Laws on electronic transactions: banking ombudsman suggests changes

The banking ombudsman has proposed certain amendments in the Part IV-A of the Banking Companies Ordinance, Electronic Transactions Ordinance of 2002 and Payment System and Electronic Fund Transfer Act of 2007 to safeguard the interests of the general public.
He was addressing a press conference on the release of seventh annual report here on Wednesday. Banking Mohtasib Pakistan Mansurur Rehman Khan said that annual report includes analysis of systemic deficiencies and control weaknesses in banks for which the banking mohtasib had already forwarded recommendations to the SBP, besides proposing certain amendments.
He said that Electronic Transactions Ordinance specifically barred its application to the negotiable instruments defined in Section 13 of Negotiable Instruments Act of 1881. This ordinance was promulgated in 2002, much before the advent of 'Online Banking' in Pakistan. Therefore, he said, the position needed to be reviewed in the changed circumstances.
"It was suggested that SBP may consider advising the federal government to issue a notification in this regard under Section 31(2) of the ordinance," he added.
Secondly, the Payment Systems and Electronic Funds Transfers Act of 2007, in its definition of Payment Instruments, expressly excluded payment instruments prescribed in the Negotiable Instruments Act of 1818, although it defined a 'Truncated Cheque', he pointed out.
"It is felt that this state of the law may cause complications among other things, of cheques collected online. In this regard, we have referred to the recent amendments in sections 6, 64, 89 and 131 of the Indian Negotiable Instruments Act and requested the SBP to consider the enactment of similar amendments in the Negotiable Instruments Act in force in Pakistan," he added.
Besides this, he said that, a set of eight amendments proposed in Chapter IV-A of the Banking Companies Ordinance, 1962, had been forwarded to the State Bank to remove deficiencies.
He said that the report also included 11 case studies based on some leading decisions of the Banking Mohtasib during the year. Some specific cases briefly cited observations on service culture, drew attention to the unsatisfactory and unsympathetic attitude adopted by some banks towards complainants and the complaint resolution process, and highlighted the need for improving internal processes and service standards.
The highlight of the report was the stated position of 431 cases granted during the year and payment of Rs123.379 million against claims of over Rs200 million by the banks.
Another important development was the speedy disposal of complaints during the year under review, against average time taken for resolution of complaints of 101 days, an average time period of 45 days for complaint resolution was set by the mohtasib as a target for 2011.
"This was in anticipation to an amendment proposed to the State Bank of Pakistan in Section 82D (2) of the Banking Companies Ordinance of 1962 (BCO) for reducing the prescribed notice period," Mansurur Rehman said.
The Banking Mohtasib said that notwithstanding the fact that the amendment had not yet been made, the average time taken in resolving a complaint had been brought down to 45 days as of December 31, 2011.
He said: "Once the proposed amendment is enacted, the average time period will be cut down even further and drastically." The average complaint resolution period previously stood at 326 days and 101 days in 2009 and 2010, respectively.
According to the report, the total number of complaints received by the Banking Mohtasib Pakistan (BMP) Secretariat stood at 3,622 in 2011 against 3,185 in 2010, showing an overall increase of 13.7 percent.
Of the total complaints, 896 were formal (submitted after adopting the procedure as laid down in the law), while 2,726 complaints were informal.
In terms of complaint disposal, 42.8 percent of formal complaints were granted, 37.6 percent declined, and 8.6 percent rejected while 11 percent were reported pending at the year-end.
As on December 31 last year, 99 formal and 80 informal complaints pertaining to the year 2011 were outstanding. Of these, all but six formal and an informal complaint have so far been disposed.
In terms of complaint categories, an overall decrease of 19.3 percent was witnessed in total formal complaints relating to consumer products such as advances, loan and deposits and ATMs, when compared with 2010. This, the report said, was because of an increased public awareness as well as the increased focus of banks on internal monitoring, the report says.
Necessary guidance provided to Regional Heads of banks by the Banking Mohtasib also played a role in this regard, he mentioned.
He said that his office was also publishing two books to provide banking guidelines to the public in general and the banking community in particular. The first one is a selection of 33 case studies of a unique nature based on complaints decided by the Banking Mohtasib Pakistan during the past seven years.
The second book, to be published in two volumes, is a compendium of 374 orders passed by successive Banking Mohtasibs and relates to complaints received between May 2005 and December 2010.