Wednesday, 22 May 2013

Arbitration and Appeals for Bank ATM Complaints in India

Reserve Bank of India has devised a system of arbitration and appeals for the use of banks and customers who lost money in failed ATM transactions. What we generally see is that after receiving a complaint of a failed ATM transaction, the card issuing bank raises a charge-back with the bank whose ATM was used in the disputed transaction (this bank is called acquiring bank). When the charge-back is rejected by the acquiring bank, meaning the transaction is claimed to be successful, the issuing bank informs the decision of the acquiring bank to the customer and closes the complaint. Issuing banks in most cases do not pursue the complaint once it is rejected by the acquiring bank. However, what they are supposed to do as per Reserve Bank of India's guidelines is a different story. The process of charge-back and response between issuing and acquiring banks happens through a software called Dispute Management System (DMS) which is operated by National Payments Corporation of India (NPCI). After a charge-back is rejected by the acquiring bank and the customer is not satisfied, the issuing bank should refer the dispute to "Arbitration" which is the next step in DMS after charge-back. Read more below...

Time limit for referring a case to Arbitration is 30 days from the date when the original charge-back was rejected. Disputes in Arbitration can either result in Acceptance of charge-back by the Acquiring Bank (customer gets refund of the Failed ATM transaction) or the Acquiring bank not accepting the charge-back, in which case the dispute will go to a Panel called PRD - Panel for Resolution of Disputes. This Panel has been created in NPCI by order of Reserve Bank of India vide their circular DPSS.CO.CHD.No.654/ 03.01.03 / 2010-2011 dated September 24, 2010 and consists of the CEO or COO of NPCI and four members of the Steering Committee of the National Financial Switch (NFS). It is a high level body and for some reason, NPCI has managed to keep this system of Arbitration and the exixtense of PRD, a closely guarded secret. Most bankers in the country are not aware of this system leave alone bank customers. Only a few hundred cases are referred to PRD in a year whereas the number of complaints of Failed ATM Transactions is in Lakhs every year. Referring a case to PRD requires a fee of Rs. 500 to be paid by the issuing bank that may or may not be recovered from the customer. PRD gives its decision within 15 days. Any party, the bank or the customer who is not happy with the decision of the PRD can go in appeal to the Appellate Authority who will be the Regional Director of the Reserve Bank of India's office under whose jurisdiction the transaction happened or the Chief General Manager of the Department of Payment & Settlement Systems of RBI in Mumbai in case the transaction happened in the four metros - Delhi, Mumbai, Chennali, Kolkata.

All banks have access to DMS where Arbitration and PRD process is to be initiated. I strongly recommend that if your genuine ATM complaint of a Failed Transaction is rejected by an Acquiring Bank, you should force your Card Issuing Bank to take the matter to Arbitration and then to PRD. Be willing to pay Rs. 500 if your bank insists on it. is perhaps the only source from where you could get this information. Please share this page with your friends and help them.

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All information given in this blog is obtained from sources in the public domain, RTI applications, discussions with bankers, bank customers in India and also with some employees of Reserve Bank of India having knowledge of the working of various Offices of Banking Ombudsman in India. All information in this blog is presented on a best effort basis and is not claimed to be complete information on any of the subjects covered in this blog. Use of any information given in this blog is purely voluntary on the part of the readers. Author of this blog does not assume any responsibility for any action of the readers related to any matter discussed in this blog or any consequences thereof. Readers of this blog are advised to consult a legal practitioner before taking any action related to any matter discussed in this blog.