Reserve Bank of India (Internal Ombudsman) Directions, 2023: Strengthening Customer Complaint Resolution
Introduction: The Reserve Bank of India (RBI) has revolutionized customer complaint resolution with the issuance of the Internal Ombudsman Directions, 2023, on December 29, 2023. This directive aims to bolster the Internal Grievance Redress mechanism within Regulated Entities, bringing about comprehensive changes and updates for banks, Non-Banking Financial Companies (NBFCs), Non-bank System Participants (NBSPs), and Credit Information Companies (CICs).
Key Provisions:
1. Effective Date: These directions are effective from December 29, 2023, and apply nationwide.
2. Suspension: RBI holds the authority to suspend provisions for a specified period in specific cases, with the option to extend the suspension.
3. Definitions: Clearly defines terms related to banks, NBFCs, NBSPs, CICs, Internal Ombudsman, and more.
4. Applicability: This applies to banks, NBFCs, NBSPs, and CICs meeting specified criteria. Entities reaching the thresholds post-issuance must comply within six months.
Office of the Internal Ombudsman:
1. Appointment: Regulated entities must appoint Internal Ombudsman meeting specified criteria, ensuring necessary skills and experience. Deputy Internal Ombudsman may also be appointed.
2. Tenure: Internal Ombudsman’s term is fixed, not exceeding five years. Removal requires RBI approval.
3. Oversight: Internal Ombudsman reports administratively to Competent Authority and functionally to the Board of the regulated entity.
4. Secretariat: Regulated entities provide necessary infrastructure and support to the Internal Ombudsman’s office.
Internal Audit: Entities conduct yearly internal audits of these directions’ implementation, excluding the correctness of decisions by the Internal Ombudsman.
Role and Responsibilities:
1. Complaint Handling: Internal Ombudsman deals with complaints rejected by the regulated entity, analyzing patterns and suggesting corrective actions.
2. Board Oversight: Internal Ombudsman reports to the Board Committee handling customer service, ensuring oversight and periodic reports.
Procedural Guidelines:
1. Complaint Redress: Regulated entities establish an SOP for a Complaints Management Software, auto-escalating rejected complaints to the Internal Ombudsman within 20 days.
2. Decision Process: Internal Ombudsman’s decision is binding on the entity. Disagreement requires approval and explicit communication to the complainant.
3. Regulatory Oversight: RBI supervises customer service-related areas, risk assessment, and compliance with these directions.
4. Reporting to RBI: Periodic reporting of information to RBI, including Internal Ombudsman details, to ensure transparency and oversight.
Repeal Provisions:
1. Repeal of Existing Schemes: Previous schemes related to Internal Ombudsman stand repealed with the issuance of these directions.
Note: This summary provides a brief overview, and entities are advised to refer to the full text for comprehensive understanding.
RBI Notification reference: RBI/CEPD/2023-24/108 CEPD.PRD.No.S1228/13.01.019/2023-24
Applicable to
(1)All Scheduled Commercial Banks (excluding RRBs)
(2)All NBFCs
(3) Non-Bank System Participants
(4) All Credit Information Companies.
Conclusion: In conclusion, the Reserve Bank of India’s Internal Ombudsman Directions, 2023, represent a significant stride in fortifying customer complaint resolution mechanisms. Issued on December 29, 2023, these directives set a new standard for banks, Non-Banking Financial Companies (NBFCs), Non-bank System Participants (NBSPs), and Credit Information Companies (CICs). The framework’s key provisions, stringent oversight, and procedural guidelines ensure a comprehensive and uniform approach to grievance redress. As entities adapt, the directions not only enhance customer satisfaction but also foster a culture of accountability and transparency within the financial sector. The repeal of existing schemes and regulatory oversight by the RBI underscore the transformative nature of these directives, urging prompt compliance and a fresh start for regulated entities nationwide.
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