Customer satisfaction is considered of utmost importance in the era of competition. In the present time when there is cut throat competition, small issues such as inefficient redressal of complaints or delay in resolving a matter can cause the customer to get dissatisfied and discontinue the business with the organization. In such case to avoid such dissatisfaction and with the aim to provide customer protection and security banks came up with a complaints resolution mechanism which would provide reliable and efficient solutions for the complaints filed by the customers and resolve the issues in timely manner.

The concept of banking ombudsman is not new to the administration; it finds its roots in Chinese administration and Korean system in different forms. The etymological analysis of ombudsman reveals that it is derived from a term ombud which means proxy attorney. Ombudsman is usually appointed by government or other organisations for acting on their behalf while resolving complaints as it facilitates dispute resolution without going to court. Ombudsman acts as a mediator and enables grievance redressal through settlement or reconciliation.

Indian Banking System owing to many discrepancies in services and piles of complaints registered at Reserve Bank of India, need was felt to overhaul the banking sector by bringing reforms. Various committees and commissions were formed to deliberate an recommend various reforms which are required for the banking sector. Banking Commission headed by Sri R.G. Saraiya[1] followed by Sri RK Talwar[2] gave approximately 172 recommendations for improvement of services. After final submissions made by Narsimhan Committee titled “Banking and Finance Sector Reforms[3]” which critically analyzed the areas of deficiency and emphasized on introduction of Banking Ombudsman Scheme, 1995. RBI brought the scheme of banking ombudsman to provide efficient and prompt services for the customers which would not only serve the purpose of disposing off the complaints but also by protecting the rights of the customers, enable the banks to maintain healthy customer relationship.

The scheme defined ombudsman as an authority vested with powers to resolve the complaints made by customers against banks falling under its jurisdiction. The jurisdiction of the authority was kept wide open with territorial limitations. It covered the banks defined under the interpretation clause, the scope of which was widened again when the scheme was revised in 2006[4] in order to achieve greater goals and meet the requirements of development in economic sector. Jurisdiction clause is stated under clause 7[5] of the scheme which requires the complaints to be filed to the ombudsman whose territorial jurisdiction lies and not the place where the bank against whom such complaint is filed is located. The complaints which are maintainable under the scheme are complaints which are filed on the grounds as stated under clause 8[6] and any complaints which do not fall under the category mentioned in clause 8 are bound to be rejected. Clause 8 is not at all exhaustive and it includes a variety of complaints ranging from deficiency in service relating to opening of deposit account to issues relating to ATMs and credit cards. Studies show that plethora of complaints received by ombudsman scheme relate to ATMs of foreign banks as these facilities are easily available everywhere in present time.

Office of ombudsman is vested with wide powers ranging from power of general superintendence to specific powers of calling of information from the bank against whom such complaint is filed to peruse for disposal of complaint. The ombudsman has been given the power to call for evidence which could be in form of documents or oral statements but when such documentary evidence or oral evidence requires consideration in a manner for which the proceedings of ombudsman are not appropriate then such complaint is bound to be rejected.

The scheme facilitates disposal of disputes by means of settlement and reconciliation without going to the court. The scheme provides for a proper procedure of filing of complaint either in writing or through electronic means and the proceedings of disposal of complaints are also elaborate.

The ombudsman has the power to pass an award whereby he can award compensation to the complainant up to a certain limit and also in addition to actual loss caused to complainant, ombudsman also has the jurisdiction to direct respondent bank to pay extra amount of money in addition to the actual loss caused in order to compensate for mental damage, harassment or expenses incurred by complainant.

The award of ombudsman holds certain authority where the bank is bound to comply with the award and pay compensation to the complainant. The scheme provides an elaborate procedure as to the execution of award. The complainant after getting the award from ombudsman is supposed to furnish a copy of the award of the award to the bank along with a letter of acceptance in full and final form[7] and bank may within 30 days from such acceptance of letter, file an appeal to the appellate authority if there is any objection relating to the award[8].

The scheme has elaborate procedure and provides for a proper remedy for the complainant but the execution of award has been left hanging because if the bank refuses to comply with the award and fails to pay the compensation then the complainant has no remedy under the scheme but to approach civil court and go through all that hassle again. If the scheme does not have proper mechanism for execution for award then having the scheme serves limited purpose because at the end of the day, the wronged has to approach civil court and face the wrath and go through all that lengthy procedure again which he/she wanted to avoid at the first instance.

As there has been a steady rise in complaints filed in the office of ombudsman, there has been rise in the speed of disposal of such complaints. The trend shows that these complaints mostly relate to non -adherence to fair practices code as directed and instructed by Reserve Bank of India and also for non- adherence to the directions and instructions given by RBI from time to time.

It can also be pointed to out that the scheme provides for a provision where the banks are under obligation to promote and advertise the scheme of ombudsman but there is lack of awareness among people regarding such scheme or mechanism in place and there is requirement of proper awareness drive by banks to make people known with such mechanism and its advantages.