Reserve Bank - Integrated Ombudsman Scheme (RB-IOS), 2021

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Overview:

The Delhi High Court recently rebuked the RBI Ombudsman for passing an unreasoned order, observing that the Reserve Bank- Integrated Ombudsman Scheme, 2021, under which the official is appointed, cannot be reduced to a “tantalizing promise.”

About Reserve Bank - Integrated Ombudsman Scheme (RB-IOS), 2021

  • It was launched on November 12, 2021.
  • The Scheme simplifies the grievance redress process at RBI by enabling customers of Regulated Entities (REs) like banks, Non-Banking Financial Companies (NBFCs), Payment System Participants (PSPs), and Credit Information Companies to register their complaints at one centralised reference point.
  • The objective of the RB-IOS is to provide cost-free redress of customer complaints involving ‘deficiency in service’ on the part of entities regulated by the RBI, if not resolved to the satisfaction of the customers or not replied to within a period of 30 days by the regulated entity.
  • It integrates the erstwhile three Ombudsman schemes of RBI namely, (i) the Banking Ombudsman Scheme, 2006; (ii) the Ombudsman Scheme for Non-Banking Financial Companies, 2018; and (iii) the Ombudsman Scheme for Digital Transactions, 2019. 
  • In addition to integrating the three existing schemes, the Scheme also includes under its ambit additional REs, namely, Non-Scheduled Primary (Urban) Co-operative Banks with a deposit size of ₹50 crore and above and Credit Information Companies.
  • The Scheme adopts the ‘One Nation One Ombudsman’ approach by making the RBI’s Ombudsman mechanism jurisdiction neutral.
  • Who is a Banking Ombudsman?
    • The Banking Ombudsman is a senior official appointed by the RBI as an appellate body where customers can escalate complaints if the financial institution fails to address the complaint within 30 days.
    • Even when customers are not satisfied with the resolution offered or explanation given by the financial institution, they can approach the ombudsman.
    • The Reserve Bank may appoint one or more of its officers as Ombudsman and Deputy Ombudsman to carry out the functions entrusted to them for a period not exceeding three years at a time.
  • Features of RB-IOS:
    • The Scheme will have one portal, one email, and one address for the customers to lodge their complaints.
    • It has done away with the jurisdiction of each ombudsman office.
    • The Scheme defines ‘deficiency in service’ as the ground for filing a complaint, with a specified list of exclusions. A deficiency of service is a shortcoming or an inadequacy in the financial service or some other service related to it that the RE is supposed to provide.
    • It will no longer be necessary for a complainant to identify under which scheme he/she should file a complaint with the Ombudsman.
    • A Centralised Receipt and Processing Centre has been set up at RBI, Chandigarh, for receipt and initial processing of physical and email complaints in any language.
    • The responsibility of representing the RE and furnishing information in respect of complaints filed by customers against the RE would be that of the Principal Nodal Officer in the rank of a General Manager in a Public Sector Bank or equivalent.
    • The RE will not have the right to appeal in cases where an Award is issued by the ombudsman against it for not furnishing satisfactory and timely information/documents.
    • The Executive Director-in charge of Consumer Education and Protection Department of RBI would be the Appellate Authority under the Scheme.

Q1) What are Non-Banking Financial Companies (NBFCs)?

An NBFC is a company registered under the Companies Act 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by the Government or local authority or other marketable securities of a like nature. They offer various banking services but do not have a banking license. They provide banking services like loans, credit facilities, TFCs, retirement planning, investing and stocking in the money market. Generally, these institutions are not allowed to take traditional demand deposits—readily available funds, such as those in checking or savings accounts—from the public. 

Source: Delhi High Court Rebukes RBI Ombudsman For Passing Unreasoned Order, Says Ombudsman Scheme Can’t Be Reduced To A ‘Tantalizing Promise’