RBI strengthens consumer grievance resolution:
Banks’ internal ombudsman and RBI ombudsman system will be overhauled
Oct 1, 2025
Synopsis
The Reserve Bank of India is significantly enhancing its consumer grievance redressal system by revising its ombudsman scheme and extending coverage to Rural Co-operative banks. The internal ombudsman systems of regulated entities are also being strengthened for more effective complaint resolution. RBI Governor Sanjay Malhotra announced these consumer-centric measures on October 1, 2025.
RBI’s ombudsman scheme is being revised to improve the grievance redressal system for consumer complaints. Further, rural co-operative banks will also be included under the RBI Ombudsman scheme. The RBI also announced that the bank’s internal ombudsman scheme is being strengthened to make sure that the grievance redressal system of the regulated entities (banks, etc) are more effective.
Reserve Bank of India (RBI) governor Sanjay Malhotra announced three consumer centric measures on the concluding day of monetary policy meet (MPC) on October 1, 2025. One of the announced measures is about improving both the bank and RBI ombudsman scheme.
RBI governor Sanjay Malhotra said on October 1, 2025: "The Internal Ombudsman mechanism is proposed to be strengthened to make grievance redressal by regulated entities more effective. The RBI Ombudsman Scheme is also being revised for improved grievance redressal and rural cooperative banks are being included under the ambit of the Scheme."
Measures for strengthening the Internal Ombudsman mechanism in REs
The Reserve Bank has institutionalized the Internal Ombudsman (IO) mechanism in select Regulated Entities (REs) which enables an independent apex level review of complaints that are being rejected by the RE. To further improve upon the efficacy of this mechanism, it is proposed that the IOs be equipped with compensation powers and be allowed access to the complainant, aligning the role of IOs more closely with that of the RBI Ombudsman.
Additionally, a two-tiered structure may be introduced within REs for grievance redress prior to escalation to the IO.
These measures aim to provide meaningful and timely resolution of customer grievances within the REs, thereby improving service standards and consumer confidence. A draft of the Master Direction, outlining these revisions, is being released shortly for public feedback.
Review of the Reserve Bank – Integrated Ombudsman Scheme, 2021
The Reserve Bank – Integrated Ombudsman Scheme (RB-IOS) (the Scheme), 2021 launched on November 12, 2021, provides customers of Regulated Entities (REs) a speedy, cost-effective and expeditious alternate grievance redress mechanism. The REs currently covered under the Scheme include Commercial Banks, Regional Rural Banks, Scheduled Primary (Urban) Co-operative Banks, Non-Scheduled Primary (Urban) Co-operative Banks with deposits size of Rs 50 crore and above, select NonBanking Financial Companies and Credit Information Companies.
To enable the customers of the rural co-operative banks to access the mechanism of RBI Ombudsman, it has been decided to bring State Co-operative Banks and District Central Cooperative Banks, hitherto with NABARD, within the scope of the RBI Ombudsman Scheme. Notification will be issued shortly in this regard.
Moreover, based on the operational experience, stakeholder feedback, and global best practices, the Reserve Bank has undertaken a comprehensive review of the Scheme. The review seeks to enhance clarity, simplify procedures and reduce timelines to further improve timely, fair, and effective redress. The draft Scheme shall be placed on the Reserve Bank’s website shortly for seeking feedback from stakeholders.
Abhinav Sharma, Partner, Dentons Link Legal, said to ET Wealth Online:
The Banking Ombudsman Scheme, 2006, implemented by the Reserve Bank of India (RBI), was designed to address complaints related to banking services in an efficient, fair, and cost-free manner. Its objectives included enhancing customer service and providing constructive feedback to the RBI for the continuous improvement of banking guidelines.
Subsequently, the scheme was consolidated into the Reserve Bank-Integrated Ombudsman Scheme, 2021, which unified three distinct ombudsman frameworks covering various entities, thereby streamlining grievance redressal processes for services delivered by organisations regulated by the RBI. The ombudsman acts as an alternative dispute resolution mechanism that provides summary proceedings without any fees, while allowing complainants to pursue other legal forums if dissatisfied with its determinations.
The scope of this scheme, initially applicable to RBI-regulated institutions such as banks, NBFCs, Payment System Participants, and Credit Information Companies, has been expanded to include rural cooperative banks.
This development is expected to strengthen grievance redressal at the grassroots level. The RBI has actively promoted awareness of the scheme through advertising and SMS campaigns, including endorsements from public figures like Amitabh Bachchan. According to the latest RBI Ombudsman report (dated 25 January 2025), the scheme received a staggering 934,000 complaints during FY 2023-24. While a significant portion of these complaints pertained to loans and advances, there was also a notable increase in issues related to cyber and bank fraud.
The enhancement of the scheme aligns with the RBI Governor's perspective, articulated at the annual conference of RBI Ombudsmen, that entities regulated by the RBI must prioritise quality service to remain competitive.
Sharma added: "The Governor noted that nearly 60% of maintainable complaints required mediation or intervention from the RBI and recommended that banks and NBFCs implement two levels of grievance redressal while improving areas such as KYC compliance and digital fraud management."
Sharma said: "Overall, while the expansion of the RBI Ombudsman scheme and the inclusion of rural cooperative banks represent significant steps towards improved regulatory oversight, it remains essential for regulated entities—including banks and NBFCs—to enhance their service standards and grievance redressal mechanisms. This will reduce the necessity for RBI Ombudsman intervention and ensure more effective resolution of consumer complaints."
What is RB-IOS, 2021?
The Reserve Bank - Integrated Ombudsman Scheme, 2021 (RB-IOS, 2021/ the Scheme) was launched on November 12, 2021. It integrates the erstwhile three Ombudsman schemes of RBI namely, (i) the Banking Ombudsman Scheme, 2006; (ii) the Ombudsman Scheme for Non-Banking Financial Companies, 2018; and (iii) the Ombudsman Scheme for Digital Transactions, 2019. These schemes had limited and different grounds of complaints and limited coverage of REs, apart from jurisdiction related restrictions. RB-IOS, 2021 provides for cost-free redress of customer complaints involving deficiency in services rendered by entities regulated by RBI, if not resolved to the satisfaction of the customers or not replied to within a period of 30 days by the RE.
In addition to integrating the three existing schemes, the Scheme also includes under its ambit additional REs, namely, Non-Scheduled Primary (Urban) Co-operative Banks with a deposit size of Rs 50 crore and above and Credit Information Companies. The Scheme adopts ‘One Nation One Ombudsman’ approach by making the RBI’s Ombudsman mechanism jurisdiction neutral.
What is the RBI Alternate Grievance Redress (AGR) Framework?
The AGR Framework of RBI comprises of RBI Ombudsmen (RBIOs), Consumer Education and Protection Cells (CEPCs) and CEPD. The RBIOs function under the framework of RB-IOS, 2021. The CEPCs take up complaints against REs not falling under the ambit of RB-IOS, 2021. CEPD provides assistance to the Appellate Authority (AA) under the RB-IOS and processes the appeal cases.
Are all REs covered under RB-IOS, 2021?
RB-IOS, 2021 covers all commercial banks, Non-Banking Financial Companies (NBFCs), Payment System Participants, most Primary (Urban) Cooperative Banks, and Credit Information Companies. The REs covered under the RB-IOS, 2021 are listed under Question 11.
Who is an RBI Ombudsman (RBIO)?
An RBI Ombudsman is a senior official of RBI appointed by RBI to redress the complaints from customers of the REs against “deficiency in service”, as defined under Clause 3(1)(g) of the RB-IOS, 2021.
“Deficiency in service” means a shortcoming or an inadequacy in any financial service or such other services related thereto, which the RE is required to provide statutorily or otherwise, which may or may not result in financial loss or damage to the customer.
[The Economic Times]
