RBI Governor Urges Banks and NBFCs to Strengthen Customer Grievance Redress

Key Highlights

• Sharp Criticism of Rising Complaints
  • RBI Governor Sanjay Malhotra expressed serious concern over the increasing number of customer complaints.
  • Urged regulated entities (banks and NBFCs) to strengthen grievance redress systems urgently.
  • Emphasized that senior leaders, including CEOs and MDs, should dedicate time each week to focus on customer service.
• Data on Complaint Surge
  • Complaints under the RBI Integrated Ombudsman Scheme grew at nearly 50% annually over the past two years.
  • 934,000 complaints were received in FY24.
  • RBI Ombudsman processed 294,000 complaints in FY24, up 25% from FY23.
  • Nearly 57% of complaints required formal intervention or mediation, highlighting the inefficiency of current systems.
  • Scheduled commercial banks received over 10 million complaints in FY24.
• Directives to Regulated Entities (REs)
  • Senior management, zonal heads, and branch managers must allocate time weekly or daily to grievance handling.
  • The goal should be not only to resolve complaints but to ensure that similar issues do not arise repeatedly.
  • Large REs should have multi-level grievance redress systems, allowing escalation of unresolved issues to senior decision-makers.
• Areas Identified for Improvement
  • KYC Documentation
    • Once a customer submits documents, they should not be repeatedly asked for the same information.
    • Urged immediate enablement of Central KYC Records Registry (CKYCRR) integration across branches and outlets.
  • Digital Fraud
    • Raised alarm over the increasing number of digital fraud cases affecting unsuspecting customers.
  • Misselling and Aggressive Recovery Practices
    • Called for more ethical practices and customer protection measures across financial institutions.
• Potential Role of Artificial Intelligence (AI)
  • Stressed that AI can play a transformative role in grievance redress.
  • Suggested integrating AI at every stage of the grievance process, from lodging complaints to resolution.
  • AI could help create seamless, efficient, and data-driven grievance systems.

The RBI Governor’s remarks serve as a wake-up call to all regulated financial institutions. As customer expectations rise and digital transactions become more prevalent, banks and NBFCs must prioritize customer service and grievance handling.