By Dibisha Mishra (email@example.com)
Reserve Bank of India (RBI), in its Statement on Development and Regulatory Policies dated April 04, 2019, stated its intention to extend the same to the remaining notified classes of NBFCs as well, by the end of April, 2019.
Ombudsman Scheme for Non-Banking Financial Companies, 2018 (Scheme) on 23rd February, 2018 was introduced with the intent of curbing down the time, costs and complexities involved in complaint redressal mechanism for certain services rendered by non-banking financial companies (NBFC). The salient features of the Scheme worth taking note of has been explained in our previous article. The Scheme covered within its ambit, all NBFCs registered with RBI, who are:
- authorized to accept deposits; or
- having customer interface, with assets size of Rs. 100 Crores or above, as on the date of the audited balance sheet of the previous financial year,
(hereinafter referred to as “notified classes of NBFCs”)
However, to start with, the Scheme was made applicable to deposit taking NBFCs only and the idea was to make it applicable on the other notified classes of NBFCs, once the same could gather some traction.
Subsequently, as per RBI’s recent statement in regard to increased applicability, it is expected that a formal notification in this regard will follow.
Considering the importance of the matter, in this article we will discuss all that the remaining notified classes of NBFCs must know or be prepared for before the formal notification of the Scheme for them.
As already stated the Scheme is applicable to all notified classes of NBFCs, however, the following classes of companies are excluded from its purview:
- Non-banking Financial Company – Infrastructure Finance Company (NBFC-IFC);
- Core Investment Company (CIC);
- Infrastructure Debt Fund – Non-banking Financial Company (IDF-NBFC); and
- A company under liquidation.
To do list for newly included entities
Upon notification of Scheme, the newly notified NBFCs will have to immediately take care of the following:
- Make the copy of the Scheme available on the website and also with the designated officer of the company for perusal in the office premises.
- Display prominently in all its offices and branches:
- the purpose of the Scheme;
- the contact details of the Ombudsman to whom the complaint is to be made by the aggrieved customer;
- notice about the availability of the copy of Scheme with such designated officer.
- Appoint Nodal Officers at Head/ Registered/ Regional/ Zonal Offices and inform all the Offices of the Ombudsman about the same.
- Nodal Officers so appointed must be responsible for representing the company and furnishing information to the Ombudsman in respect of complaints filed against the NBFC.
- Wherever more than one zone/ region of a NBFC is falling within the jurisdiction of an Ombudsman, designate one of the Nodal Officers as the ‘Principal Nodal Officer’ for such zones or regions
Pre-Conditions for availing the Scheme by an aggrieved customer
A customer aggrieved by the acts of the company or its representatives can make an application under the Scheme, however, the following pre-conditions must be satisfied before making an application:
- Complaint must refer to any of the grounds mentioned under Clause 8 of the Scheme.
- Customer must have filed a written representation to the respective NBFC regarding the grievance
- Concerned NBFC must have rejected the complaint or the complainant must not have received any reply within one month of NBFC receiving the representation or the complainant must not have been satisfied with the reply given to him by the NBFC.
- Not more than one year must have elapsed after the complainant received the unsatisfactory reply or where no reply was received, not later than one year and one month have elapsed after the date of representation to NBFC.
- The complaint must not be in respect of the same cause of action which was settled or dealt with on merits by the Ombudsman in any previous proceedings whether or not received from the same complainant or along with one or more complainants or one or more of the parties concerned with the cause of action;
- The complaint must not pertain to the same cause of action, for which any proceedings before any court, tribunal or arbitrator or any other forum is pending or a decree or Award or order has been passed by any such court, tribunal, arbitrator or forum;
- The complaint must not be frivolous or vexatious in nature;
- The complaint must fall under the period of limitation prescribed under the Indian Limitation Act, 1963 for such claims; and
- The complainant must have filed along with the complaint, copies of the documents, if any, which he intends to rely upon, and a declaration that the complaint is maintainable under Clause 9-A.
Roadmap while availing the Scheme
Once the complainant is satisfied that the aforesaid conditions are satisfied, it will have to take the following route to make the application:
- Make a complaint, as per Annex II of the Scheme, to the Ombudsman under whose jurisdiction the concerned NBFC falls. The complaint can be made either by the aggrieved customer himself or by his authorized representative;
- Where extra clarification or documents is required from the customer, the same is to be provided;
- Ombudsman shall send a copy of the complaint to the branch or registered office of the NBFC named in the complaint, under advice to the designated Nodal Officer (NO);
- Ombudsman may require NBFC to provide information or furnish certified copies of any document relating to the complaint which is or is alleged to be in its possession;
- Endeavour should be made to promote a settlement of the complaint by agreement between the complainant and the NBFC through conciliation or mediation. He/ she may convene a meeting of NBFC and the complainant together to promote an amicable resolution;
- If complaint is still not settled by agreement, Ombudsman shall pass an award of either allowing or rejecting the case after giving both parties an opportunity of being heard;
- The Ombudsman shall take into account the evidence being placed, the underlying principles on which the practices, directions, instructions and guidelines issued by the Reserve Bank from time to time and such other factors which in his opinion are relevant to the complaint;
- A copy of the Award shall be sent to the complainant and the NBFC free of cost;
- An Award shall take effect only when the complainant furnishes to the NBFC and the Ombudsman concerned within a period of 30 days from the date of receipt of copy of the Award, a letter of acceptance of the Award in full and final settlement of his claim;
- Unless an appeal is filed, the NBFC shall then comply with the Award and intimate compliance of the same to the complainant and the Ombudsman;
- Award or appeal rejection can be appealed against within 30 days of receipt of such communication.
The Ombudsman scheme plays a very important role in the banking system. Considering the growing importance of NBFCs in the country, introduction of this became essential. However, effectiveness of any initiative depends on how well the beneficiaries of the same are informed; same will be the case with this Scheme as well. This Scheme will turn out to be fruitful only if the same borrowers are educated about this. RBI must also take some initiative to achieve that as well