Monday, September 9, 2013

A Comprehensive Guide to approaching Banking Ombudsman in India

Considering approaching the Banking Ombudsman? 

Here is a comprehensive guide. 


If you have a complaint against a bank in India, brace up. It is likely to take some time to resolve. Prepare for a consistent and persistent effort in getting your due.

Your options are:

  1. Reason with the bank (escalate as much as possible – here are 4 tips on dealing with the customer care – most important, escalate, escalate, escalate to the higher executives.)
  2. Approach the Banking Ombudsman (this guide with explain everything you need to know about the Banking Ombudsman Scheme)
  3. File a consumer complaint with your district consumer forum (here's your quick and easy to read guide on filing a consumer complaint).
  4. Give up – just kidding, sometimes it might look like too much hassle to do all this yourself (and here comes a plug for Akosha services – we can help you with your complaint. Call our helpline 011 6464 3453 to find out more.)

Now, let's get into the meat of this guide.


Banking Ombudsman is a person appointed by the Reserve Bank of India (RBI) to look into the problems faced by the customers against the deficiency in the services provided by banks. The process before the Ombudsman includes an attempt of mediation, conciliation and settlement of consumer disputes. As on date, fifteen Banking Ombudsmen have been appointed in India with their offices located mostly in state capitals.

How to file the case with the Banking Ombudsman

Firstly, you are required to bring up the matter with your bank. You should do this by addressing a complaint in writing to the higher management of the bank.

If you don't get a reply within one month of filing the complaint with the bank, then you can approach the Banking Ombudsman and file a complaint. You can go online and you can also send an email to the banking ombudsman (for addresses, and email ids of the Banking Ombudsman in your state, please refer to ( Even though, you really don't need to use a particular format, here is an example (

This step of approaching the Banking Ombudsman should be done within the expiry of one year of the date on which the problem arises (the legal jargon is "within a year of when the cause of action arose" – and to understand what that means, read Cause of Action: Where can I file my complaint? – though the context is a bit different, the concept is explained there).

The complaint should have all the necessary details like the name and the address of the consumer and of the bank against whom the complaint is to be made. And the most important thing is to mention what the complaint is all about. You should attach all the necessary evidentiary material against the bank.

Binding Nature

The order passed by the Banking Ombudsman will be binding in nature on the bank but not on the consumer. If the consumer feels that the decision was not appropriate according to him, then he can go for appeal. If he wants to accept the settlement, then he can send the acceptance letter within 15 days of the settlement.

In case you decide to appeal, the appeal is needed to be made before the Deputy Governor of Reserve Bank of India. If he is satisfied that there is sufficient cause for making an appeal, he is required to allow the appeal and give the award within 30 days of making the appeal. He may dismiss the appeal if proper documentary evidence is not provided by the consumer. He may also send back the matter to the Banking Ombudsman for fresh disposal along with the specific directions. He also have the power to modify the award according to the appeal made by the consumer.


The Banking Ombudsman can pass an verdict awarding compensation for loss directly arising out of the bank's action or inaction. Any compensation awarded by the Banking Ombudsman is limited to the actual loss suffered by the complaint or Rs.10 lakhs (whichever is lower). In other words, you cannot get a compensation of more than Rs.10 lakhs in a Banking Ombudsman verdict. In fact, your complaint might be rejected if you are looking for compensation higher than Rs.10 lakhs. In the case of complaints relating to credit cards, the Banking Ombudsman can also award up to Rs.1 lakh as compensation for mental agony and harassment to the consumer.

Those were the basics. We decided to go further and pull out some cases on how actual cases are being decided by the Banking Ombudsman. We have drawn some general principles for you from each of these cases.

Examples where Banking Ombudsman held in favour of the consumer

Principle: Banks cannot hold the customers responsible if banks themselves don't have sufficient documents to prove that it was the customer's fault.

Example: The consumer had a savings account with the bank and he was abroad from 2nd February to 16th February 2003. He used the Proton Card for shopping but the card was rejected by the machine as the amount was exceeding 15000. Then in May, 2003 and July, 2003 the card was allegedly used and the accounts were debited. He was surprised to see 15 international debits on his account. He filed a complaint and submitted the proof that he was not aboard during that particular time period. It was held by the Banking Ombudsman that the bank could have got the protection only if they could prove it beyond the doubt that the consumer was negligent. Unfortunately, the bank could not produce any evidence to prove that the consumer was negligent. Therefore, bank was directed to reimburse the consumer with the 15 disputed international debits in the account due to use of Proton Card which was issued to him by the bank.

Principle: Banks are required to honour the commitment made by them regarding a fixed deposit.

Example: The mother of the consumer had a deposit with the bank and she also had a loan with the same bank. On her death a particular balance was deposited for 48 months and the deposit receipt was issued with the maturity date and the maturity value. When the legal heirs, approached for the payment, they received the fewer amounts and not the proper maturity value as was promised by the bank. The bank also did not pay the interest amount. It was held by the Banking Ombudsman that the bank is required to honour the commitment made by them to their customers. Therefore bank is ordered to pay the maturity value along with the deposit as appearing on the deposit receipt. In addition to this, they also had to pay the interest from the date of default.

Principle: Consumers cannot be held liable for the mistakes done by the banks.

Example: The consumers had an arrangement with the bank for immediate credit of cheques into the account with a proviso that if there is a case of dishonor of the cheques by the drawee then the cheques are to be delivered back. Bank credited the consumers account in the years 1989, 1991 and 1992 and then they were debited by the bank after several years. The consumer filed the complaint for re-crediting the amounts of the cheques. It was held by the Banking Ombudsman that according to the arrangements between the consumer and the bank it was said that in case of return of the cheques the amount is to be debited to the consumers' account and the dishonored cheques are to be delivered back to the consumers. It was then found that due to the negligent work done by the bank, they debited the amount of the 3 cheques.

Principle: If customer takes care of the necessary details, banks will not be able to hold the customer liable for their negligent work.

Example: The consumer's representative gave a cheque for credit into her PPF account. While lodging the cheque it was not checked that the wrong date was written on the cheque. The date was changed immediately with the confirmatory letter to the bank. But the bank failed to honour the cheque. Due to this failure the consumer was deprived of the tax benefit that was to be made on the PPF account. It was held by the Banking Ombudsman that the bank admitted its negligence and the matter was settled in the favour of the consumer.

Principle: Banks should restore the particular amount in the account of the customer if the bank did not follow principles of law.

Example: The consumer wanted to claim for the restoration of the amount of Rs. 13,500 that was debited from his account. The consumer alleged that a cheque drawn on his account was debited for Rs 15,000 whereas the amount paid out was Rs.1500 only. It was held by the Banking Ombudsman that the cheque bore the amount of Rs.15000 and in words it was written one thousand and five hundred. It was held by the Banking Ombudsman that the bank should not have acted according to the provisions of the Negotiable Instruments Act, 1881. The act states that when the amount in figure and in words differs, then the amount in words should be considered. Therefore the bank is liable to restore the amount of Rs. 13500.

Examples where Banking Ombudsman held against the consumer

Principle: Consumer must have proper evidentiary material to file a case.

Example: The consumer had a special term deposit in name of her minor daughter. At the time of maturity, the bank wanted to make a renewal but due to the inability of the credit in the account it couldn't do so. The consumer stated that the deposit amount was paid in cash, which the respondent bank denied having received. It was held by the Banking Ombudsman that due to the enthusiasm of the consumer after hearing the new scheme, she wanted to transfer the money from savings account to the fixed deposit account but she didn't had the receipt as in the evidence which will prove that she bought the money in cash to deposit, the same for the FD. Therefore the complaint was rejected.

Principle: Customers must keep a record of how much money they withdrawn from the bank and at what instances.

Example: The consumer was having savings account with the bank. He found that unauthorized debit of Rs 15,000 was made. After an enquiry, bank informed that this transaction was made from the ATM card. The consumer claimed that he had not withdrawn any amount on that particular day. The debits were made by the bank after six months without intimation to the complaint. It was held by the Banking Ombudsman that the document evidence for the ATM transactions produced by the bank, which contained everything like ATM card number and even his account number, clearly shows that nobody can other than the card holder can operate the ATM card. Therefore his argument that he was not aware of the ATM transactions made by him was not accepted. In the end it was said that on the basis of the documents submitted by the bank, the card holder has undoubtedly made the three ATM transactions of Rs. 5,000 each.

Principle: Consumer must look at his economic capacity before applying for a loan.

Example: The consumer filed a complaint that the bank was not considering the educational loan application for his daughter. The consumer's son already had an educational loan. It was held by the Banking Ombudsman that the Educational Loan is generally allowed to the student jointly with the father/guardian keeping in view the repaying capacity of the father/ guardian, so that the loan may be recovered from the father/guardian, if the student does not find employment. The consumer's pension would not be adequate and he already stands as co-borrower in Educational Loan of his son. Therefore, the application for the Educational Loan was not found to be valid as economically is was not considered to be good for the consumer. In other words, the bank is not obliged to provide an Education Loan.

Principle: Banks always work under their legal capacity – and can enforce their indemnity in case there was no deficiency in their service.

Example: The consumer took educational loan from the bank and was required to pay GBP 3950 for her admission in the institute in which she was about to take admission. She purchased a foreign currency draft to be payable at London branch of the same bank. Then she approached the draft-issuing branch and reported the loss of the draft and requested them to issue a duplicate draft in lieu of the original draft. Then, thereafter the bank, issued a duplicate draft.

Subsequently, she again approached the bank with a request to cancel the duplicate draft and to refund the amount of the draft as she decided to postpone her studies in that institute. Bank then cancelled the duplicate draft and refunded the money. The bank against whom the complaint was filed came to know that the original draft was paid to the payee by the branch in U.K.  Then, accordingly, the bank took steps to enforce its right under the indemnity bond. The consumer filed the complaint that the paying branch of the bank had wrongly paid the draft, subsequent to the order to stop the payment. Consumer wanted bank to stop enforcing the right of indemnity bond executed by her. It was held by the Banking Ombudsman that the bank has every right to enforce the indemnity given to it. Banking Ombudsman cannot stop the bank from enforcing the indemnity and he did not find any deficiency in services on the part of the bank and it was stated that the bank acted within its legal capacity.

Read the ATM Cash Withdrawal issues article too.

This guide was written by the Akosha Team with the help of Jasmine Kaur, a law student from National Law University, Orissa.