Banks with over 10 branches to have internal ombudsman: RBI’s Internal Ombudsman Scheme 2018

The Reserve Bank of India (RBI) on September 3, 2018 asked all scheduled commercial banks with more than 10 branches to appoint an Internal Ombudsman.

However, the apex bank excluded Regional Rural Banks from its directive.

Highlights of the Scheme

• The Scheme covers appointment and tenure; roles and responsibilities; procedural guidelines and oversight mechanism for the Internal Ombudsman.

• All Scheduled Commercial Banks in India having more than 10 banking outlets are required to appoint IO in their banks.

• The IO will examine customer complaints referring to the deficiency in service on the part of the bank that are partly or wholly rejected by the bank.

• The customers of banks need not approach the IO directly as the banks themselves will escalate all complaints internally, which are not fully redressed to their respective IOs before conveying the final decision to the complainant.

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

Why was there a need of revised directions regarding Internal Ombudsman?

In May 2015, the RBI had advised all public-sector and selected private and foreign banks to appoint Internal Ombudsman (IO) as an independent authority to review complaints rejected by them.

The IO mechanism was set up with a view to strengthen the internal grievance redressal system of banks and to ensure that the complaints of the customers are redressed at the level of the bank itself by an authority (Internal Ombudsman) placed at the highest level of bank’s grievance redressal mechanism.

Now, to enhance the independence of the Internal Ombudsman while simultaneously strengthening the monitoring system over functioning of the IO mechanism, RBI issued revised directions under Section 35 A of the Banking Regulation Act, 1949 in the form of ‘Internal Ombudsman Scheme, 2018’.

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