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American Journal of Business, Economics and Management

2015; 3(6): 324-329


Published online October 22, 2015 (http://www.openscienceonline.com/journal/ajbem)

A Study on the Impact of Banking Ombudsman


Scheme on Service Quality Provided by Banks
P. Malyadri1, S. Sirisha2
1
Government Degree College, Rayalaseema University, Kurnool, A. P. India
2
Institute for Technology and Management - Business School, Warangal, India

Email address
drpm16@gmail.com (P. Malyadri), sirisha@itm.edu (S. Sirisha)

To cite this article


P. Malyadri, S. Sirisha. A Study on the Impact of Banking Ombudsman Scheme on Service Quality Provided by Banks. American Journal of
Business, Economics and Management. Vol. 3, No. 6, 2015, pp. 324-329.

Abstract
The banking system in India today has perhaps the largest outreach for delivery of financial services and is also serving as an
important conduit for delivery of financial services. The Reserve Bank of India set up the Bank Ombudsman in year 1995 to
provide an expeditious and inexpensive forum to bank customers for resolution of their complaints relating to deficiency in
banking services. The Ombudsman Scheme is a system of expeditious and inexpensive resolution to customer complaints. The
customers who are unhappy with the services rendered by a bank or face problems while dealing with one can apply to the
banking ombudsman for redressal under the RBIs Banking Ombudsman Scheme. Banking ombudsman exploits the Redressal
policy to reach out to the large number of customers which are beyond the reach of traditional Redressal systems. In this regard
the paper evaluates the performance of Banking Ombudsman Scheme 2006 in terms of complaints received on Deposits, Loans,
ATM Debit cards and credit cards, pension, Non observance of fair practices, total complaints and region wise complaints and
in this paper we have analyzed the impact of Banking Ombudsman Scheme on service quality provided by banking institutions.
For this purpose Trend analysis technique have been employed. The study indicates that the number of complaints against
banking institutions has been continuously increasing under the Banking Ombudsman Scheme in regions like Patna, Kanpur
Bhubaneshwar, Guwahati, Mumbai and continuously decreasing in regions like Ahmedabad Chandigarh, Chennai, Jaipur,
Kolkata and New Delh. The total complaints against foreign banks have been decreasing while the total complaints against
private sector banks have been increasing. No doubt, the scheme will gain more popularity in future and its impacts on service
quality by banks will be positive.

Keywords
Banking Performance, Banking Ombudsman, Customer Complaints, Grievances

Gross Settlement) and NEFT (National Electronic Fund


1. Introduction Transfer), adoption of Fair Practices Code (Lenders liability),
issuance of guidelines for handling of card products,
In the present scenario of competitive banking, excellence implementation of code of conduct for Direct Selling Agents
in customer service is the most important tool for sustained (DSA) and Direct Recovery Agents (DRA), setting up of a
business growth. Customer service has been the challenging mechanism to handle the customer complaints, etc. It is the
job in the banking industry, specifically, after the financial result of RBIs initiatives that today all commercial banks
sector reforms and implementation of new age technology. have their own grievance redressal cells to handle the
Providing prompt and efficient service is on the top agenda grievances of their customers. However, sometimes,
of commercial banks to attract and retain the new customers. customers complaints are not handled properly by banks,
Making banks more customer-friendly has also been high on which may result in dissatisfaction to the customers. At this
the agenda of the Reserve Bank of India. Reserve Bank of point of time customer is in a dilemma about where to file a
India has taken so many steps in this regard, which includes complaint against the deficiency in services rendered by the
deregulation of interest rates, deregulation and setting up of banks. Courts may not be the right choice because of long
ATMs, payments system initiatives like RTGS (Real Time time involved in settling of cases and heavy costs. Here,
American Journal of Business, Economics and Management 2015; 3(6): 324-329 325

Reserve Bank of India has provided an alternative customers, and which factors influence these preferences.
mechanism to handle the customers grievances by setting up Changing of residence, salary and non-availability of
of Bank Ombudsman in India. The prime objective behind technology based services were given as the three main
the setting up of Bank Ombudsman was to provide an reasons for changing bank. Jain and Jain (2006) show that the
expeditious and inexpensive forum to bank customers for Indian banking industry has undergone radical changes due
resolution of their complaints relating to deficiency in to liberalization and globalization measures undertaken since
banking services provided by commercial banks, regional 1991.There has been a great surge in retail banking. The
rural banks and scheduled primary co-operative banks. There study based on responses received from 200 customers of
are 15 Offices of Banking Ombudsman (OBOs), spread Housing Development Financial Corporation (HDFC) bank,
across the country. RBI modified the Scheme in 2002, 2006, Industrial Credit and Investment Corporation of India (ICICI)
2007 and 2009 on the basis of feedback gathered in the bank and some other private and nationalized banks in
course of administering the BOS to include customer Varanasi identified the various types of services offered by
complaints on new areas such as credit card complaints, banks, the level of satisfaction about different types of
internet banking, deficiencies in providing the promised services, expectations about these services and the level of
services by both bank and its sales agents (DSAs), levying segmentation among the services offered. Goyal and Thakur
service charges without prior notice to the customers, no (2008) concludes that public sector banks that have no
adherence to the Fair Practices Code adopted by individual monopoly licenses are to be given to new public sector banks
banks, etc. RBI operates the BOS, free of cost, so as to make and foreign banks. However, when the public sector banks
it common people oriented. In order to increase its realized that government was no longer there for them, they
effectiveness and utility, BOS is fully staffed and funded by started devising various strategies for survival and growth. In
RBI. the present study, the researcher has taken 3 public and
private sector banks.
2. Literature Review
3. Objective
The number of studies has been conducted regarding the
services of banking ombudsman to their customers. Some of The main objective of the paper is to Study the Impact of
them are listed below: Banking Ombudsman Scheme on service quality provided by
Shankar (2004) asserts that customer service in banks banks.
means satisfying the needs of customers at the right time and
in the right manner with accuracy, reliability, high service 4. Research Methodology
speed, security and enquiry facility for inefficient customer
service. The excellent and managing customer relationship is 4.1. Sources of Data
the future of any business or everybodys business. As such,
customer focus is not being viewed as just a business strategy, The paper is based on Secondary Data. The sources of
but should become corporate mission. The ongoing review secondary data are annual reports, browsing internet, through
shows that a customers satisfaction of is an invaluable asset articles.
for the modern organization. To reduce the complaints, bank 4.2. Data Analysis Tools
should improve service because the survival of banking
business is dependent on customer service. Furthermore, To analyse the data trend analysis is applied.
Kamakodi (2007) examines how computerization has
influenced the banking habits and preference of Indian 4.3. Data Analysis and Interpretation

Table 1. Complaint on Deposits.

Name of the bank 2011 2012 2013 2014 2011 (%) 2012 (%) 2013 (%) 2014 (%)
Nationalised Banks 379 3135 1,366 1,370 100 827 360 361
State Bank Group 347 2607 1262 1415 100 751 364 408
Public Sector Banks 726 5742 2,628 2,785 100 791 362 384
Old Private Sector Banks 50 250 133 102 100 500 266 204
New Private Sector
591 1644 796 811 100 278 135 137
Banks
Private Sector Banks 641 1894 929 913 100 295 145 142
Foreign Banks 293 506 159 134 100 173 54 46
Scheduled Commercial
1,660 8,142 3,716 3,832 100 490 224 231
Banks

Source: Report on Trend and Progress of Reserve Bank of India.


326 P. Malyadri and S. Sirisha: A Study on the Impact of Banking Ombudsman Scheme on Service Quality Provided by Banks

The above table presents trends for deposits for three years deposits changed over time. The index for deposits indicate
i. e 2012, 2013 and 2014. The base year on which the whether the deposits is increasing or decreasing and at what
analysis is based is 2011. The index is 100 for the base year rate. The table shows a growing trend in all the hree years of
2011. The above trend analysis gives a picture of how the study as compared to the base year 2011.

Table 2. Complaints on Loans and Advances.

Name of the bank 2011 2012 2013 2014 2011 (%) 2012 (%) 2013 (%) 2014 (%)
Nationalised Banks 1891 2086 2292 2191 100 110 121 116
State Bank Group 1371 1851 1,860 1,941 100 135 136 142
Public Sector Banks 3,262 3,937 4,152 4,132 100 121 127 127
Old Private Sector Banks 185 335 238 267 100 181 129 144
New Private Sector Banks 647 993 929 722 100 153 144 112
Private Sector Banks 832 1,328 1,167 989 100 160 140 119
Foreign Banks 199 329 167 159 100 165 84 80
Scheduled Commercial Banks 4,293 5,594 5,486 5,280 100 130 128 123

Source: Report on Trend and Progress of Reserve Bank of India.

From the above table it is observed that there is a banks and new private sector banks as compare dto base year,
continuous increase in the complaints on loans and advances yet over all complaints in private sector banks is
in the year 2012, 2013 and 2014 in case of public sector comparatively as compared to public sector banks .In case of
banks. Though there is increase in the complaints on loans foreign banks the complaints on loans and advances declined
and advances in the year 2014 in case of old private sector in the year 2013 and 2014 as compare to base year.

Table 3. Complaints on ATM/Debit cards and Credit cards.

Name of the bank 2011 2012 2013 2014 2011 (%) 2012 (%) 2013 (%) 2014 (%)
Nationalised Banks 3,343 3,223 3,961 4,565 100 96 118 137
State Bank Group 5,874 5,998 6,106 5,582 100 102 104 95
Public Sector Banks 9,217 9,221 10,067 10,147 100 101 109 110
Old Private Sector Banks 149 141 196 253 100 95 132 170
New Private Sector Banks 647 3,104 4560 4967 100 480 705 768
Private Sector Banks 796 3,245 4,756 5,220 100 408 597 656
Foreign Banks 3,196 1,771 2,789 2,837 100 55 87 89
Scheduled Commercial Banks 13,209 14,237 17,612 18,204 100 108 133 138

Source: Report on Trend and Progress of Reserve Bank of India.

Complaints on ATM/Debit cards and credit cards shown an trend. (55% and 87%). If we compare both public banks and
increasing trend in case of public sector banks (101%, 109% private sector banks, private sector banks increasing trend is
and 110%) and private sector banks (408%, 597% and 656%) more than that of public sector banks.
whereas in case of foreign banks it has shown a declining

Table 4. Complaints on Pension.

Name of the bank 2011 2012 2013 2014 2011 (%) 2012 (%) 2013 (%) 2014 (%)
Nationalised Banks 1746 1975 2018 2326 100 113 116 133
State Bank Group 4000 3818 3596 4118 100 95 90 103
Public Sector Banks 5746 5793 5614 6444 100 101 97 112
Old Private Sector Banks 1 1 13 4 100 100 1300 400
New Private Sector Banks 42 38 17 19 100 90 40 45
Private Sector Banks 43 39 30 23 100 91 70 53
Foreign Banks 21 13 2 4 100 62 10 19
Scheduled Commercial Banks 5,810 5,845 5,646 6,471 100 101 97 111

Source: Report on Trend and Progress of Reserve Bank of India.

The pensions are shown increasing trend in case of fluctuating and as a result the overall performance of
nationalised banks and in the case private sector banks it is scheduled commercial banks is showing variations in the
decreasing trend. In case of foreign banks the trend line is trend line.
American Journal of Business, Economics and Management 2015; 3(6): 324-329 327

Table 5. Complaints on Non-Observance of Fair Practices.

Name of the bank 2011 2012 2013 2014 2011 (%) 2012 (%) 2013 (%) 2014 (%)
Nationalised Banks 4,680 3,379 3,675 5,072 100 72 79 108
State Bank Group 4,119 4,160 3,138 3,601 100 101 76 87
Public Sector Banks 8,799 7,539 6,813 8,673 100 86 77 99
Old Private Sector Banks 254 181 308 424 100 71 121 167
New Private Sector Banks 3,124 1,920 2,519 2,773 100 61 81 89
Private Sector Banks 3,378 2,101 2,827 3,197 100 62 84 95
Foreign Banks 1,163 548 616 703 100 47 53 60
Scheduled Commercial Banks 13,340 10,188 10,256 12,573 100 76 77 94

Source: Report on Trend and Progress of Reserve Bank of India.

The above trend indicates that all bank groups are showing declining trend as compared to base year 2011 but in case of old
private sector bank there was a decreasing trend in the year 2012 but again the trend increased in the year 2013 and 2014 as
compared to the base year 2011.

Table 6. Total Complaints.

Name of the bank 2011 2012 2013 2014 2011 (%) 2012 (%) 2013 (%) 2014 (%)
Nationalised Banks 12039 13798 13312 15524 100 115 111 129
State Bank Group 15711 18434 15962 16657 100 117 102 106
Public Sector Banks 27750 32232 29274 32181 100 116 105 116
Old Private Sector Banks 639 908 888 1050 100 142 139 164
New Private Sector Banks 5052 7699 8821 9292 100 152 175 184
Private Sector Banks 5690 8607 9709 10342 100 151 171 182
Foreign Banks 4872 3167 3733 3837 100 65 77 79
Scheduled Commercial Banks 38312 44006 42716 46360 100 115 111 121

Source: Report on Trend and Progress of Reserve Bank of India.

The above table depicts that there is a continuous increasing trend in case of private sector banks and in case of foreign
banks as compared to the base year 2011.

Table 7. Region-wise Complaints received at Banking Ombudsman Offices.

Regions 2011 2012 2013 2014 2011 (%) 2012 (%) 2013 (%) 2014 (%)
Ahmedabad 5190 4590 4838 4588 100 88 93 89
Bangalore 3470 3486 3318 4101 100 101 96 118
Bhopal 5210 5953 4920 4907 100 114 94 94
Bhubaneswar 1124 1826 1523 1498 100 162 135 133
Chandigarh 3559 3521 3094 3162 100 99 87 89
Chennai 7668 6614 7255 8775 100 86 95 114
Guwahati 584 708 807 770 100 121 138 132
Hyderabad 5012 5167 4303 4477 100 103 86 89
Jaipur 3512 4209 4099 4104 100 120 117 117
Kanpur 8319 9633 9012 8389 100 116 108 101
Kolkata 5192 4838 4388 4698 100 93 85 91
Mumbai 7566 7905 8607 9965 100 104 114 132
New Delhi 10508 9180 9444 11045 100 87 90 105
Patna 2283 2718 2785 3253 100 119 122 142
Thiruvananthapuram 2077 2541 2148 2841 100 122 103 137

Source: Report on Trend and Progress of Reserve Bank of India.

We observe from the above table that in the regions like Whereas in case of patna, Kanpur Bhubaneshwar, Guwahati
Ahmedabad Chandigarh and Kolkata the complaints received and Mumbai the trend rate was higher in the year 2012, 2013
at Banking Ombudsman Officers trend rates are less in the and 2014.
year 2012, 2013 and 2014 as compared to the base year 2011.
328 P. Malyadri and S. Sirisha: A Study on the Impact of Banking Ombudsman Scheme on Service Quality Provided by Banks

5. Conclusion banks and the number of complaints against foreign banks


are less as compared to the base year which shows that
In case of complaints related to deposit accounts it is Indian customers are most satisfied with the foreign banks
predicted from the trend analysis that in future period the carrying out operations in India. This analysis clearly depicts
complaints trend regarding deposit accounts may increase as that the services of Indian banks are poor as compared to
compared to the base year in all bank groups except foreign foreign banks so the Indian banks should take care about the
banks. In case of foreign banks it is predicted that the different complaints that are received by banking
complaints may show decreasing trend as compared to base ombudsman.
year. Delays in credit, non-credit of proceeds to parties An analysis of the complaints received region wise by the
accounts, non-payment of deposit or non-observance of the banking Ombudsman offices reveals that the number of
Reserve Bank directives, if any, applicable to rate of interest complaints increased continuously in case of Guwahati,
on deposits in savings, current or other account maintained Mumbai and patna and continuous decrease in Chandigarh
with a bank were the major reasons for complaints in the and Kolkata. In other regions there are fluctuations
category of Deposit Accounts It is concluded that the trend analysis with regard to public
In case of complaints pertained to loans and advances it is sector banks and private sector banks are showing increasing
predicted from the trend analysis that in future period the trend in most of the categories of complaints as compared to
complaints trend regarding loans and advances witness the base year but if we see the trend, the increasing trend is slow
upward trend in case of public sector banks and private sector that says that bank groups are taking care to avoid the
banks, whereas in the case of foreign banks it witnessed the complaints but the force and the strategies have to be
downward trend. The reason why public sector banks and improved as compare to foreign banks.
private sector banks have more complaints as compared to
foreign banks because complaints pertaining to non -
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