Will RBI Enhance Consumer Protection by Empowering Internal Ombudsman of Banks?
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Synopsis
RBI's Governor Sanjay Malhotra has announced new measures to empower Internal Ombudsmen of banks, aiming to fortify consumer protection. With enhanced compensation powers and direct access to complainants, the changes intend to improve the grievance redressal process significantly. Stay tuned for more updates on these pivotal changes.
Key Takeaways
- Internal Ombudsmen to receive enhanced powers.
- Direct access to complainants for faster resolution.
- Two-tier structure for grievance redressal being introduced.
- Review of the Reserve Bank – Integrated Ombudsman Scheme for clarity and efficiency.
- Inclusion of rural co-operative banks to improve consumer access.
Mumbai, Oct 1 (NationPress) Reserve Bank Governor Sanjay Malhotra revealed on Wednesday that to bolster consumer protection, the RBI has opted to empower the Internal Ombudsman (IO) of banks with compensation authority and grant them access to the complainant, thus aligning the IO's role more closely with that of the RBI Ombudsman.
The Reserve Bank has established the Internal Ombudsman (IO) mechanism within select Regulated Entities (REs) such as banks and NBFCs, enabling an independent apex review of complaints that these entities have rejected. This enhancement to the Internal Ombudsman’s powers is expected to significantly boost the effectiveness of this mechanism.
Furthermore, a two-tier structure may be implemented within REs for grievance handling before they escalate to the IO. These initiatives are designed to deliver prompt and meaningful resolutions to customer issues within REs, thereby enhancing service quality and consumer trust. A draft of the Master Direction, detailing these changes, will soon be available for public feedback, the RBI Governor stated.
The Reserve Bank – Integrated Ombudsman Scheme (RB-IOS) launched on November 12, 2021, provides customers of Regulated Entities (REs) with a fast, cost-effective, and efficient alternative for grievance resolution.
Currently, the REs covered by this scheme include Commercial Banks, Regional Rural Banks, Scheduled Primary (Urban) Co-operative Banks, and Non-Scheduled Primary (Urban) Co-operative Banks with deposits of ₹50 crore and above, along with select Non-Banking Financial Companies and Credit Information Companies, as stated by Malhotra.
To facilitate access to the RBI Ombudsman mechanism for customers of rural co-operative banks, it has been decided to include State Co-operative Banks and District Central Cooperative Banks, which were previously under NABARD, into the scope of the RBI Ombudsman Scheme. A notification regarding this will be released shortly.
Additionally, based on operational experiences, stakeholder feedback, and global best practices, the Reserve Bank has undertaken a thorough review of the scheme.
This review aims to enhance clarity, streamline processes, and reduce timelines to further ensure timely, fair, and effective grievance redressal. The draft scheme will soon be posted on the Reserve Bank’s website for stakeholder feedback, he added.
Point of View
The Reserve Bank's decision to empower Internal Ombudsmen signifies a proactive approach to consumer rights. By institutionalizing a robust grievance redressal mechanism, the RBI is reinforcing its commitment to safeguarding consumer interests, which is critical in building trust in the banking system.
NationPress
01/10/2025
Frequently Asked Questions
What are the new powers granted to Internal Ombudsmen?
The Internal Ombudsmen of banks will now have compensation powers and direct access to complainants, enhancing their role in consumer protection.
How will these changes affect consumer grievances?
These changes aim to provide quicker and more effective resolutions to consumer grievances, thereby improving service quality and consumer confidence.
What is the Reserve Bank – Integrated Ombudsman Scheme?
Launched on November 12, 2021, the RB-IOS offers customers of Regulated Entities a fast and cost-effective alternative for grievance resolution.
Which entities are included under the Ombudsman Scheme?
The scheme covers Commercial Banks, Regional Rural Banks, and select Non-Banking Financial Companies, among others.
Are rural co-operative banks included in the Ombudsman Scheme?
Yes, the scheme will now include State Co-operative Banks and District Central Cooperative Banks to enhance consumer access.
