Reserve Bank of India (RBI) is strengthening the internal ombudsman (IO) scheme by banks and NBFCs to make grievance redressal system for consumer complaints more effective.

The central bank is also bringing rural co-operative banks under the ambit of the scheme.

RBI Governor Sanjay Malhotra said Wednesday that the changes will authorise IOs to award compensation and allow them direct access to complainants, aligning their role closer to that of the RBI Ombudsman.

The IO mechanism in regulated entities such as banks and non-banking financial companies (NBFCs) provide an independent apex level review of complaints that are rejected by the RE. The RBI believes that increased powers to the IOs will ensure the system to become more effective and credible.

The RBI is also looking at a two-tiered structure for handling timely complaints within banks and other regulated entities prior to escalation to the IO. 

Malhotra said the details of these revised proposals will be included in a draft Master Direction, which will be released shortly for public comments.

Review of ombudsman scheme

The proposals are linked to the Reserve Bank – Integrated Ombudsman Scheme (RB-IOS), launched on 12 November 2021. It provides customers of Regulated Entities (REs) a cost-effective and time-bound mechanism for complaints against banks and other financial institutions. 

The REs currently covered under the scheme include commercial banks, regional rural banks, scheduled primary urban co-operative banks, non-scheduled primary urban co-operative banks with deposits of Rs 50 crore and above, select NBFCs and credit information companies.

The RBI also plans to bring State Co-operative Banks and District Central Co-operative Banks, which until now have been under the jurisdiction of NABARD, within the scheme. A notification to this effect will be issued shortly.

Malhotra said the RBI has undertaken a comprehensive review of the ombudsman scheme, incorporating operational experience, stakeholder feedback and global best practices. The review seeks to improve clarity, simplify procedures and shorten timelines, while ensuring that consumers have access to timely, fair and effective grievance redressal.

The draft scheme will be shortly put up on the RBI website seeking feedback from stakeholders.