Wednesday, 10 April 2013

How Reserve Bank of India (RBI) Contradicted its own Guidelines on ATM Compensation

Reserve Bank of India (RBI) had on 27th May 2011 issued fresh guidelines for payment of compensation by banks to the customers for not crediting the money involved in failed ATM transactions within 7 working days of the receipt of complaint. Revised guidelines became effective from July 1, 2011 and are subject to conditions stipulated by RBI. These guidelines were issued by Department of Payment and Settlement Systems of RBI vide their circular number DPSS. PD. No. 2632 / 02.10.002 / 2010-2011. The fresh guidelines replace the earlier circular of July 17, 2009 that allowed a time of 12 days to the banks that now stands reduced to 7 days. Details of these guidelines can be read on this page: Banks in India to Pay Penalty for Delayed Refund of Failed ATM Transactions. However, there seems to be a twist in the tale. Another department of Reserve Bank of India called Customer Service Department issued its own guidelines to all the Banking Ombudsmen operating in India directing them not to fully implement the guidelines relating to payment of compensation by banks due to delayed refund of failed ATM transactions. Later on Customer Service Department denied having issued any such guidelines in its reply under RTI Act, 2005. Read on for details:

Customer Service Department issued a circular on November 3, 2010 in which it specified:

"Applicability of DPSS circular dated July 17, 2009 as "Applicability and enforcement of these instructions by Banking Ombudsmen while passing awards in favour of the complainants was discussed with DPSS and it is of the opinion that it would be inappropriate for the Banking Ombudsmen to pass awards by giving reference to and on the basis of this circular (DPSS circular dated July 17, 2009) as it is likely that the complaints are lodged with the Banking Ombudsman only after the complaint filed by the customer with the bank has been disposed of by the bank.

In view of the above, once the complaint comes before Banking Ombudsman, the compensation payable as per the instructions contained in DPSS circular should not be levied on the banks for the period involved in resolution of the complaint so that the compensation is limited to the period of delay in the bank only..."


In effect, Customer Service Department of Reserve Bank of India is of the opinion (the opinion is actually attributed to DPSS) that if a bank unduly refuses to pay compensation to an aggrieved customer, the Banking Ombudsman will limit the compensation to the period up to the date when the bank concerned refused to pay compensation. No compensation will be payable for the delay after that date.

Official Noting of Reserve Bank of India's Department of Payment & Settlement Systems
(Obtained through Right to Information Act, 2005)(Click on Image to Enlarge)\


Reserve Bank of India Official Noting on ATM Penalty


November 3, 2010 Circular Pictures (click on images to enlarge):



Reserve Bank of India Internal Guideline Part 1

Reserve Bank of India Internal Guideline Part 2

Reserve Bank of India Internal Guideline Part 3

Reserve Bank of India supplies Incorrect Information under Right to Information Act, 2005

Original reply of Reserve Bank of India

Interestingly, Reserve Bank of India's Customer Service Department completely denied the existence of these instructions dated November 3, 2010 to Banking Ombudsmen. In response to my RTI application dated April 16, 2012, Customer Service Department replied on May 4, 2012 saying that "No specific Circular relating to processing / disposal of ATM related complaints has been issued by us..." (See image below - click image to enlarge)



Incorrect Information given by Reserve Bank of India under RTI Act, 2005

Reply of Reserve Bank of India after Appeal under RTI Act, 2005

When I confronted RBI with a copy of the circular dated November 3, 2010, they revised their reply on August 13, 2012 saying that "...no other circular / directive / advisories on ATM transaction or amount of penalty other than the one dated November 3, 2010 has been issued by CSD to the Banking Ombudsmen." (See image below - click image to enlarge)



Revised Information given by Reserve Bank of India under RTI Act, 2005

I wonder why Customer Service Department of Reserve Bank of India issued this circular of November 3, 2010 in the first place. The need for the circular is not justified, discussion with DPSS appears to have been initiated by Customer Service Department and the opinion behind the instructions is attributed to DPSS. On top of everything, Reserve Bank of India wants to hide these instructions to Banking Ombudsmen from public and goes to the extent of giving totally incorrect information under Right to Information Act, 2005 which is an illegal act.

Also See: Reserve Bank of India's Operational Guidelines to Banking Ombudsmen in India

Also see: Arbitration and Appeals for Bank ATM Complaints




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