Marked drop in complaints against direct selling and recovery agents

Credit card defaulters are getting more disciplined, so are the banks.

According to the annual report on the Bank Ombudsman scheme, prepared by the Reserve Bank of India complaints against direct selling agents and recovery agents declined to 351 at the end of 2012-13 against 1,722 at the end of 2010-11.

RBI officials draw two key inferences from this. One, people prefer to pay dues on time to avoid default or ‘settling’ the account in future, as both will unsettle their capability of accessing loans in future. Two, after the Supreme Court’s intervention, banks are not involving recovery agents to collect dues.

Today, most banks check credit records with CIBIL or Credit Information Bureau. Default, no doubt, is a serious issue and the consequences are well known.

But, equally serious is the issue of ‘settlement’, which usually allows a consumer to pay part dues (at least the principal amount), the remaining is treated as loss in the bank’s book and account is closed. Banks report this to CIBIL which, in turn, records this as a settled account, which puts a question mark on the consumer’s ability to repay the loan fully. So, it is better to pay fully rather than settle the account.

The report also noted growing awareness in rural areas about the ombudsman scheme. The RBI figures show that the share of rural areas in filing complaints had increased not just in absolute numbers but also as a share of total complaints.

The number has gone up to 8,598 in 2012-13 from 7,816 in 2010-11. In terms of share in total complaints, rural areas accounted for 12 per cent in 2012-13 from 11 per cent in 2010-11.

RBI officials attributed this to two reasons. First, financial inclusion had increased and, second, outreach programmes had helped in explaining the complaint redressal mechanism to rural folks.

The best part of the scheme is that it comes free of cost and complaints can be resolved in an average time period of three months.

The Ombudsman can prescribe direct compensation up to ₹10 lakh and indirect compensation up to ₹1 lakh (for mental harassment in cases related with recovery of credit card dues).

A customer can complain to the Bank Ombudsman against the service deficiencies, including credit cards, ATM and internet banking. The scheme, as last amended in 2009, includes non-adherence to the provisions of the Fair Practices Code for lenders or the Code of Bank's Commitment to Customers issued by the Banking Codes and Standards Board of India and non-observance of the Reserve Bank guidelines or directions.

Complaints can be filed with the Ombudsman a month after approaching a bank and un-satisfactory responses there.

There are 15 such offices across the country. Now, banks are also appointing internal Ombudsman, with Punjab National Bank and Oriental Bank of Commerce taking the lead.