RBI releases framework for the grievance redress mechanism in banks

The Reserve Bank of India (RBI) as announced in the ‘Statement on Developmental and Regulatory Policies’ issued as part of the Monetary Policy statement dated December 4, 2020, today put in place a comprehensive framework to improve the efficacy of the grievance redress mechanism of banks. The framework comprising of i) enhanced disclosures on complaints to be made by the banks; ii) 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) is in excess of their peer group averages; and iii) intensive review by RBI of the grievance redress mechanism of banks having persisting issues in their redress mechanism has been issued today. The framework will come into effect from the date of the circular i.e.January 28, 2021.
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. As a part of the framework, banks were required to disclose in their annual reports, summary information regarding the complaints handled by them. Certain disclosures were also being made in the Annual Report of the Ombudsman Schemes published by the Reserve Bank. Banks were also mandated to appoint an Internal Ombudsman (IO) to function as an independent and objective authority at the apex of their grievance redress mechanism. If a lender has higher unresolved complaints than average, it will be charged. Bank customers, however, will continue to enjoy a free cost of redressal.
The cost of redress to be recovered in this respect will be the average cost of handling a complaint at the Offices of the Banking Ombudsman (OBOs) during the year. To operationalize the cost-recovery framework for banks, peer groups based on the asset size of banks as of March 31 of the previous year will be identified. RBI will consider three parameters – the average number of maintainable complaints per branch, the average number of maintainable complaints per 1,000 accounts held by the bank; and an average number of maintainable digital complaints per 1,000 digital transactions executed through the bank by its customers. Disclosures, shall “serve as an important tool for market discipline as well as for consumer awareness and protection,” RBI said. If there is an excess of one parameter, 30 per cent of the cost will be recovered from banks. In case of excess in two parameters, 60 per cent of the cost will be recovered, and if the bank is found lacking in all three parameters, 100 per cent of the cost would be recovered from the bank, it said.
Master list of grounds of complaints to be used for disclosure on the top five ground-wise receipts of complaints by banks are ATM/Debit Cards, Credit Cards, Internet/Mobile/Electronic Banking, Account opening/difficulty in operation of accounts, Mis-selling/Para-banking, Recovery Agents/Direct Sales Agents, Pension and facilities for senior Citizens/differently-abled, Loans and advances, Levy of charges without prior notice/excessive charges/foreclosure charges, Cheques/drafts/bills, Non-observance of Fair Practices Code, Exchange of coins, issuance/acceptance of small denomination notes and coins, Bank Guarantees/Letter of Credit and documentary credits, Staff behavior, Facilities for customers visiting the branch/adherence to prescribed working hours by the branch, etc.and others.