RBI Notification

RBI Grievance Redressal Mechanism in Banks: A Framework

RBI Grievance Redressal Mechanism in Banks

The article is about the RBI grievance redressal mechanism in Banks for which a framework has been notified. The RBI released notification dated 27th January 2021 about the change in banks’ mechanism of grievance redressal.

The Notification 2020-2021/1002 has been issued by RBI- as a framework which comprises of a) the increasing disclosures on complaints should be made by the Banks from the customers, b) to lay down the –recovery of cost redressal which comprises of -maintainable complaints from the banks against whom the number of complaints has been received in the Office of Banking Ombudsman (OBO). Such complaints were received in excess compared to the average complaints against the banks to the Ombudsman, c) that the RBI[1] has issued the intensive review of the grievance redress mechanism of banks having persisting issues in their redress mechanism.

Clarification in the Notification

It has been clarified by RBI- that the RBI grievance redressal mechanism, will continue to be free of cost for the customers of the banks and members of the public.

AIM – RBI grievance redressal mechanism

  1. The Aim of the RBI grievance redressal mechanism framework is to ensure that clarity over the volume and nature complaints received by the banks.
  2. To improve customer satisfaction and customer confidence in the system. RBI should identify the banks’ remedial steps to solve the persisting issues in the grievance redressal mechanism.
  3. RBI has mentioned in its circular that the frameworks shall be effective from the date of the circular.
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Introduction of ombudsman scheme – RBI grievance redressal mechanism

The Ombudsman system is the grievance redressal of the Bank. In case the Bank is unable to take action, the customer can raise the issue with the Internal Banking Ombudsman of the relevant Bank.  The RBI has taken steps to strengthen the Internal Ombudsman and making them more independent authority. Even though the banks have internal grievance system along with an internal ombudsman, still many complaints remains unresolved and reaches the external ombudsman.

So, in reality, the internal Ombudsman of the Bank is the internal checker of customers complaints.

Statement on Development and Regulatory Policy – RBI grievance redressal mechanism

RBI grievance redressal mechanism

The statement sets out the various developmental and regulatory policy measures, which also speaks about the regulation and supervision, under which, the Grievance Redress Mechanism, has been discussed:

  1. Enhanced Disclosure Mechanism– According to the statement, the ombudsman mechanism instituted by the Reserve Bank of India, is an alternate grievance redressal mechanism. They mentioned that, to improve or strengthen the efficacy of the internal grievance redress mechanism, the RBI has decided to put a comprehensive framework. Here it answers and put forth the enhanced disclosure mechanism on customer’s complaints.
  2. Monetary Compensation from the Bank– It has put forward a monetary disincentive in the form of recovery of the cost of redressal of complaints from the Bank when complaints are comparatively high.
  3. Intensive Review by RBI– Undertaking and involving a high review /intensive review of grievance redressal mechanism on the respective Bank.
  4. Supervisory action – It means the banks who fail to improve their redressal mechanism in a time-bound manner.
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Statistics showing the data of 2017-2020 – Rise of Ombudsman Redressal

The statistics in the below data shows the rise of the RBI grievance redressal mechanism and the Ombudsman redressing it:

  1. From 2017- 2018– The previous years, the data was recorded to be 1, 63,590 complaints about banking activities.
  2. From 2018-2019- The data was recorded to be 1, 95,901 cases, where the total jump was approximately 32,311.
  3. Percentage rise of cases– The total increase of cases is up to-19.75%.
  4. The electronic rise in cases– The cases received electronically were 72.19% via email or online platform, which was a sturdy rise from 63.1%.
  5. Reasons for the complaints– the complaints arise majorly due to the non-observance of the fair practices by the banking authorities. The cases were approximately due to this 22.10% and in 2018-2019- the cases were-19.17%.
  6. Rise of Debit Card Fraud- ATM and debit card cases increased from 15.08% and 18.65% in the last year.
  7. Complaints about levying of charges– The related charges have been on the rise, including levy charges without notice, credit card related issues, remittance declined etc.
  8.  Mis-selling- the cases have increased from 579 to 1,115 complaints in the 2018-2019 year.

Why is RBI Grievance redressal mechanism different from the existing structure?

The importance of the RBI grievance Redressal mechanism is of utmost importance cause of the following:

  1. Banks introduced in 2019 a Complaint Management System, a fully automated process- flow based platform, availability to customers 24*7 to lodge complaints with the Banking Ombudsman.
  2. Banks were asked to disclose annual reports along with summary information regarding the complaints handled by the banks, and the disclosures made in the annual report of the Ombudsman schemes published annually by RBI.
  3. The banks were asked to appoint internal Ombudsman to strengthen the activities which were fair and independent.
  4. The office of Ombudsman should be fair and independent, and the ombudsman activities must be part of the bank strategy.
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It can be concluded that RBI grievance redressal mechanism is necessary to retain and sustain the customers’ confidence and trust in the banking system. The supervisory function of the Bank is essential at the time when the economy is suffering and recovering from the pandemic. Enterslice can provide the support for same.

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