It aims to strengthen banks’ internal grievance system.
The Reserve Bank of India (RBI) has required commercial banks with more than 10 branches to appoint an Internal Ombudsman who will be responsible for addressing customer grievances.
"The IO shall examine customer complaints which are in the nature of deficiency in service on the part of the bank, that are partly or wholly rejected by the bank," the RBI said in a release introducing the Internal Ombudsman (IO) Scheme, 2018.
In 2015, the RBI advised public and select private banks operating in the country to appoint an IO as an independent authority that will review customer complaints.
Customers with complaints on their banking provider may turn to the IO who is placed at the highest level of the bank’s grievance redressal mechanism. The move aims to minimise the need for aggrieved to approach other fora for their grievances.
The implementation of the programme will be monitored by the bank’s internal audit mechanism apart from regulatory central bank oversight although regional rural banks are exempted from the rule.
The move is the latest in a series of initiatives by the central bank to improve corporate governance standards at India's debt-ridden banking sector. State lenders are steadily making headway after recovering over $5.23b (INR 365b) of nonperforming assets (NPA) in Q1 which represents almost half the recoveries in the full year 2017-18 period.
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