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RBI issues Master Direction on Internal Ombudsman Mechanism [Download PDF]


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The Reserve Bank of India (RBI) has introduced Master Directions with the aim of standardizing instructions for the Internal Ombudsman (IO) mechanism across various regulated entities.

Internal Ombudsman

Reserve Bank of India (RBI) had, in May 2015, advised all public-sector and select private and foreign banks to appoint Internal Ombudsman (IO) as an independent authority to review complaints that were partially or wholly rejected by the respective banks. 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 placed at the highest level of bank’s grievance redressal mechanism so as to minimize the need for the customers to approach other fora for redressal.

Master Directions

The issuance of these directions is intended to establish uniformity in several key aspects, including the timeline for escalating complaints to the IO, exclusions from the escalation process, managing temporary absence of the IO, setting minimum qualifications for IO appointments, and updating reporting formats. Additionally, the circular issued by the RBI mentions the introduction of the Deputy Internal Ombudsman position.

According to the RBI, the Master Directions are designed to enhance the effectiveness of the IO mechanism and, consequently, strengthen the Internal Grievance Redress system within regulated entities. The regulatory body anticipates that these instructions will not only contribute to a more robust IO mechanism but will also facilitate compliance for the regulated entities involved.

This Master Direction brings in uniformity in matters like timeline for escalation of complaints to the IO, exclusions from escalating complaints to the IO, temporary absence of the IO, minimum qualifications for appointing the IO and updation of reporting formats, in addition to introduction of the post of Deputy Internal Ombudsman. These instructions are expected to further strengthen the IO mechanism and in turn, the Internal Grievance Redress system in regulated entities apart from providing ease of compliance.

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