DRTs) Discussed at the end in note 2.
***
Note on:- 1. The Banking Ombudsman:-
I. Banking Ombudsman:-
The Banking Ombudsman is a quasi-judicial body set up by the Reserve Bank of
India (RBI) to provide a quick and inexpensive way for customers to resolve their
complaints against banks. The Banking Ombudsman scheme covers all banks operating in
India, including public sector, private sector, foreign, and cooperative banks.
Banking ombudsman is a term that refers to an independent and impartial authority
that handles complaints and disputes between customers and banks. The Reserve Bank of
India (RBI) introduced the concept of a banking ombudsman in 1995 under the Banking
Ombudsman Scheme. The scheme aims to provide a quick and cost-effective resolution of
grievances related to banking services, such as deposit accounts, loans, credit cards, digital
transactions, etc. The scheme covers all scheduled commercial banks, regional rural banks,
and cooperative banks in India.
The Integrated Ombudsman Scheme, 2021 (IOS) is the most recent banking
ombudsman scheme in operation in India. It was launched on 12 November 2021 by the
Reserve Bank of India (RBI) to streamline the grievance redressal process for customers
of banks, Non-Banking Financial Companies (NBFCs), and Digital Payment Service
Providers (DPSPs). The IOS replaces the three previous ombudsman schemes that were in
operation, namely: (i) The Banking Ombudsman Scheme, 2006; (ii) The Ombudsman
Scheme for Non-Banking Financial Companies, 2018; (iii) The5 Ombudsman Scheme for
Digital Transactions, 2019.
Customers can lodge various complaints with the Banking Ombudsman, which
generally pertain to deficiencies in banking services. The Reserve Bank of India (RBI) has
outlined the grounds on which complaints can be lodged. the common grounds for filing
complaints include:
1. Non-payment or inordinate delay in the payment or collection of cheques, drafts,
bills, etc.
2. Non-acceptance, without sufficient cause, of small denomination notes tendered
2 As per 2006 Scheme
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Grievance Redressal and Debt Recovery Prof. Santosh D. Bhosale
“Law Master’s”
for any purpose and for charging of commission in respect thereof.
3. Delays, non-crediting of proceeds to parties' accounts, non-payment of deposit,
or non-observance of the Reserve Bank of India directives, if any, applicable to the rate of
interest on deposits in any savings, current, or other account maintained with a bank.
4. Complaints from Non-Resident Indians (NRIs) having accounts in India
regarding their remittances from abroad, deposits, and other bank-related matters.
5. Refusal to open deposit accounts without any valid reason for refusal.
6. Levying of charges without adequate prior notice to the customer.
7. Non-adherence to the fair practices code as adopted by the bank or non-adherence
to the provisions of the Code of Bank's Commitments to Customers issued by the Banking
Codes and Standards Board of India (BCSBI) and as adopted by the bank.
8. Banks do not observe the Reserve Bank of India guidelines on engaging recovery
agents and adopt restrictive practices affecting the rights of borrowers.
9. Non-disbursement or delay in disbursement of pension to the extent the grievance
can be attributed to the action on the part of the bank concerned.
10. Refusal to accept or delay in accepting payment towards taxes, as required by
Reserve Bank of India/Government.
It's important to note that the above list is not exhaustive, and the specific grounds
for complaints may evolve over time.
Filing a complaint with the Banking Ombudsman involves a straightforward
procedure as follows:-
1. Attempt to Resolve the Issue with the Bank:
Before approaching the banking ombudsman, it is advisable to try to resolve the
issue with the concerned bank. If the bank rejects the complaint or the complainant does
not receive a reply within one month after the bank receives the complaint, the complainant
can approach the Banking Ombudsman. Many complaints can be resolved directly with the
bank's customer service.
2. Be prepared with Necessary Information:
The Complainant should gather all relevant details related to his complaint, such
as account details, transaction references, and a clear description of the problem.
3. Contacting the Banking Ombudsman:
It is necessary to determine the jurisdiction of the Banking Ombudsman under
whose purview the bank falls. The complainant can find this information on the RBI
3 As per 2006 Scheme
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Grievance Redressal and Debt Recovery Prof. Santosh D. Bhosale
“Law Master’s”
website or by contacting the RBI's regional offices.
4. Submit a Written Complaint:
The complainant should prepare a written complaint providing a detailed account
of the issue and supporting documents. He may file a written complaint himself or through
an authorised agent. He should clearly state the relief sought. Online complaints to the
Banking ombudsman can be filed.
Filing a complaint with the Banking Ombudsman is free of charge. Complaints to
the Banking Ombudsman must be made within one year of the date of the cause of action.
5. Ombudsman's Decision:
After receiving the complaint, the Banking Ombudsman will investigate and
reach a decision.
The Banking Ombudsman is a quasi-judicial authority that has been established in
India to resolve disputes between bank customers and banks. It was established in 1995
and is part of the Reserve Bank of India (RBI). The Banking Ombudsman has offices in all
major cities in India.
The Banking Ombudsman has a wide range of powers to satisfy complaints,
including the power to:
a. Summon witnesses: The Banking Ombudsman can summon witnesses to give evidence
before him or her.
b. Call for documents: The Banking Ombudsman can request documents from the bank
or customer to investigate a complaint.
c. Pass an award: The Banking Ombudsman can pass an award in favour of the customer
if he or she finds that the bank has been at fault. The award can be for compensation,
interest, or other relief.
Facts:- The Bank failed to issue a bank guarantee despite sufficient security, so the
complainant suffered a loss.
Held:- that the non-issuance of bank guarantees despite a security deposit with the bank
amounts to a deficiency in service, and the complainant was held entitled to interest on the
security amount.
Facts: The son of the complainant remitted some amount from abroad to be credited to his
NRI account with the Bank. The remittance was not confirmed by the Bank until long ago.
The Bank cited the failure of the computer system as the reason.
4 2003 (2) CPR 53
5 2000 (3) CPR 423
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Grievance Redressal and Debt Recovery Prof. Santosh D. Bhosale
“Law Master’s”
It was observed that it amounts to a deficiency in services. It was further observed that the
bank officials could have verified vouchers and cheques received by post.
d. Recommend disciplinary action: The Banking Ombudsman can recommend
disciplinary action against bank employees who have been found to be negligent or
misbehaving.
The Banking Ombudsman's decisions are binding on the bank, and the bank is
obliged to comply with any award that is made.
***
2. Debt Recovery Tribunals (DRTs)
Debt Recovery Tribunals (DRTs) are quasi-judicial bodies that deal with the
recovery of debts owed to banks and financial institutions. The Tribunal is established
under the Recovery of Debts due to the Banks and Financial Institutions Act of 1993 to
provide a speedy and effective mechanism for debt recovery. The Act bars all other Courts
from the adjudication of matters relating to debt recovery. The Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act,
2002, also provides access to DRTs. DRTs consist of one person referred to as the Presiding
officer.
Jurisdiction of DRTs:-
DRTs have jurisdiction over all civil suits and proceedings relating to the recovery
of debts due to banks and financial institutions, including:
(i) Loans
(ii) Advances
(iii) Bills of exchange
(iv) Promissory notes
(v) Cheques
Procedure for filing a case before DRT:-
To file a case before a DRT, the creditor (bank or financial institution) must file an
Original Application (OA) along with the necessary documents. The OA must contain the
following details:
(i) The name and address of the creditor and the debtor
(ii) The amount of the debt
(iii) The particulars of the debt
(iv) The grounds on which the debt is claimed
6 Limit was raised in 2018.
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Grievance Redressal and Debt Recovery Prof. Santosh D. Bhosale
“Law Master’s”
Powers of DRTs
DRTs have a wide range of powers that are available to the District Court, including:
(i) The power to summon and examine witnesses
(ii) The power to order the production of documents
(iii) The power to attach and sell the property of the debtor
(iv) The power to appoint a receiver to take possession of the property of the debtor
(v) The power to pass a decree for the recovery of the debt. After adjudication, the
DRT issues an order and a REvocery Certificate, certifying the amount payable by the
borrower. The amount is then recovered by the Recovery Officers. Presently, there are 39
Appeals from DRTs-
Appeals from DRTs lie to the Debts Recovery Appellate Tribunals (DRATs).
DRATs are specialised courts that deal with appeals from DRTs.
Benefits of DRTs
DRTs have several advantages over traditional courts, including:
(i) Speed: DRTs are designed to provide a speedy disposal of debt recovery cases.
(ii) Efficiency: DRTs are more efficient than traditional courts, as they are not
subject to the same procedural formalities.
(iii) Expertise: DRTs are staffed by judges who have expertise in debt recovery
matters.
Overall, DRTs play an important role in the Indian financial system by providing a
speedy and effective mechanism for debt recovery. This helps to protect the interests of
banks and financial institutions and to promote financial stability.
*****
References:-
7 https://www.clearias.com/debt-recovery-tribunals/