Reserve Bank tightens Ombudsman Scheme

The Reserve Bank of India has tightened the banking ombudsman scheme with the objective to strengthen the grievance redressal mechanism for customers.

The banking regulator has asked all commercial banks having 10 or more banking outlets to have an independent internal ombudsman (IO) to review customer complaints that are either partly or fully rejected by the banks.

New guidelines:

The banking regulator has asked all commercial banks having 10 or more banking outlets to have an independent internal ombudsman (IO) to review customer complaints that are either partly or fully rejected by the banks.

The IO shall, inter alia, examine customer complaints which are in the nature of deficiency in service on the part of the bank, that is partly or wholly rejected by the bank.

As banks should internally escalate complaints that are not fully redressed to their respective IOs before conveying the final decision to the complainant, customers need not approach the IO directly.

Internal Ombudsman Scheme:

The Internal Ombudsman Scheme of 2018 mandates banks to grant a fixed term of three to five years, which cannot be renewed, to the IO.

The IO can be removed only with prior approval from RBI. The remuneration would have to be decided by the customer sub-committee of the board and not by any individual.

The Ombudsman Scheme of 2018 covers appointment/tenure, roles, and responsibilities, procedural guidelines, and oversight mechanism for the IO, among others.

The implementation of IO Scheme 2018 will be monitored by the bank’s internal audit mechanism apart from regulatory oversight by RBI.

Banking Ombudsman is a quasi-judicial authority, created to resolve customer complaints against banks relating to certain services provided by them.

The Ombudsman is a senior official, who has been appointed by the Reserve Bank of India to address grievances and complaints from customers, pertaining to deficiencies in banking services.

It covers all kinds of banks including public sector banks, Private banks, Rural banks as well as co-operative banks.

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