The Banking Ombudsman might be spending more time in rejecting rather than looking into complaints – it rejected 71% of complaints last year We need a proactive Banking Ombudsman
Four years ago, when the excesses of the financial sector led to a global financial crisis, India had its own, albeit smaller, share of reckless sub-prime lending—hard-sell of credit cards and personal loans and the ruthless persecution of delinquent borrowers through recovery agents. YV Reddy, the then RBI governor, ordered a clean-up, empowered the Banking Ombudsman (BO) and prescribed stricter rules for credit cards and personal loans. A multi-tiered grievance redress process was also initiated. But the 2010-11 report of the BO scheme suggests that things are slipping badly. A 71% rejection rate for complaints suggests an unsympathetic system and poor awareness among customers. A majority of complaints are rejected for reasons such as savers having approached BO without seeking redress at the bank level or because there is insufficient cause or, worse, because the cases are too complicated. That leaves very little for the BO to do and it is no wonder that fewer people are approaching the BO. The “worst sin”, says an activist consumer “is that the BO has been empowered to play God and to decide whether or not a customer can appeal its order.” This is simply unacceptable. On one hand, RBI has deregulated rates and charges and does nothing about the rampant mis-selling of insurance and other products by banks. On the other, stricter account-opening and KYC rules as well as linkages, electronic payments of bills or auto debit on loans and mortgages, make it difficult for customers to switch banks. We need proactive BO to hear customer issues, dispense justice and also provide feedback to RBI to frame better regulation. Is RBI listening?