RBI has introduced a new notification vide CIRCULAR NO. RBI/2022-23/124 CEPD.PRD.NO.S806/13-01-008/2022-23 on 6th October in respect of the decision of the RB-IOS of bringing the Credit Information Companies (CICs) also under the ambit of RB-IOS 2021 to broaden its base as mentioned in Para 2 of Statement on Developmental and Regulatory Policies dated August 5, 2022, which shall come into effect from 1st April 2023.
The Directions are introduced to strengthen the internal grievance redress mechanism within (the CIC) which enables a review of customer complaints before their rejection by an independent apex-level authority within the CIC.
The article discusses this notification’s key provisions to clarify such provisions.
What is RB – IOS
The Reserve Bank-Integrated Ombudsman Scheme, most commonly referred to as (RB-IOS) 2021, covers the Regulated Entities (REs) like the Scheduled commercial banks, including urban cooperative banks (NBFCs) and non-scheduled primary cooperative banks with deposit sizes of ₹50 crore and above.
These Directions are applicable to all Credit Information Companies (‘CICs’) as defined under sub-section (e) of sec – 2 of the Credit Information Companies (Regulation) Act, 2005 (‘Act’) as amended from time to time.
Who is an Internal Ombudsman?
An Internal Ombudsman is appointed to deal with complaints which have already been examined by the CIC but have been partially or wholly rejected by the credit information companies.
Office of the Internal Ombudsman
The following aspects are covered under the Office of the Internal Ombudsman
Who can be appointed as an Internal Ombudsman
The following persons can be appointed as internal ombudsperson for 3 and a maximum of 5 yrs after fulfilling the prerequisites.
- He must be a retired or a serving officer, not below the rank of Deputy General Manager or at an equivalent position in any financial sector regulatory body, CIC, (NBFC) or bank, possessing the necessary skills and experience of a minimum of 7 yrs in the banking and related sectors.
- He must not be previously employed, nor presently be employed, by the CIC or the parties related to the same.
- He shall not attain the age of 70 before completing the proposed term.
- The Internal Ombudsman won’t be eligible for an extension of tenure or re-appointment in the same CIC.
When should an Internal Ombudsman be appointed?
The credit information company must ensure that at no point of time shall the position of the internal ombudsman must remain vacant, and to ensure the same, the CIC must initiate the process of fresh appointment of IO well in advance to fill in the vacancy before the expiration of the tenure of the incumbent IO as well as make sure that there exists at least one-month b/w the time of demitting the office of the outgoing IO and the incumbent IO.
What are the things entitled to Internal Ombudsman
The internal Ombudsman is entitled to the following –
The payments, facilities and benefits that shall be provided to the IO must be determined by the CIC, which must be appropriate, keeping in mind the stature and position of the IO, who is the apex of the grievance redressal mechanism of the CIC and the necessity of attracting experienced persons possessing the requisite expertise.
It must be noted that the payments, facilities and benefits, once decided, cannot be changed during the entire tenure of the internal Ombudsman.
The internal ombudsman cannot be removed before completing the contracted term unless explicit approval has been received from RBI in this regard.
What happens if a vacancy arises suddenly?
Suppose the vacancy arises because of the reasons which are not in the control of Credit Information Companies, like death, resignation, incapacitation, terminal illness, etc. In that case, a new IO must be appointed by the CIC within 90 days, i.e. 3 months from the date the vacancy has arisen.
The CIC can appoint more than one IO if the same is deemed fit, depending upon the volume of the anticipated complaints. However, it is important for the CIC to restrict the jurisdiction of the IO in such cases.
Secretariat to the Office of Internal Ombudsman
- The Credit Information Companies can appoint such officers or staff as deemed fit by the authority and make them available to the IO for facilitating effective functioning or as per the directions of RBI.
- The office of the IO shall be functioning either from the Head Office or the Corporate Office of the CIC.
What are the Directions for Internal Audit?
The internal audit of the Credit Information companies would cover the implementation of the directions and the compliance of the same inter alia, including the following.
- The adequacy of the infrastructure provided to the IO, which shall include space, IT infrastructure, human resources, etc., along with it being in line with the volume of complaints as well as the stated position of the IO at the apex of the grievance redressal mechanism.
- Adherence with various timelines indicated in these directions.
- Support the Credit Information companies provided to the IO to redress the complaints.
However, the internal audit shall exclude any assessment of the correctness of decisions taken by the Internal Ombudsman.
Roles and Responsibilities of Internal Ombudsman
What is the scope of the role of the Internal Ombudsman?
The IO is not obligated to handle the complaints directly received by the complainant or from the general public. Rather is obligated to deal with only those complaints already examined by the CIC but have been partially or wholly rejected by the credit information companies.
There are certain types of complaints that the IO, such as shall not handle –
- Complaints regarding fraud, misappropriation, etc., except those resulting from a deficiency in service, if any, of the CIC.
Complaints/references regarding (a) internal administration, (b) HR or (c) payment & emoluments of the staff
- References in the nature of commercial decisions, suggestions made by the CIC
- Complaints that have been decided by or are already pending in other for such as Consumer Disputes Redressal Commission, courts, etc.
- Disputes the remedy provided under Section 18 of the Credit Information Companies (Regulation) Act, 2005.
- Complaints falling outside the purview of this notification shall be immediately referred back to the CIC by the IO.
- The IO shall examine the complaints based on the records present with the CIC, which shall include any documents submitted by the complainant and comments or clarifications furnished by the CIC to the specific queries of the IO. The IO can seek information from the concerned Credit Institution/s (CI), if deemed necessary, along with additional information from the complainant, through the CIC. The IO must record the Reason for the decision in each case.
- The IO can conduct a meeting with the functionaries of CIC and ask for the documents available with them, which are essential for the examination of the complainant and review of the decision. The CIC must furnish such records as demanded by the IO for expeditious resolution of the complaints without delay.
- The IO is required to analyze the pattern of the complaints received against CIC on a quarterly basis on certain parameters like entity-wise, product-wise, category-wise, consumer group-wise, geographical location-wise, followed by providing input regarding the intervention in the policy to the CIC if warranted so.
- The IO cannot represent the CIC in the legal proceedings before any court, authority or fora.
The IO shall be reporting to the MD or the CEO of the Credit Information Companies administratively and functionally to the Board.
Board Oversight and participation
(a) The IO is required to furnish periodic reports to the Board’s CPC, preferably quarterly but not less than twice a year.
(b) The IO shall be designated as an ex-officio member or a permanent invitee to the meetings of the Consumer Protection Committee.
Procedure Guidelines as per the notification
The procedural guidelines are elaborated on below.
- The CIC must formulate an SOP as approved by the Board of Directors to establish a system of auto-escalation within 21 days from the receipt of the complainants that are wholly or partially rejected by the CIC Internal grievance redress mechanism to the IO for a final decision.
- The IO and the CIC must ensure that the final decision is communicated to the complainant within a maximum of thirty days from the date of receipt of the complaint by the CIC.
If the CIC has complaint management software, the IO must be provided just the ‘read-only’ access to the system and enable
- the upload of the decisions of the IO.
- Such ’access to the Reserve Bank’s Complaint Management System shall allow the internal Ombudsman keeping a record of the cases forwarded by the offices of RBI Ombudsmen, where it applies, the decision of the Appellate Authority under the RBI -OS (ii) decisions of the RBI Ombudsmen, and
- The decision of the IO shall be considered binding on the CIC, except where the CIC has obtained approval for disagreeing with such a decision.
- In cases wherein the IO upholds the decision of the CIC regarding the rejection or partly rejects the complaint, the reply to the complainant must e state explicitly the fact about the complaint being examined by the IO and, for the reasons stated in the reply, the decision of the CIC has been upheld.
- If the IO overrules the decision of the rejection of the complaint by the CIC . the CIC can express disagreement with the decision of the IO only after receiving the approval of its MD /CEO. Here the reply to the complainant shall explicitly state the fact that the examination of the complaint has been done by the Internal Ombudsman and the decision of the CIC was overruled by him in favour of the complainant; however, the CIC, with the approval of its MD /CEO, has disagreed with the decision of the IO. Such a decision must be communicated to the complainant within Seven days of communication of the decision of the Internal Ombudsman on the case to the CIC. All such cases must be subsequently reviewed on a quarterly basis by the Board of the CIC.
- The complaints that are fully or partly rejected even after examination by the IO, the CIC must necessarily advise the complainant, as part of the reply, that he/she has the right to approach the RBI Ombudsman for redressal (provided the complaint pertains to a Credit Institution / Regulated Entity that falls under RB-IOS, 2021) together with the complete details of the complaint. The advice must also include the link to the Reserve Bank’s portal for online filing of complaints.
- The CIC shall be using the analysis of complaints handled by the Internal Ombudsman as a part of their training programmes or conferences to raise awareness among their staff interacting with complainants and with Credit Institutions about inter-alia, the patterns of complaints that are received in the CIC, their main causes, the remedial measures as well as the expected action by the frontline staff. The Internal Ombudsman may also be associated with such training, where necessary.
- At the time of assessing the performance of the IO, in addition to the level of pendency etc., the CIC must also consider the no. of cases wherein substantive differences b/w the decisions of the IO vis-à-vis those given by the RBI Ombudsman subsequently.
- The guidelines/instructions in respect of the role of the IO must be CIC disseminated by the CIC among its staff while communicating the appointment of the IO in the organization, which includes all the branches and administrative offices.
- The CIC shouldn’t provide the contact details of the IO in the public domain because the IO won’t handle complaints received directly from complainants.
- It is mandatory to include the decision of the IO on the respective complaint in the information submitted by the Credit Internal Companies to the RBI Ombudsman office when replying to or furnishing documents to the office of the RBI.
Reporting to RBI
The reporting to the RBI must be done in the following manner-
(a) A system of periodic reporting of information to the Consumer Education and Protection Department, Central Office, Reserve Bank of India, shall be put in place by the CIC on a quarterly and annual basis as per the prescribed format. The reports shall be submitted on or before the 10th day following the quarter/year they are due.
The CIC should furnish the details of the individual so appointed to the Central Office, Consumer Education and Protection Department RBI (email) in the following format within five working days of the appointment of the Internal Ombudsman.
- Name of the IO
- Details of previous positions held
- Date of Appointment
- Tenure (in years)
- Brief professional biodata, including previous financial services exposure, highlights all major achievements.
The areas related to customer service, customer grievance redress, and implementation of the Direction, shall be a part of the supervisory review conducted by the RBI. Further, the RBI will review the cases wherein the CIC has not accepted the decision of the IO and the aggrieved complainant has approached the RBI Ombudsman for the assessment with regard to the effectiveness of the internal grievance redress mechanism of the Credit internal Companies and initiate corrective actions as it may deem fit.
The directions can provide a cost-free alternate redress mechanism to customers of REs for grievances against CICs. Further, the idea of bringing the CICs under the Internal Ombudsman (IO) framework can enhance the overall functions of the Internal Ombudsman.
Read our Article: Internal Ombudsman Scheme mandated for NBFCs