Internal Ombudsman Rules for Regulated Entities
The Reserve Bank of India
released the master directions on the Internal Ombudsman rules for the
regulated entities on 6 Oct '23 to harmonize the instructions applicable to the
various regulated entities on the Internal Ombudsman Mechanism.
Background
All
public-sector banks as well as a few private and foreign institutions were
advised by the Reserve Bank of India in May 2015 to designate an Internal
Ombudsman as an impartial body to examine grievances that the individual banks
had partially or completely dismissed. To minimize the need for customers to
seek redress from other sources, the Internal Ombudsman mechanism was
established to strengthen the internal grievance redressal system of banks and
guarantee that customer complaints are addressed at the bank level by an
authority positioned at the highest level of the bank's grievance redressal
mechanism. The framework has gradually been expanded to include all credit
information companies, a subset of non-banking financial companies, and
non-bank system participants. The IO framework principles are presently being
implemented for different types of regulated businesses with comparable design
elements but with some differences in operational concerns. It has been
determined to harmonize the current Internal Ombudsman guidelines and offer a
consolidated master direction, based on the lessons learned from their
execution.
Who
can be an Internal Ombudsman?
1.
The internal ombudsman must be an officer who has served in the financial
sector for at least seven years and is either retired or currently serving in a
position equivalent to that of general manager at another bank, financial
sector regulatory body, NBSP, NBFC, or CIC. The officer must also possess the
requisite skills and experience in areas such as regulation, supervision,
payment and settlement systems, credit information, or consumer protection.
2. Neither the Internal Ombudsman's former employment nor its current
employment may be attributed to the regulated organization or any of its
affiliated entities.
3.
The IO shall not be over 70 years of age before the completion of the tenure.
Appointment
of IO
1.
To maintain operations during the IO's absence, the regulated entity may
designate more than one IO based on the volume of complaints received by them.
In certain situations, the regulated entity may specify each Internal
Ombudsman's specific jurisdiction.
2.
The regulated entity may designate one or more deputy Ios to support the
IO in competently handling complaints. The deputy IO may fill in as the IO for
a maximum of 15 working days during the IO's temporary absence, with the sole
responsibility of examining the complaints that were turned down.
3.
The period of office for an IO or deputy IO must be fixed, with a minimum of
three years and a maximum of five years.
4.
They will not be eligible for re-appointment or term extensions in the same
regulated entity. Moreover, they cannot be fired before the end of their
contracted term without the Reserve Bank of India's express consent.
5.
In case the vacancy arises on account of reasons beyond the control of the
regulated entity, they shall inform RBI within 10 working days from the date of
such vacancy. Appointment within 3 months from the date of vacancy and submit a
report within 5 working days from the date of appointment to RBI.
Roles
of IO
The
IO will only address complaints that have been reviewed by the regulated body
and either partially or completely rejected, rather than complaints that are
received directly from complainants. In situations where the regulated entity
has rejected the findings of the IO, the RBI's Consumer Education and
Protection Department may examine the issue.
Applicability
1.
Banks with ten or more branches throughout India, regardless of whether they
were founded there or not;
2.NBFCs that, as of this
date, meet the following requirements:
• NBFCs that accept deposits and have ten branches or more (NBFCs-D);
• Non-deposit taking NBFCs (NBFCs-ND) with a public client interface and assets
of at least Rs. 5,000 crore;
3.
Every NBSP that, as of March 31, 2023, or later, had more than one crore
outstanding Pre-paid Payment Instruments. Nevertheless, even if at a later time
the total amount of outstanding Pre-paid Payment Instruments drops below the
level, the Scheme will still be in effect.
4.
Following the issuance of these directives, every regulated entity that meets
the specified standards will fall within their purview and will need to
establish an internal Ombudsman mechanism within six months of doing so.
These
actions are taken in the exercise of the powers granted by,
Section
35A of the Banking Regulation Act, 1949, Section 45L read with 45M of the
Reserve Bank of India Act, 1934, Section 11(1) of the Credit Information
Companies (Regulation) Act, 2005, and Section 18 of the Payment and Settlement
Systems Act, 2007.
By permitting a review before their rejection by an apex-level authority within the Regulated Entity, these Directions aim to enhance the Internal Grievance Redress system inside a Regulated Entity and guarantee an appropriate and prompt resolution of client complaints. The RBI's current Internal Ombudsman Schemes for banks, non-banking financial companies (NBFCs), non-bank system participants (NBSPs), and credit information companies (CICs) are integrated and updated by these directives.
Reference
https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12395&Mode=0
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