THE OMBUDSMAN SCHEME FOR NBFCs, 2018 explained

The Ombudsman  Scheme for NBFCs 2018 was launched by RBI on February 23, 2018, for cost-free expeditious complaint redressal against NBFCs registered with RBI under Section 45-IA of the RBI Act, 1934 and covered all deposit-accepting NBFCs to begin with. Further, on April 26, 2019 Reserve Bank extended the coverage of the Ombudsman Scheme to eligible deposit non-banking Financial Companies (NBFC-NDs) having an asset size of Rupees 100 crore (One Billion Rupees) or above with customer interface. Nevertheless, the Non- Banking Financial Company-Infrastructure Finance Company (NBFC-IFC), Core Investment Company (CIC), Infrastructure Debt Fund-Non-banking Financial Company (IDF-NBFC), and an NBFC under liquidation are excluded from the ambit of the Ombudsman Scheme for NBFCs.

The Ombudsman for NBFCs is appointed by the Reserve Bank of India who is a senior official not below the grade of General Manager of RBI. The offices of the NBFC Ombudsmen are functioning at four metro centers viz. Chennai, Kolkata, Mumbai, and New Delhi and handle complaints of customers in the respective zones. The Ombudsman shall receive and consider complaints relating to the deficiencies in services filed on any one or more of the grounds stated below and facilitate their satisfaction or settlement by agreement or through conciliation and mediation between the non-banking financial company concerned and the aggrieved party or by passing an Award by the provisions of the Scheme. Wherever the Ombudsman decides to allow the complaint, the Award passed shall contain the direction/s, if any, to the NBFC for the specific performance of its obligations and in addition to or otherwise, the amount, if any, to be paid by the NBFC to the complainant by way of compensation for any loss suffered by the complainant. That may be arising directly out of the act or omission of the NBFC. However, the Ombudsman shall not have the power to pass an Award directing payment of an amount that is more than the actual loss suffered by the complainant as a direct consequence of the act of omission or commission of the NBFC, or one million rupees (10 lakh) whichever is lower. The Ombudsman may, also award compensation not exceeding one million rupees (10 lakh) to the complainant, taking into account the loss of time, expenses incurred, harassment, and mental anguish suffered by the complainant. The Ombudsman Scheme also provides for an Appellate mechanism under which the complainant / NBFC has the option to appeal against the decision of the Ombudsman before the Appellate Authority.

Ground for complaint relating to deficiency of services:

Any person may file a complaint with the Ombudsman having jurisdiction, on any one of the following grounds alleging deficiency in services or non-observance of directions issued by Reserve Bank such as  non-payment or inordinate delay in the payment of interest on deposits;  non-adherence to the Reserve Bank directives, if any, applicable to rate of interest on deposits;  non-repayment or inordinate delay in the repayment of deposits; non-presentation or inordinate delay in the presentation of post-dated cheques provided by the customer; failure to convey in writing, the amount of loan sanctioned along with terms and conditions including annualised rate of interest and method of application thereof; failure or refusal to provide sanction letter/ terms and conditions of sanction in vernacular language or a language as understood by the borrower; failure or refusal to provide adequate notice on proposed changes being made in sanctioned terms and conditions in vernacular language as understood by the borrower; failure or inordinate delay in releasing the securities documents to the borrower on repayment of all dues; levying of charges without adequate prior notice to the borrower/ customer; failure to provide legally enforceable built-in repossession clause in the contract/ loan agreement;  failure to ensure transparency in the contract/ loan agreement regarding (i) notice period before taking possession of security; (ii) circumstances under which the notice period can be waived; (iii) the procedure for taking possession of the security; (iv) a provision regarding final chance to be given to the borrower for repayment of loan before the sale/ auction of the security; (v) the procedure for giving repossession to the borrower and (vi) the procedure for sale/ auction of the security;

Non-Admission of a complaint by the Ombudsman:

The complainant must first approach the concerned NBFC and if the NBFC does not reply within one month after receipt of the complaint, or rejects the complaint, or if the complainant is not satisfied with the reply given, the complainant can file the complaint with the Ombudsman for NBFC. The complainant may approach the Ombudsman for redressal of his grievance. The Ombudsman shall not accept and consider, if the complaint is not made to the Ombudsman within one year from the date of receipt of reply from the NBFC or in case the reply is not received from the NBFC and the complaint to the Ombudsman is made after the lapse of more than one year and one month from the date of complaint. Further, the Ombudsman will not accept a complaint, in case the subject matter of the complaint is pending disposal / has already been dealt with at any other forum like court of law, consumer court, tribunal or arbitrator or any other forum is pending or a decree or Award or order has been passed by any such court, tribunal, arbitrator or forum; or if the complaint is frivolous or vexatious.

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