Customer Dispute Settlement in the Banking Industry of Pakistan
Muhammad Mobasher Ali
Introduction : Customer Dispute Settlement in the Banking Industry of Pakistan
Customer dispute resolution is an essential component of service quality in the banking industry. In our recent article, we have seen Customer Dispute Settlement in Banking Industry Globally, As banking services grow increasingly complex in Pakistan—with the expansion of digital channels, branchless banking, and various financial products—the frequency and nature of disputes have also evolved. Addressing these disputes promptly, transparently, and fairly is not just a regulatory (SBP) requirement but a key factor in maintaining customer trust and institutional integrity.
As the State Bank of Pakistan (SBP) asserts:
Fair treatment of customers is fundamental to building trust and confidence in the banking system
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What Constitutes a Customer Dispute?
A customer dispute in banking typically arises when there is a disagreement between a bank and a customer regarding a transaction, service, or policy. Common causes include:
- Unauthorized transactions or fraud
- Charges or deductions without customer consent
- Delay or denial in processing transactions
- ATM or digital banking errors
- Loan recovery practices
- Breach of service commitments
Dispute Resolution Mechanisms in Pakistan:Customer Dispute Settlement Pakistan
The customer dispute resolution system in Pakistan operates at multiple levels:
1. Internal Complaint Resolution (ICR) by Banks
Banks are required by SBP to have dedicated complaint resolution units. Customers can lodge complaints through helplines, email, online portals, or at branches. Banks are mandated to resolve complaints within 7 to 15 working days.
According to the SBP’s Annual Consumer Protection Review (2023), over 91% of customer complaints were resolved at the bank level.
2. Banking Mohtasib Pakistan (BMP)
Established under the Federal Ombudsman Institutional Reforms Act, 2013, the Banking Mohtasib provides an independent and impartial forum for customer complaints. BMP handles complaints free of charge.
As per BMP’s 2023 Annual Report, over 27,000 complaints were received in the year, of which over 24,000 were resolved, with monetary relief of over PKR 1.2 billion awarded to customers.
> “We are committed to strengthening public confidence in the banking system by providing speedy and low-cost redressal of grievances.”
(Office of the Banking Mohtasib Pakistan)
3. State Bank of Pakistan (SBP) Oversight
SBP acts as a regulatory watchdog ensuring that banks adhere to fair practices. SBP’s Consumer Protection Department regularly monitors bank compliance. The SBP issued a Customer Grievance Handling Mechanism in 2016, updated in 2021 to strengthen redressal channels.
Case Examples
1. Digital Fraud Complaints: With the rise in digital banking, fraud-related complaints have surged. In 2022, a major bank in Pakistan refunded over PKR 15 million in unauthorized mobile transaction disputes after customer escalation to the BMP.
2. Loan Recovery Practices: A customer filed a complaint against aggressive recovery tactics by a private bank. The BMP intervened, directing the bank to issue an apology and revise recovery procedures.
Challenges in Dispute Resolution
Despite progress, several issues persist:
Delays in resolution: Not all banks meet the 15-day resolution window.
Lack of awareness: Many customers, especially in rural areas, are unaware of their right to file complaints with BMP or SBP.
Language and literacy barriers: Complaint processes are often inaccessible to low-literacy populations.
Bias perception: Some customers still perceive internal complaint handling units as biased toward the bank.
Recommendations for Improvement
1. Customer Education Campaigns: Banks and SBP should conduct awareness drives, especially in rural and low-income areas, Although, in Urban areas People get some understanding by discussion with others, but still need imporvement,
2. Simplify Processes: Digital complaint portals must be made multilingual and mobile-friendly.
3. Empower Banking Mohtasib: Expand jurisdiction and resources of the BMP to address rising caseloads.
4. Real-Time Tracking: Provide customers with complaint tracking systems to increase transparency.
Conclusion
An effective customer dispute resolution framework enhances customer trust and long-term loyalty. As a Banker I Believe if you handle your customer disputes tactfully and with care and gave utmost importance for resolution, that customer shows in return such a loyalty that no one can ever see. In Pakistan, while mechanisms like internal complaint units, the Banking Mohtasib, and SBP oversight are operational and increasingly effective, further efforts are needed to expand accessibility, transparency, and responsiveness.
As aptly quoted by the former Banking Mohtasib, Mr. Kamran Shahzad:
“Access to justice in financial matters is not a luxury; it is a right.”
By strengthening dispute settlement processes, Pakistan’s banking sector can ensure more equitable and customer-focused financial services.