RBI’s Banking Ombudsman Act 2006 had its second major changes this week. This act has been a game changer in the Banking Industry since its inception. Now as the time changes- technology changes. So new products and miss-selling ways also evolve. This dynamic act got new inclusions to cope up with the modern times. Let’s understand what are the new changes in Banking Ombudsman System of our country.
In today’s scenario if we see the banking’s involvement with our lives – it is getting huge day by day. With the deposits and money management, the banking is instrumental in Loans, Credits Cards and investments in Mutual Funds & Insurance. Now you can even pay utility bills and recharge your phones.
| Do not miss the below video by Comedian Sumit Anand depicting -How Bank RMs Mis-sell to the public. |
The bank is a major service provider and hence a deficiency in service or a dispute is bound to arise between the service provider (bank) and a service user (you).
These grievances can be dealt with banks as all banks are mandated to have grievance and redressal set up. But what if you are still not satisfied with the bank’s mechanism? Here comes the Ombudsman set up by Reserve Bank of India (the regulators of all banks in India).
We have already written in details about Banking Ombudsman. Here is the updated act with all the new additions that are mentioned below.
WealthWisher (TW2) has always kept investors interest above all, as I feel – Country can survive without Mutual Funds or PPF but it cannot survive without Investors. Product-taker rights should be protected first.
In other words: We Hate Mis-selling. Hence we have written a lot on the protection of investor interest and providing them help to resolve disputes:
If you have a grievance you may read/follow these links:
Banks: Link
Real Estate/Property: Link
Income Tax: Link
NBFCs/Fraudulent companies: Link
RBI-Link to Ombudsman: Link
Addresses of RBI Ombudsman: Link
The recent changes in Banking Ombudsman effect 1st July 2017
These changes are done to enhance penalties so that banks take customer satisfaction as a priority. Also, recent changes have included the new products which were not under the base act of 2006. The new changes are:
- Under the amended scheme, a customer would also be able to lodge a complaint against the bank for its non-adherence to RBI instructions with regard to mobile banking/ electronic banking services in India.
- Banking Ombudsman Scheme, 2006, to include, deficiencies arising out of the sale of insurance, mutual fund, and other third-party investment products by banks.
- The pecuniary jurisdiction of the Banking Ombudsman to pass an Award has been increased from existing rupees one million to rupees two million.
- Compensation not exceeding Rs 1 lakh can also be awarded by the Ombudsman to the complainant for loss of time, expenses incurred as also, harassment and mental anguish suffered by the complainant.
- Customers are also allowed to appeal on complaints closed by Ombudsman under Clause 13. This section allows an ombudsman to reject a complaint at any stage if it appears to have been pursued without sufficient cause.
Impact
- Now if the bank has mis-sold you a Mutual Fund or an Insurance Policy you can approach Ombudsman.
- If banks are violating RBI norms on mobile or internet banking you can approach Ombudsman.
- The Ombudsman could penalize by Rs 10 Lakh maximum. Now it can do it till Rs 20 Lakhs.
- It can also award Rs 1 lakh or below to complainant to compensate time, metal pressure & expenses to make the complaints.
- If Ombudsman has closed your complaint you can further appeal.
Mis-selling
Banks have been identified as a major candidate for mis-spelling the financial products like Insurance & Mutual funds. Here is a quick Video by Comedian Sumit Anand on how bank RMs mis-sell.
Regularly media and regulators receive complains that Bank Relationship Managers (RMs) have given a wrong product like a ULIP or a close-ended fund to earn revenues.
They do it to achieve their targets, save their jobs, earn internal contests. They are fearless as they know theirs is a transferable job. So it will hard for an investor to blame. Also, private bank employees change jobs, so they vanish after committing their share of mis-selling.
Until now, if the buyer of an insurance policy or mutual fund was missold s/he had to seek redressal from the insurance company or the mutual fund. This was a departure from global practices. For instance, last year in UK four of the biggest banks, Barclays, HSBC, Lloyds, and RBS, faced large fines for mis-selling payment protection insurance.
Now, after these changes, the penalties have risen and Indian banks can keep a check on employees who are doing mis-selling on regular basis. They can keep a check while recruiting a new employee by confirming if that person has any past complaints related to mis-selling.
Mis-selling is rising too. According to the annual report on the banking ombudsman scheme for 2015-16 (July-June), 15 offices of banking ombudsman received 102,894 cases, a jump of 21% over the 2016-17 fiscal year.
Although it is a “Buyers Beware” market. You and we will make it a “Buyers Aware” market.
