RBI unveils stricter norms for banks to bolster grievance redress mechanism


The Reserve Bank of India (RBI) on Wednesday announced a comprehensive framework aimed at strengthening the grievance redress mechanism in banks and nudge lenders address the customer complaints in a time bound manner. The central bank’s action follows an increase in customer complaints in the banking industry in the recent years.

“Effective grievance redress should be an integral part of the business strategy of the banks. It is, however, evident from the increasing number of complaints received in the Offices of Banking Ombudsman (OBOs), that greater attention by banks to this area is warranted,” the RBI said.

The new framework mandates banks to have enhanced disclosures on complaints. Also, it talks about recovery of the cost of redress of maintainable complaints from the banks against whom the number of complaints received in the Offices of Banking Ombudsman (OBOs) are in excess of their peer group averages.

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Besides, the framework also includes an intensive review by RBI of the grievance redress mechanism of banks, having persisting issues in their redress mechanism has been issued today, the RBI said in a statement.

The redress of complaints will continue to be cost-free for the customers of banks and members of public, the RBI said. This is a kind of monetary disincentive to banks to address the customer complaints effectively.

“The framework intends to, inter-alia, provide greater insight into the volume and nature of complaints received by the banks as also the quality and turnaround time of redressal, promote satisfactory customer outcomes and improved customer confidence, and identify remedial steps to be taken by the banks having persisting issues in grievance redress mechanism,” the RBI said.

The framework will come into effect from the date of the circular, the central bank said.

The RBI had first announced about this plan in the December 4 monetary policy where the central bank said it will put in place a comprehensive framework comprising enhanced disclosures on customer complaints, a monetary disincentive in the form of recovery of cost of redress of complaints from banks and undertaking intensive review of grievance redress mechanism and supervisory action against banks that fail to improve their redress mechanism in a time bound manner.

Over years, the RBI has taken various initiatives for improving customer service and grievance redress mechanism in banks. As part of this, the Banking Ombudsman Scheme was introduced in 1995 to serve as an alternate grievance redress mechanism for customer complaints against banks.

In 2019, Reserve Bank also introduced the Complaint Management System (CMS), a fully automated process-flow based platform, available 24×7 for customers to lodge their complaints with the Banking Ombudsman (BO).

As part of the disclosure initiative, banks were advised to disclose in their annual reports, summary information regarding the complaints handled by them and certain disclosures were also being made in the Annual Report of the Ombudsman Schemes published by the Reserve Bank, the central bank said.

Also, to further strengthen grievance redress mechanisms, banks were mandated to appoint an Internal Ombudsman (IO) to function as an independent and objective authority at the apex of their grievance redress mechanism.