‘ONE NATION- ONE OMBUDSMAN’ FOR BANKS COMES INTO FORCE DESPITE REFINEMENTS, ODDS CONTINUE TO BE AGAINST CUSTOMER

Fancying on Prime Minister Modi’s ‘One nation-One poll’ idea, the Reserve Bank of India has launched
the ‘One nation-One ombudsman’ programme. But unlike Modi’s poll plan, which could change the
very nature and structure of democracy and governance in India, the reason for which it is vehemently
opposed by opposition parties, RBI’s ombudsman might hardly make a difference to the remediation of
complaints against banks and financial institutions. By all available indications, the one nation
ombudsman will be as toothless as the paper tiger that its previous incarnation was.
In the wake of the pandemic and the increased use of online transactions, financial transactions through
the digital mode have grown manifold. Concomitantly, complaints related to electronic and digital
banking transactions viz., ATM/debit cards, credit cards and mobile/electronic banking collectively have
witnessed a spurt, constituting more than 40 per cent of the total complaints received in Ombudsman
offices.

The RBI’s Integrated Ombudsman Scheme (RBI-OS) for providing cost free redress of customer
complaints involving deficiency in services rendered by entities regulated by the Reserve Bank was
launched in November 2021. The new scheme integrates the three existing ombudsman schemes
pertaining to banking (launched in 2006), non-banking financial companies (introduced in 2018) and
system participants14 (notified in 2019). The Scheme, which has also been extended to cover non-

scheduled primary urban co-operative banks with a deposit size of Rs 50 crore and above and adopts a
‘One Nation One Ombudsman’ approach by making the redressal mechanism jurisdiction neutral.
The new move stems from the realisation that as more users go digital, they will expect a higher quality
of service from digital payments and also expect better protection from fraud and risk. The RBI’s high
level committee on deepening of digital payments had recommended that payment systems use machine
driven, online dispute resolution systems to handle complaints. To manage fraud, the committee
recommended the creation of shared fraud registries that must be created and used to grade each
payment transaction for risk. This transition to a digital economy will require all payments acceptance
systems to move to digital as the default option. Similarly, on the bank side, digital transactions must be
a part of serving the customer. No additional charges to be levied on the consumer for such transactions,
the panel recommended.
All noble thoughts. But on the ground, the situation is quite different. Recently, a Bengaluru techie was
shocked to hear from a member of his bank’s fraud detection team that the complaint to the ombudsman
‘would anyway come’ to them and that he need not expect anything to come out of it.In fact, this is the
crux of the problem. The ombudsman merely refers the case back to the bank for its comments and in
most cases the bank manages to pass the buck to somebody other than itself.
Under the prevailing RBI rules, the liability of the customers to card fraud is limited, with the burden
shared by both, but the banks are to be held responsible if the fraud occurred due to negligence on its
part or a third party. As per the recommendations of the committee, RBI has decided to establish the
Centralised Receipt and Processing Centre to receive the complaints filed under the scheme and process
them.
A couple of years ago, the Kerala High Court ruled that banks cannot be absolved of liability for
unauthorised withdrawals from their customers’ accounts and that SMS alerts cannot be the basis to
determine the liability of a customer, for there would be account holders who may not be in the habit of
checking SMS alerts regularly. Despite these strict guidelines, banks manage to get away by laying the blame on the customers. When it
is an issue between the individual customer and the bank, the dice invariably falls in favour of the latter
as it is an unequal fight between an individual and the clout of an institution. The ombudsman ends up
being a mute spectator. The sad fact is that the ombudsman is not in a position to influence the outcome
in any manner.