Source: ET
Context:
In January 2026, the Reserve Bank of India (RBI) issued fresh guidelines on the appointment and functioning of Internal Ombudsmen (IOs) in banks and Non-Banking Financial Companies (NBFCs) to strengthen customer grievance redressal mechanisms. RBI has issued separate directions to provide category-specific clarity for banks and NBFCs.
Who is an Internal Ombudsman (IO)?
An Internal Ombudsman is an independent senior functionary within a regulated entity who:
- Reviews customer complaints rejected by the bank/NBFC
- Acts as a last internal checkpoint before a complaint can be escalated to RBI’s Integrated Ombudsman Scheme (IOS)
Key Objectives of the New Norms
- Strengthen consumer protection
- Improve fairness and transparency in complaint handling
- Reduce avoidable escalation to RBI
- Ensure institutional accountability in banks and NBFCs
Key Features of RBI Guidelines
1. Mandatory Appointment
- Banks and specified NBFCs must appoint an Internal Ombudsman
- IO must be independent of executive management
2. Independence & Tenure
- IO should not have held any executive role in the same entity in the recent past
- Fixed tenure to ensure functional autonomy
3. Scope of Review
- IO to review all complaints rejected (fully or partly) by internal grievance redressal units
- Decision of IO must be reasoned and documented
4. Binding Nature
- Banks/NBFCs cannot override the decision of the Internal Ombudsman
- If IO upholds rejection, only then can the complaint move to RBI’s IOS
5. Governance & Reporting
- Direct reporting to the MD/CEO or Board-level committee
- Periodic reporting on complaint trends and systemic issues
