CHAPTER VII

BANKING OMBUDSMEN SCHEME

In the earlier chapter the researcher made an analysis of the bnnkerYs

opinion about customer service and a comparison was made between the

opinion of bankers and customers about the customer service. Though, nlajority

of them have expressed their satisfaction, the dissatisfied custo~ncrsshould

find a solution for their dissatisfaction. Hence, 'The Banking Ombudsman

Scheme', which is the redressal mechanism available for the bank customers

have been studied and analysed in this chapter.

A bank's branch generally caters to the banking needs of the people in

its operational area. Most of the customers, do not want to lodge any corl~plnint

when they have any grievances in getting banking services. Only a very few

of the affected customers used to lodge complaints for their grievances.

Banking Ombudsman Scheme was implemented in India in the year

1995 with the objective of effective, quick and impartial redrcssal of

the grievances of the customers and also to avert the defects of' the existing

redressal machineries.

BANRING OMBUDSMAN

Sir Lawrence Shurman, Banking Ombudsman of U.K. states that

Ombudsman is neither a champion nor the defender of the banks. HI: is an
 independent arbitrator for fair settlements of disputes arising betwern the

banker and the customer. P.H. Collin defines in the diction;lry of business an

Ombudsman is an official who investigates complaints by the public against

Government departments or other large organisations.'

The first Banking Ombudsman Scheme was setup in 1986 at U.K. It

soon developed into a popular and effective forum for settling banking disputes.

The Banking Ombudsman Scheme in U.K. is a tripartite structure, consisting

of Board of directors (Since Banking Ombudsman Scheme is a Limited

Company with member banks guarantee), the Governing Council and the

Ombudsman, who is assisted by the Resident Banking Adviser2.

ESTABLISHMENT OF BANKING OMBUDSMAN IN INDIA

Indian Banking Association had set up a Sub Committee in 1992 to

examine the possibilities of setting up an Ombudsman type of machinery for

Indian Banks. To this effect Sir Lawrence Shurman was invited to India in
1993 to impress the bank officials about the functioning and importance of the

concept of the ombudsman. Consequently Reserve Bank of India formulated a

scheme of Banking Ombudsman Scheme, which was implemented from June

14th,1995.

RITA SRNASTAVA, 'Banking Finance', August 1997, Page 6, Article,

"Banking Ombudsman Scheme: A Boon for customers".
2
Canara Bank, STC, Training Material.
STRUCTURE OF BANKING OMBUDSMAN SCHEME

In India, the RBI appoints retired persons from the banking sector for

a period of three years who may be eligible for extension for a further period

not exceeding two years subject to the age limit of 65 years.

Secretariat comprising people from banks would be provided to assist

the Banking Ombudsman Scheme. The location of office, the territorial limits,

thc recommendation of the BOM and other officers and their perquisites

payable will be determined by the Reserve Bank from time to time.

Remunerative expenses will be borne by the different banks in such proportion

and in such manner as may be determined by the Reserve Bank.

Functions

Jurisdiction powers and duties of Bombay Ombudsman.

The duties of the the Banking Ombudsman will be

(a) to receive complaints relating to the deficiency in the provision of

the banking services.

(b) to consider such complaints and facilitate their settlement either

by making recommendations or awards or by such other means

a s deemed expedient.
 All commercial banks including private sector banks and foreign banks
(Regional Rural Banks are excluded) having a place of business in India,

whether such banks are incorporated in India or outside India and scheduled

primary cooperative banks are all brought under the scheme.

Any individual person, groups of individuals such as partnership, clubs,

companies etc., and authorised representative of the complainant and

aggrieved person can be the user of the scheme.

Complaints under the Ambit of the Ombudsman:

The BOM h a s the authority to look into the following complaints

relating to banking services.

* All complaints concerning deficiency in services such as:

i) non-payment / inordinate delay in the payment or collection of

cheques, drafts, bills etc.

ii) non-acceptance, without sufficient cause of small denomination

notes tendered for any purpose, and for charging of commission

in respect thereof,

iii) non-issue of drafts to customers and others;

iv) non-adherence to prescribed working hours by branches,

V) failure to honour letter of guaranteenetter of credit commitments

by banks.

vi) complaints pertaining to the operations in any form of account,

maintained with a bank, such as delays, non-credit of proceeds to

parties accounts, non-payment of deposits or non-observance of

the Reserve Bank directives, if any, applicable to the rate of

interest on deposits.

vii) claims in respect of unauthorised or fraudulent withdrawals from

deposit account, etc.

viii) complaints from exporters in India regarding delays in receipt of

export proceeds, handling of export bills, collection of bills, etc.

provided the said complaints pertain to the banks operation in

India and

ix) complaints from NRI's, having accounts in India, in relation to

their remittances from abroad, deposits and other bank related

matters.

(B) Complaints concerning loans and advances only in so far as they

relate to:

i) non-observance of RBI directives on interest rates,

 ii) delays in sanctionlnon-observance of prescribed time schedule for

disposal of loan application; and

iii) non-observance of any other directions or instructions of the RBI,

as may be specified for this purpose, from time to time.

(C) Such other matters as may be specified by the RBI from time to
time on this behalf.

Procedure for Redressal of Grievance by Banking Ombudsman Scheme

Office:

Any aggrieved person against deficiency in the banking services may

himself or through an authorised agency lodge a complaint in writing duly

signed by the complainant furnishing the details such a s name and address of

the complaint, name and address of the branchlofice of the bank against which

the complaint is made, the facts giving rise to complainant, supporting

documents relevant to complainant, in duplicate, the loss caused, and the

rxtent of relieUcompensation expected to the Banking Ombudsman.

Pre condition for lodging the complaint to the Banking Ombudsman

Scheme

Prior to approaching an Ombudsman the complaint in writing should

have been lodged with the concerned bank. Only when the bank rejects the

complaint or does not reply within two months from the date of complaint or
the complainant is not satisfied with the reply he can approach the Banking

ombudsman Scheme.

The Banking Ombudsman Scheme has the power to reject the complaint,

if the complaint is not filed within the year of rejection by the concerned bank,

if' already an award is made by any authority and if it does not come under the

ambit of clause 13.

On receiving complaint against any bank he can call for documents. In

case the bank fails to produce the documents, BOM can make its inference, a s

the supply of information would be unfavourable to the bank.

Besides maintaining confidentiality of the information supplied by the

bank, BOM can award a compensation of a maximum of Rs.10 lakhs, which

should be enforced through RBI.

PROCEDURE OF REDRESSAL

If the complaint is accepted by Banking Ombudsman Scheme, a copy of

the complaint should be sent to the bank concerned and try for conciliatory

proceedings. If the settlement is not reached within a month from the date of

receipt of the complaint, it will make recommendations, a copy of which will

be sent to the complainant and to the bank concerned.

If the recommendation is acceptable to the complainant he has to send

his acceptance in writing within two weeks to Banking Ombudsman Scheme
and the same will be sent to the concerned bank. If the settlement is not

acceptable to the bank, it has to report within two weeks to Banking

Ombudsman Scheme.

When the settlement cannot be made by agreement or recommendations,

within two months from the date of receipt of the complaint, the Banking

Ombudsman Scheme would inform both parties of his intentions t o pass an

award. Within 15 days from the date of receipt of the notice of Award, both

parties can submit any new evidence or information to support their case.

The Banking Ombudsman Scheme shall be guided by the evidence

placed before him by the parties, the directions, instructions, and guidelines

issued by RBI from time to time, principles of Banking Law and Practice, and

such other factors which in h s opinion are necessary in the interest ofjustice.

Banking Ombudsman Scheme will pass an award not exceeding Rs.10

Iakhs, which would be communicated to the erring bank, and the complainant

who should send his acceptance or otherwise within 15 days to the BOM. If it

is accepted by the complainant, the same will be informed to the erring bank

for its acceptance or otherwise. The erring bank should sent its reply to BOM

within two weeks. If the bank does not comply with the award, the BOM will

make a report to RBI for necessary action under sec.35 of the Banking

Regulation Act, 1949.

ANALYSIS OF THE OMBUDSMAN SCHEME

With its existence during the last six years, the scheme attained wide

publicity in the media and has gained perceptible awareness among the users

of banlung services. There were 4700 branches of commercial banks operating

in Tamil Nadu, Pondicherry and Andamans & Nicobar Islands and the details

are given in the following table. There was no scheduled co-operative urban

banks in the area of jurisdiction of this office. The table itself is a self

explanatory one.

TABLE 7.1

BANK BRANCHES COVERED AS ON

-
2001 2002

Total
S1. State/ Private Foreign
PSB's banks
No. Union Banks Banks
covered

. Territory
1. 3509 1059 17 4585
Tamilnadu

2. Pondicherry 66 18 84

Andaman &
3. Nichobar 31 31
Islands

Source: BOM's Annual Report 2001 - 2002.

 TABLE 7.2
GEOGRAPHICAL COVERAGE

S1. No. Particulars 1997-98 1998-99

1999- 2000- 2001 -
2000 2001 2002
1. Foreign 9 10 15 9 10
2. Metropolitan 141 168 146 121 112
3. Urban 51 125 123 25 48
4. Semi-urban 61 71 147 135 140
5. Rural 94 82 17 92 43

Source: BOM's Annual Report 1997-98 to 2001-2002.

An attempt is made by the researcher to find out the number of

complaints received from the different geographical area. It may be seen from
Table 7.2 and Chart 7.1 that the highest number of complaints were received
by the Ombudsman from the customers of metropolitan branches followed by

semi urban, urban, rural and from foreign branches. This is quite natural as
the number of branches of the metropolitan area are more and the awareness
of the customers of these branches will also be at the highest level when
compared to other geographical area. Perhaps that may be the reason for the
more number of complaints from metropolitan area. Naturally there should be
a positive correlation between the level of awareness and the number of

complaints of a particular area.

But, one point to be remembered by the metropolitan, urban and semi

urban branches is that their customers are more time conscious and better
service needed people. Hence the banks should try to reduce this.
 Chart 7.3,
Geographical Coverage of Ombudsman Scheme

Foreign Metropolitan Urban Semi-urban Rural

 TABLE 7.3

ANALYSIS OF COMPLAINTS RECEIVED MONTH WISE

'I*
Months 1997-98 1998-99
1999 - 2000 - 2001 -
No. 2000 2001 2002
-
1. April 29 26 26 52 15
2. May 5 50 25 44 11
3. June 42 24 36 44 21
4. July 41 36 51 33 37
5. August 20 24 27 27 47
6. September 21 27 19 26 16
7. October 25 30 28 13 21
8. November 18 24 37 24 37
9. December 12 41 66 15 19
10. January 59 54 42 21 26
11. February 42 52 37 24 34

12. March 42 68 54 59 69

Total 356 456 448 382 353

Source: BOM's Annual Reports.

From the above table 7.3 it is obvious that during the month of March

the number of complaints went up sharply compared t,o the previous months.

This may perhaps due to the release of advertisements in the print media in

December 2001 and March 2002.

 TABLE 7.4

DISPOSAL STATISTICS

9. S~ttled 114 32 178 34.36 182 36.4 140 30.76 149 35.73

4. Kejected 151 42.4 104 20.08 89 17.8 106 23.3 193 46.28

5. Pending 61 17.1 52 10.04 72 14.4 64 14.07 72 17.27

Rwerted
6. Probing 20 3.86 -
impossible

Non- -
7. 20 5.6 136 26.25 140 28 131 28.79
maintainable

356 100 518 100 500 100 455 100 417 100

Source: BOM's Annual Reports. (Figures in brackets shows the percentage to

total)

During the year 2001-2002, out of the 417 complaints handled 149 cases

were settled by mediation. When we analyse the pending cases every year it

ranges from 10 percent to 17 percent of the total cases received. It shows the

speed and timely action taken by the office. The rejected cases ranged from

20 percent to 46 percent. This may be due to lack of awareness. Cases must

have been rejected because they did not fall within the ambit of the scheme.

Settled complaints ranges from 31 percent to 36 percent over the years.

 During the year 2001-2002, three recommendations were issued under

section 19(1) of the scheme, of these 2 were accepted and implemented by the

banks. Table 7.4 and Chart 7.2 gives the details of the total number of

complaints received and disposed for the past five years from 1997-98for 2001-

2002. The total complaints for the scheme for the year 1997-98 was 356 which

increased upto 99-2000 and started declining for the remaining two years. It

could be seen from the table that more than 30% of the total complaints have

been settled for all the years of the study. But the rejected complaints which

was 42.4 percent during 1997-98 had started declining to 24 percent in 1998-

99. 17.8 percent in 1999-2000 and again went up to 23.2 percent and 46.2

percent respectively for the years 2000-2001 and 2001-2002. It is interesting

to note from the table that nearly 90 percent of the complaints fell under the

category of either settled or rejected or pending. There were more than 25

percent of the complaints which were not maintained for the years for 1997-98
to 2000-2001 due to the failure of submission of details required by the

complaints.

From the over all analysis it is clear that nearly 75 percent of the

complaints were disposed either by settlement or by rejection since the

complaints could not be considered under the purview of the ombudsman

scheme. Hence it may be concluded that the ombudsman scheme is very much

useful to redress the complaints and grievances of the customers.

 TABLE 7.5
AGE WISE ANALYSIS OF PENDING CASES

Source: BOWS Annual Report.

Table 7.5 and Chart 7.3 shows that during the year 2001-2002,33
percent of the cases were pending for less than one month cases pending for
more than 1 month but less than 2 months ranged from 18 percent to 81
percent of the total pending cases for all the years of the study. In the year
2000-2001 it was 81 percent. This may be due to the non-co-operation on the
part of the complainants and the banks. This year (2001-2002) it constitute
only 18 percent of the total pending cases.

Cases pending for more than 2 months and less than 3 months ranges
from 4 percent to 21 percent of the total pending cases. This year (2001-2002)
there is a sharp rise to 17 percent from 5 percent in the previous year. In the
same way the cases pending for more than 3 months ranges from 14 percent
to 32 percent of the total pending cases. Even in this category there is a steep
rise from 14 percent to 32 percent during the year 2000-2001. This may be
compared to the previous year. This may be on account of non-receipt of full
information from the banks concerned for taking a final view on the
complaints. But it is clear that the percentage of pending cases for more than
3 months had gone up to 31 percent when compared to the 14 percent for the
previous year. This trend should not be allowed to continue failing which, the
complainants will loose confidence on the ombudsman scheme.
 Chart 7.3
Age Wise Analysis of Pending Cases for the Period 2001-02

ng less than one month

33%

More
 TABLE 7.6
RESIDENTIAL STATUS OF THE COMPLAINTS

S1.
97-98 98-99 99-2000 2000-2001 2001-2002
No.
1. *Govt. Departments 8 4 4 7 18
2. Resident Individuals 79 123 262 260 213
3. NRI 2 7 17 10 10
4. PSU's 2 1 5 2 2
5. Association and Clubs 5 11 29 28 46
6. ** Ltd companies 20 19 35 23 15
Partnership firms/ 8 13 60 52 49
Proprietorship concerns
8. Pensioners 36

Source: BOM's Annual Reports.

Note: * Govt. department includes State and Central Government.
** Ltd. companies includes Private and Public Ltd. companies.

An analysis of the different categories of the customers who lodged

complaints to ombudsman scheme is done, so as to know which category of the
customers had more grievances and sought for redressal. It is clear from the
table that resident individuals have more grievances against the banking
services for all the years of the study. It ranges from 79 in 1997-98 to 213 in
2001-2002 with same fluctuations. This is followed by partnership firms,
associations and clubs and limited companies as seen in the table 7.6 and
chart 7.4. It is interesting to note that even the state and central governments
had sought redressal for their grievances of course with less number of
complaints. All these are evidences that the different categories of the
customers had complaints against customer services of banks. To gain the
confidence of all these different categories of the customers, the bankers should
take all precautions to provide them better services.
 TABLE 7.7
BANKWISE COVERAGE

District
7 . Central Co-op 16 4.5 4 0.9 8 1.8 10 2.6 6 1.7
Banks
Others rind
8. Regional Rural 4 1.1 8 6.8 15 3.3 11 2.9 11 3.1
Banks
Total 356 100 456 100 498 100 382 100 353 100

Source: BOM's Annual Report.

Table 7.7 and Chart 7.5 shows that major constituents of the complaints
received is from the nationalised group. Its coverage ranges from 46 percent
to 63 percent over the years. Second major group is SBI group. Its coverage
ranges from 20 percent to 29 percent over the years. Third major constituent
is private sector banks. Other constituents are foreign banks, unscheduled

banks, apex co-operative banks, district central co-operative banks, and others
& regional rural banks.

During the current year (2001-2002) the Nationalised Bankrconstitute

46 percent, SBI group 26 percent, Private Banks 14 percent. This is due to the
fact that these banks have larger branch network in the area ofjurisdiction of
this ofice.
 TABLE 7.8
NATURE-WISE ANALYSIS OF RESOLVED COMPLAINTS

''
No.
Nature of Complaints 1997-98 1998-99 1999-2000 2000-2001 2001.2002
1

1. Delay in sanction of loan 23 5 5 7 3

Non-observance of RBI 7 4 5
2' directives 6 2
Delay in collection of
3. . 17 31 35 37 14
instruments
4. Failure to honour LCILG 6 7 5 16 21
Unauthorised debits in 5 12 7 16 14
5.
deposits
6 . Operations in deposits 26 35 43 72 36
7. Non-issueAoss of DD 8 3 4 9 3
8. Foreign exchange 4 1 1
9. Miscellaneous 28 71 77 214 254

lo'
NRI's Remittance 1 4 3 3
Proceeds
Non-acceptance of small
. l 1 denomination 2 1 2

Non-adherence to 1 2
12' prescribed working hours

From exporters
13, regarding export bills 4 1 1
, realisation

Source: BOM's Annual Reports.

The details of the different nature of the complaints are given in table
7.8. It is seen from this that the number of the miscellaneous complaints are
the highest followed by operations in deposits, delay in collection of
instruments and failure to honour LCLG. From the above analysis the
bankers should learn a lesson and try to reduce the number of complaints in
that category if not completely avoid. Only then the banks will earn the
confidence of the public and the customers will also feel that 'better customer'
services are provided by the bankers. This is the 'back leave' for the success of
any banlung concern.
HYPOTHESIS

There is no significant reduction in the complaint received.

The total change is that complaints received over the period 1997-98to

2000-2002 is examined with the concordance coefficient method. For the data,

percentages are calculated and ranks are assigned. To test the changes in the

complaints the following procedure is followed.

Test Procedure

1. H, : There is no significant reduction in the complaints

received.

H, : There is significant reduction in the complaints received.

2. Level of significance : x2 = 5 percent

3. Statistic used:

x2
where x2 = Chi-square

N = Number of years

n = Number of observation

W = Concordance Coefficient
 = Number of Years

= Number of Observations

= Number of observations in a group tied

for a given ranks.

4. Critical region : Reject H, if x2 2 x2 critical value with

(n-1) df. at 5 percent level of

significance.

5. Computed value

The calculated value x2 = 17.4812 is less than the table value (x',,,
19.675) and hence the null hypothesis holds true. We can conclude that there

is no significant reduction in the number of complaints from 1997-98 to 2001-

2002. This is evidently seen from the variation in the total number of

complaints from 357 in 1997-98 to 457 in 1998-99, 448 in 1999-2000, 382 in

2000-2001 and 353 in 2001-2002.

HYPOTHESIS
There is no significant relationship between the number of complaints
received and disposed.

To test this hypothesis data pertaining to eligible complaints received

and complaints disposed are considered. 'F'test is used and the procedures are
given below.

Details of Complaints
-
S1. No. Year Eligible complaints Complaints
received disposed
1. 1997-98 206 124
2. 1998-99 353 206
3. 1999-2000 359 199
4. 2000-2001 276 154
t
5. 2001-2002 160 152

Test procedure
1. H, : There is no significant relationship between the complaint
received and disposed.

H, : There is significant relationship between the complaint

received and disposed.

2. ANOVA Table

Sum of Dl? Mean F

Sources of Variation square
Between Rows 28322.4 4 7080.6 3.774106
Between columns 26936.1 1 26936.1 14.3575
,Residual 7504.4 4 1876.1
Total 62762.9 9 6973.6556
 The table value of F at 5 percent for V, = 4 and V, = 4 is 6.39. Since the
calculated value 3.774106 is much less than the tabulated value, the null
hypothesis is accepted. It is clear that there is no significant relationship
between the means of complaints received and disposed over the years.

The table value of F at 5 percent for V, = 1 and V, = 4 is 7.71. Since the

computed value (14.3575) is much higher than the tabulated value, the null
hypothesis is rejected. Therefore there is significant relationship between the
means of eligible complaints received and complaints disposed.

HYPOTHESIS
There is no significant difference in the type of complaintants based
on the residential status.

To find the relationship between the different type of complaints

ANOVA method is followed for the given data in table 7.6.

ANALYSIS OF VARIANCE

Sum of Squares DF Mean Squares F

Between Rows 133476.3750 7 19068.0536 '
25.59334
Between Columns 9656.5000 4 2414.1250
Residual 22629.5000 28 808.1964

Table value for V, = 7 and V, = 28 is 2.36 at 5 percent level of

probability. The calculated value of F is more than the table value 25.59334
and hence the hypothesis is rejected. Hence the test brings out significant
difference between the complaints based on residential status by the
authorities over the years.
HYPOTHESIS
There is no significant difference in the types of Banks that has used
the Banking Ombudsman Scheme over the years.

To test this hypothesis data given in table 7.7 are used.

To find the relationship between the different types of banks on ANOVA

method is followed and the results are given in table, for the test of hypothesis.

Sum of Squares DF Mean Squares F

Between Rows 770973.6444 8 96371.7056 121.7566
Between Columns 7468.4444 4 1867.1111 2.3589
Residual 25328.3556 32 791.5111

Table value for V, = 8 and V, = 32 is 2.27 at 5 percent level of

probability. The calculated of F (121.7566) is much more than the table value
and hence the hypothesis is rejected. Hence the test brings out significant
difference between the complaints made by different groups of banks with
Ombudsman Scheme.

Table value for V, = 4 and V, = 32 is 2.69 at 5 percent level of

probability. The computed value (2.3589) is less than the table value and the
hypothesis is accepted. Therefore, there is no significant difference between the
complaints over the years.
HYPOTHESIS

There is no significant difference in the type of complaints.

To find the relationship between different types of complaints on

ANOVA method is followed and the results are given in the table, for the test
of null hypothesis that is formulated. For this purpose data in table 7.8 has
been used for analysis.

-
Sources of Sum of Squares DF
Variation Mean Squares F

Between Rows 74342.7385 12 6195.2282 7.957209

Between Coluimns 4081.1385 4 1020.2846 4.3105
Residual 37371.2615 48 778.5679

Table value for V, = 12 and V, = 48 is 1.94 at 5 percent level of

probability. The calculated value of F (7.957209)is more than the table value
and hence the hypothesis is rejected. Hence there is a significant difference
between the types of complaints received by Ombudsman Scheme over the

years.

Table value for V, = 4 and V, = 48 is 2.65 at 5 percent level of

probability. The computed value of F (1.3105) is less than the table value and
hence the hypothesis is accepted. Hence it is inferred that there is no
significant difference in the types of complaints received over the years.
 CHAPTER VIII
SUMMAFtY OF FINDINGS, SUGGESTIONS
AND CONCLUSION

The famous adages "customer is king", "customer is profit - everything

else is overhead"; along with the famous definition of a customer by Mahatma

Gandhi are quite familiar and do not need any repetition. But in practice,

though not totally, part of the customer group is dissatisfied about the services

provided by the banks.

Nationalisation of banks has brought about a phenomenal growth in the

volume of business, branch expansion, and variety of services provided to the

customers. Nationalisation of commercial banks followed by the latest policy

of liberalisation and globalisation have resulted in forceful competition among

the bankers. Pricing and placing strategies are having limited scope with

regard to banking institutions as the interest rates and branch expansion are

determined by the policy guidelines framed by the Resenre Bank of India and

the Government of India. Hence, quality customer service which is something

integrated to the banking business is the only way to distinguish them from

others in order to retain the present customers. Customers are well informed

and hence their expectations have grown over a period of time and they would

like to have quick, efficient and timely service from the banks.
 Today the concept of 'Marketing in Banks' assumes greater importance

under the stiff competition for resource mobilisation and for their existence.

Hence an attempt is made in this study to find out, the customers and bankers

opinion about the customer service in banks.

Customer Service is a derivative of a mix of human reactions influenced

by a host of stimuli, evaluating from within and outside the organisation. This

term refers to an attitude of daily attention of the customer concerned and

catering to his present and future needs. It will only be possible with

commitment and involvement of all staff a t all levels. Hence customer service

would mean the right commercial and developmental attitude of banks and

quality staff with vision who are capable of meeting the customer's needs.

The time norms followed by executing the counter transaction, the

efficiency with which the services are delivered, amenities provided in the bank

premises, ancillary services provided by the banks, behavioural aspect of the

staff in banks, grievance and redressal procedures suggested by the Goiporia

Committee, which were not dealt in the previous studies, are examined in this

study.

The main objective of the study is to find out customer's satisfaction in

receiving the services provided by the bankers.

 The objectives of the study derived from the main objective are a s

follows.

1. To study the genesis and growth of customer services in Commercial

Banks.

2. To analyse the customers' opinion about the customer service and t;he

level of satisfaction derived thereon.

3. To examine the customer services of the banks and to elicit bankers'

opinion about the same.

4. To explore the grievances of the customers, the redressal mechanism

available and its effectiveness.

5. To compare the opinion of the customers and the bankers in the

provision and implementation of the Goiporia Committee

recommendations on Customer Service in Commercial Bank.

6. To analyse and study the mechanism of the Banking Ombudsman

Scheme, 1995.

7. To suggest measures for improving the customer service for a higher

level of satisfaction.
HYPOTHESES

Keeping in view the wider theoretical framework and objectives of the

study, the researcher has formulated and tested the following hypotheses.

1. There is a significant relationship between the perception of customers

and bankers.

2. Customer services provided by the banks in the metro are better than

the services provided by them in the urban.

3. There is a significant difference in the amenities provided by the

bankers in the metro and urban.

4. There is a significant relationship between the customers and bankers

opinion on the technical aspect of the customer service provided by the

bankers.

5. There is no difference between the opinion of bankers and customers on

after sales services.

6. The Bankers perform more efficiently by adhering to the stipulated time

norms to the satisfaction of customers.

7. There is no significant reduction in the complaints received.

8. There is no significant relationship between the number of complaints
received and disposed.

9. There is no significant difference in the types of complaints.

10. There is no significant difference in the types of banks that has used the
Ombudsman Scheme over the years.

11. There is no significant difference in the nature of complaints received by

Ombudsman Scheme over the years.

RESEARCH METHODOLOGY

This is a n empirical study, based on customers belonging to the metro

and other urban areas of selected banks in Tamil Nadu. Description and
Analytical Methodology has been adopted in this study. A questionnaire
comprising of four parts was developed. In the first part, personal information
was asked. The second part includes questions to identify them as customers.
Multiple choice and dichotomous type of questions were included in the third
part. Part IV comprises of questions related to behavioural aspects, amenities
provided, choice of the bank etc. Finally suggestions of the respondent were
asked.

A similar type of Questionnaire was framed to get the opinion of the

Bankers in delivering customer service. This questionnaire also consists of four
parts. The first part is meant for the demographic details of Bank respondents.
The second part consists of the details regarding the time norms of the counter
transaction. Questions were asked in the third part to get information about
the provision of loan details and few authority services. Questions were
included in the fourth part to get Banker's opinion about the amenities,
complaint procedure and ranking the customer service in their bank. Finally

suggestions were invited in the Questionnaire.

A pilot study among 80 customers ofvarious Banks was conducted in the

study areas to bring to the light the weaknesses. A similar pilot study was
conducted among 75 bank employees. The loopholes in the Questionnaire were
removed and it was suitably modified after inculcating the opinion of the
customers and the advice of the bankers. The improved questionnaire given in
the appendix was administered for the field study.

Chennai region comprising of the Chennai district, a metropolitan city,

along with Vellore in North Arcot District, Kancheepuram and Walajapet, the
three urban areas were selected for the study. Chennai region is selected as
Chennai is the capital of Tamil Nadu comprising of people of different walks
of life and status.

SAMPLE OF THE STUDY

A total of 1200 customers, 600 from Madras, a metropolitan city and 200
from each of the three Taluks were conveniently selected with the assumption
that atleast 75 percent of the customers would promptly respond to the
Questionnaire. The sample size is equally proportioned between the metro and
the urban areas for the purpose of malung a comparative analysis.
 The questionnaires were distributed to the customers who were holding

an account in a bank. A total of 690 (380 from Metro and 310 from Urban) duly

filled in Questionnaires were received. The inferences and conclusions are

made on the basis of information which were subject to statistical analysis.

Banker respondents were selected on the basis of convenience and

purposiveness.

Primary data were collected during the financial year 2000-2001.

Questionnaire, Personal Interview and Observation techniques have been used

to collect the primary data relating to customer service in Banks. Some of the

Statistical Tools like chi-square test, Mean score, Correlation, Anova test,

T test have been used to make inferences and draw conclusions.

Both primary and secondary data were used for the study. Secondary

data were collected from different Newspapers, Journals, Magazines, reports,

books etc. for which the researcher has approached various institutions like

Indian Institute of Management, Bangalore, Indian Bank, Staff Training

College, Image, Mandavalipakkam, Chennai, Indian Overseas Bank, Staff

Training College, Koyambedu, Chennai, State Bank of India Staff Training

College, Chennai, Canara Bank Staff Training College, Chennai, Reserve Bank

of India Staff Training College, Teynampet Chennai, Institute for Financial

Management and Research, Nungambakkam Chennai, Connemara Library

Chennai and some public and University Libraries in India, Madras Institute

of Development Studies (MIDS),

Adyar, University of Madras, Library etc.
LIMITATIONS

The study is limited only to Chennai, Vellore, Kancheepuram and

Walajapet in Tamil Nadu. Rural folks are excluded on the assumption that

they may not have been well informed and educated. Sample size and the area

is restricted to only four districts due to constraints of time and money. The

study is confined to only counter customer-service and the redressal

procedures.

There is always the problem of choosing from limited options given in

the questionnaire which may not match one views, respondents are given scope

to go beyond the option where ever necessary. Any study on customer service

cannot provide enduring findings over time, as expectations of the customer

and the type of service provided by banks change from time to time. Therefore

the findings of the study indicate only contemporary views of the customers

and may not hold good for all time to come. Majority opinion of the

respondents have been considered for analysis.

CHAPTERISATION

This study is presented in eight chapters.

The importance of the study, limitations, methodology, chapterisation

scheme are all dealt with in the First Chapter.

 The second chapter deals with the review of the literature available.

The evolution of Banking both Abroad as well as in India, and the

genesis and growth of customer service in India are traced in the Third

Chapter.

The detailed profile of the customer is given in the Fourth Chapter.

The opinion of the customers about the customer services is discussed

at length in Chapter Five.

The banker's opinion on customer service in banks are analysed in

Chapter Six.

In Chapter Seven, grievances and redressal mechanisms with special

reference to Banlung Ombudsman Scheme were analysed.

Chapter Eighth being the present one, provides a summary of the

findings, suggestions and conclusions.

FINDINGS OF THE STUDY

The main findings of the study detailed in Chapter V to VII are

summarised and given below.

CUSTOMER'S OPINION ABOUT CUSTOMXR SERVICES IN BANKS

COUNTER TRANSACTIONS

Collection of cheques

Majority of the metro and urban customers have stated that the deposit

and withdrawal of cash takes less than 15 minutes on an average. Collection

of local cheque takes upto a maximum of 2 days, outstation cheques takes upto

a maximum of 4 days and it is quicker in urban areas than in the

metropolitan, in most of the cases are within the norms prescribed by the

Goiporia Committee. Though various committees have recommended that

immediate credit upto Rs.7500 has to be given against local cheques and

outstation cheques, it is only followed a t the discretion of the bank manager.

In both the metro and urban areas majority of the respondents have

revealed that immediate credit against local and outstation cheques and the

payment of interest on delayed collection is paid only on request, which is

contrary to the recommendation of the committee since it has to be done even

without request.

For delayed credit, banks collect interest from the drawers bank and pay

it to the customer. Only 19 percent of the respondents in the metro and 39

percent in the urban areas have reported that interest is credited on delayed

collection without reminder. But the percentage is very low and not even 50

percent which is a n evidence that the customer service in this aspect is not an

encouraging one.
MAIL TRANSFER

In many banks Mail Transfer (MTs) have been dispensed with, as it is

considered to be the duplication of draft. In practice Mail Transfers take 5 to

7 days to reach the other end. It is elicited from the customers that, if it is

delayed beyond 10 days, interest is paid for such delay.

TERM DEPOSIT HOLDERS

Reminders must be sent in advance to the account holders as per the

recommendation of Goiporia Committee. 62 percent of the respondents in the

Metro and 59.5 percent in the urban regions have reported that the reminders

regarding the maturity of the term deposits were made by the banks before a

fortnight i.e. within the reasonable time. Yet the remaining 38 to 40 percent

of the customers expressed dissatisfaction in this regard. This should be

avoided.

STANDING INSTRUCTION

It is a service provided by the bankers to carry out any specific

instruction given to them by their customers. Collection of dividend, payment

of premium, or bills are few examples for which the standing instruction is

given by the customer to their banker, which they cannot deny. But only 36

percent of the total respondents in the metro and 44 percent of the total

respondents in the urban have stated that they have availed this service with
their bank. 76 percent and 71 percent of the metro and urban cust,omershave

expressed that the standing instructions are promptly carried out.

NOMINATION FACILITY

80 percent of the metro respondents and 76 percent of the urban

respondents have stated that they have availed the nomination facility.

Goiporia Committee have insisted that a clause should be added to the account

opening form. This must cover the existing customers also. Notice board in this

regard is displayed in their Banking Hall. It is advisable to nominate the

nominees to avoid claim settlement at a future date.

OTHER FACILITATING SERVICES

Nearly 314th of the total respondents in urban and metro have availed

the cheque book facility. It is observed that the subsequent cheque book is

issued on the same day. Entries are made in the passbook neatly, immediately

and returned on the same day. Both in the metro and urban areas majority of

the customers strongly agree upon the same.

More than 80 percent of the respondents in metro and urban are of the

opinion that there are no mistakes made in the passbook. The others have

stated that when the mistakes are pointed out the response of the banker was

good in both metro and urban.

LOAN FACILITY GIVEN

Each bank has adopted its own way of granting loan under different

names and schemes. 30 percent of the respondents in the metro and 24 percent

in the urban have stated that they have borrowed from the banks. It is

observed that the customers are given adequate amount of loan. Those who

were not given adequate amount of loan have accepted that it is due to

technical reasons like incomplete documentation, inadequate security etc. 68

percent of the borrowers of both metro and urban areas are of the opinion that

the procedure followed by the banks for granting loans is simple. It is stated

that the reasonable time taken for sanctioning the loan is 8 days to 15 days,

of which nearly a minimum of 10 days is taken for processing the loan and a

maximum of 2 to 3 days is taken for documentation. When the loan is granted

for business purposes monthly visits are made by the bankers in almost all the

cases. The objective of visit is to take stock of the position, financial condition,

and ascertain whether the unit is functioning. In case the borrower has to pay
the instalments, the managers remind them 41 percent of the metro

respondents and 47 percent of the urban customers have stated they have used

the bank employees' influence in availing the loan.

LOCKER FACILITY

Only 40 percent of the metro respondents and 24 percent of the urban

respondents have availed the locker facility. Of the customers, who have

availed the locker facility, nearly 65 percent both in metro and urban are of
the opinion that rent charged for locker facility is nominal. 44 percent in the

metro and 40 percent in the urban feel that security deposit collected is

nominal. The attitude of the bankers in allowing the customers to operate the

locker is good, except that they have to be in the premises an hour before the

close of normal working hours.

CURRENTACCOUNT

It is observed that 25 percent and 20 percent both in metro and urban

area respectively operate current accounts and stated that statements are
provided to them as per their request. In a few cases there is a delay of not
more than 5 days.

AMENITIES

According to 80 percent of the respondents, pay-in-slips and challan

forms for the demand draft and mail transfer are easily accessible. 65 percent
of respondents in metro and urban area are of the opinion that response from
the staff of the branch to the queries are good.

Prompt opening 1 closing of the branch is rated as good by 52 percent

respondents in the metro and 53 percent in the urban.

54 percent of the metro and 48 percent of the respondents opined that

uninterrupted services are rendered a t the counter during business hours.
More than 55 percent ofthe respondents answered that treatment of customers
by the banker is good.
 Arrangement for providing guidance to customers are evaluated as good
by 56 percent of the customers in the metro and 46 percent in the urban.
Provision of display boards at the appropriate counter is good according to
nearly 50 percent of the respondents both in urban and metro. Adequacy of
space is rated as good only by 46 percent of the metro customers and 52
percent of the urban customers. Around 50 percent of the customers both in
metro and urban felt that the upkeep and cleanliness was good.

It may be said from the analysis of the data regarding the provision of

amenities to customers, that a lot of improvement needs to be made both in the

metro and urban area, since there is a very meagre percentage of differences

in the opinion of the customers of both areas. But in general it can be

concluded that nearly 50 percent of the respondents are alone satisfied with

the amenities provided and a lot need to be done to provide better amenities

to the customers so as to make them more satisfied.

COMPLAINTS AND REDRESSAL

For a question whether the sample respondents have lodged any

complaints about the poor services in the recent past only 22 percent of metro

and 18 percent of urban respondents have answered affirmatively. Even among

the complainants most of the complaints are related to the discourteous

treatment of the Branch Manager and the Staff. But majority of them (both in

Urban 68 percent and Metropolitan 65 percent) are of the opinion that they

were promptly attended and their problems solved.

 Only 40 percent of both metro and urban customers are aware of the

"Customers Day" scheduled to be held on the 15th of every month. Likewise

only 28 percent of the respondents are aware of the "Banking Ombudsman

Scheme", a grievance redressal scheme. Hence customers have to be educated

to make them aware of this day and Banking Ombudsman Scheme, in which

they can redresse their problems.

BEHAVIOURAL ASPECT

To evaluate the behavioural aspect of the Bank Manager and Clerk a

question was included in the Questionnaire to the customers. Majority of the

respondents opined that both clerks and managers were polite in their

behaviour. Around 20 percent to 25 percent felt that they were rude. Since

customers satisfaction is the most important factor to retain the customers,

positive attitude and courteous behaviour must be developed by the bankers

towards customers.

MARKETING

Less than 40 percent of the metro and urban customers have stated that

new services introduced by banks are made known to them by advertisements

which means that the banks failed to take active steps to keep their customers

informed about the new services. This trend is to be averted to retain the

existing customers and to attract new customers.

 Further from the study and survey it is clear that nearness to residence

or worlung place is one of the factors attracting the customers. Transfer of

officials affects the quality of service have equal probability in affirmative and

negative responses. 55 percent of the metro customer respondents and 57

percent of urban respondents have ranked the customer services provided by

their banks as good.

In chapter Six the researcher made an attempt to analyse and compare

the opinion of the customers and bankers about the customer service in Banks.
Services are grouped under Efficiency aspect, Technical aspect, after sales
service, ancillary services, behavioural aspect and amenities.

EFFICIENCY ASPECT

Customers have the right to receive eficient and prompt handling of

their transactions from the banker. They are willing to wait for a reasonable
time depending on the type of transaction. Time taken for accepting deposit,
malung payments for withdrawals, to credit local and outstation cheques, for
mail transfer, processing of loan, promptly sending current account statements,
etc are the main criteria for efficient customer service. Analysis of the
responses of the primary data by the customers and bankers agree with each
other in the above said transactions which is tested in the hypothesis given
below.

Contrary to the primary data, analysis of the test of the 'Hypothesis',

"bankers perform more efficiently by adhering to the stipulated norms to the
satisfaction of customers", revealed, that there is no significant reIationship
between the views of customers and bankers on the issue.
TECHNICAL ASPECT

In case of bank services, technical aspect implies the arithmetical

accuracy of transactions, correct remittances, accurate entries in the monthly
statement of accounts, timely reminders about the maturity of fixed deposits,
updating and legibility of passbook are the technical aspects of customer
service.
Analysis of the primary data shows that bankers and customers opinion

strongly agree with each other about the technical aspects of the customer

services. It is confirmed through the test of the following Hypothesis, "there is

a significant relationship between the customers' and bankers' opinion on the

technical aspect of the customer service provided by the bankers."

AFTER SALES SERVICE

Transactions like provision of interest on delayed collection of cheques,

delay in mail transfer, provision of immediate credit on cheques deposited etc.

can be grouped under after sale service, where the bankers have to necessarily

keep their promise and confidence of the future performances, failing which

they have to suitably compensate the customers to gain their confidence.

Comparing the banker's opinion and customer's opinion regarding the

above said transactions they slightly differ from each other. For example in the

provision of immediate credit on deposit of local and outstation cheques, the

bankers use their discretionary power. Likewise bankers used to provide

interest for delayed collection of local and outstation cheques and delay in mail
transfer etc. only when it is demanded. The hypothesis is verified that "there

is no difference between the opinion of the bankers and customers on after sale

service".

Analysis of the after sales services reveals that there is a lot of scope for

improvement, before whch educating the customers to make them aware of

their rights becomes necessary.

ANCILLARY SERVICES

Additional services other than the regular banlung transactions such as

accepting deposits and lending loans, provision of safe deposit lockers,

accepting standing instruction, mail transfer facility, nomination facility etc.

can be classified a s ancillary services. Analysis of the primary data showed

that, in most of the ancillary services, there is a disagreement between the

customer's opinion and banker's opinion, relating to the ancillary services such

as mail transfer and execution of standing instruction and safe deposit lockers.

Majority (78 percent) of the customers have answered that they have

given the nomination. Others might have given nomination without knowing

themselves since it is obligatory.

Analysis and observation shows that ancillary services are provided by

all the banks. But it is availed only by few customers.

 Customers availing these ancillary services is very low. It may be

presumed that most of them are not aware of the provision of these services

by the banks. Hence it is advisable that the banks and other authorities should

take all possible steps to make them aware of these services. Only then the

percentage of the customers using these services will go up. Banking

Ombudsman scheme, 1995 was studied and analysed. The scheme was

introduced in the year 1995 to handle complaints exclusively from the Banking

Industry. Though the functioning of the office is efficiently carried out, it has

to go a long way in reaching the customers. It needs to create customer

awareness which is possible with publicity.

It is clear from the analysis that the Banking Ombudsman Scheme is

effective and efficient in solving the cases which falls within the ambit of its

jurisdiction. It needs much wider publicity in reaching the common man.

SUGGESTIONS

In order to improve the Quality of customer service and thereby increase

the loyalty of customers to retain them, the following suggestions, based on the

findings, are given below:

1. Test of Hypothesis shows that there is a significant difference in the

customer service provided for metro and urban areas. There are better

amenities in metro, when compared to urban area. Hence, banks in

 urban area should take due care in providing better amenities, and good

customer service.

2. ARer sales services like timely reminder about the maturity of term
deposit, sending current accounts statements promptly, crediting

interest on delayed collection of cheques, delayed credit of mail transfer

etc. should be improved to make the customers fully satisfied.

3. Quality of customer service depends on the behavioural aspect of the

frontline staff. Though lesser percentage of customers have evaluated
negatively it will affect the image of the bank. Therefore, it is a must on
their part to develop friendly, courteous, and welcoming attitude.

4. Since most of the respondents are not aware of the Ombudsman

Scheme, customers must be educated properly to become aware of the
Ombudsman Scheme so as to motivate them to approach the same in

getting redressal for their grievances.

5. Goiporia committee has recommended'that 15th of every month should

be observed as "Customer meet". This meeting could be utilised as an

opportunity by the bankers to welcome suggestions and complaints from

the customers, creating an awareness about the new schemes, guiding

them in choosing the right scheme based on their requirement and

above all in creating trust and loyalty.

6. Banks should adhere to the time norms in executing its business like

accepting deposits, withdrawal of cash, collection of local and outstation

cheques, mail transfer, etc.

7. Preparation of customer profile, ie customer data, or data warehouse

must be maintained in each branch. This will help the banker in

analysing and grouping the customers. In turn this will help in

planning, organising and marketing of their banking products.

8. It is suggested that immediate credit should be given on local and

outstation cheques upto Rs.7500 without any discretion on the part of

the banker as recommended by the different committees.

9. From the study it is clear that interest on delayed collection is given

only on request. It is suggested that it may be provided without being

asked for by the customers, since most of them may not, aware of this

fact at all.

10. "Standing instruction" is a service provided by the Bankers. But only 33

percent of the respondents made use of the service from which it is clear

that majority of them are unaware of it. Hence it is suggested that the

banker should take steps to make the customers aware of this facility.

11. Locker facility is being provided by only 57.88 percent of .the

respondents of the bankers. At present this service becomes a necessity

in urban and metropolitan area to give protection to the valuables of the

 customers. Hence it is suggested that this type of services must be

provided by almost all the bankers particularly in urban and

metropolitan area. The use of safe deposit locker there is a condition

that the customers should be in the premises one hour before the close

of the worlung hours. It is suggested that this time schedule may be

reduced as 15 minutes before the closing hours of the bank to operate

the lockers.

12. Nearly half of the respondents felt that the time schedule in opening of

the branches is not maintained. Hence it is suggested punctuality of the

working hours should be maintained besides providing better facilities

for them.

13. Loan procedures should be simplified, as 320 percent of them are not

fully satisfied. Hence it is suggested besides simplifying the procedures

of loan, the time taken for processing the loan application may also be

reduced.

CONCLUSION

In a competitive situation, the customers demands tend to increase. The

customers expect speed, accuracy, courtesy and concern, and convenience from

the banks. These are the important aspects of customer service. Depositors,

being the suppliers of capital will assess the quality of the service provided

from the above said aspects.

 As mentioned earlier, in the scenario of intensified competition, the
success formula is "Survival of the fittest". It necessitates a comprehensive

'customer dissatisfaction analysis'. Intensive analytical work through customer

complaints will lead to innovation of new methods and services in rendering

improved quality customer service for meeting the emerging needs of the

customer.

SCOPE FOR FUTURE RESEARCH

1. Based on the experience gained, future research can be conducted on the

customer service provided by private sector banks and public sector

banks.

2. A study on computerisation and customer service can also be taken for

future research.

3. The emerging concept is "customer relationship management" which

provides adequate scope for study by banks in customer retention.

4. The research can also be undertaken to study the role of Banking

Ombudsman Scheme 1995 in customer redressal mechanism.