Offering a clear cut redressal mechanism for customers of Non banking finance companies, the Reserve Bank of India (RBI) has issued an ombudsman scheme for those entities.
According to an official release, ‘In exercise of the powers conferred by Section 45L of the Reserve Bank of India Act, 1934, the RBI being satisfied that for the purpose of enabling it to promote conducive credit culture among the NBFCs and to regulate the credit system of the country to its advantage, it is necessary to provide for a system of ombudsman for redressal of complaints against deficiency in services concerning deposits, loans and advances and other specified matters, hereby directs that the NBFCs… should comply with the provisions of the Ombudsman Scheme for Non-Banking Financial Companies, 2018’
An officer at the RBI not below the rank of general manager will be appointed by the regulator as the ombudsman with territorial jurisdiction being specified by the central bank. The tenure of each ombudsman cannot exceed three years and can be reduced by the regulator if needed.
Any customer or person can file a compliant with the ombudsman on various grounds like non-payment or inordinate delay in payment of interest, non-repayment of deposits, lack of transparency in loan agreement, non-compliance with RBI directives on fair practices code for NBFCs, levying of charges without sufficient notice to the customers and failure or delay in returning the securities documents despite repayment of dues among others.
If a complaint is not settled by agreement within a specified period as the ombudsman may allow the parties, he may, after affording the parties a “reasonable opportunity to present their case, either in writing or in a meeting, pass an award either allowing or rejecting the complaint”.
Only written complaints or those in electronic format will be accepted. The ombudsman may also award compensation not exceeding one hundred thousand rupees to the complainant, taking into account the loss of time, expenses incurred, harassment and mental anguish suffered by the complainant.
The NBFC shall, unless it has preferred an appeal, within one month from the date of receipt by it of the acceptance in writing of the award by the complainant under sub-clause (8), comply with the award and intimate compliance to the complainant and the ombudsman.
The ombudsman will be required to send a report to the RBI governor annually on 30 June containing general review of the activities of his office during the preceding financial year and other information required by the central bank.
The scheme also allows a person to appeal in case of dissatisfaction with any award by the ombudsman.
“Any person aggrieved by an award under Clause 12 allowing the complaint or rejecting the complaint for the reasons referred to in sub clauses (c) to (f) of clause 13, may within 30 days of the date of receipt of communication of award or rejection of complaint, prefer an appeal before the appellate authority,” the scheme stated.