RBI’s Draft on Integrated and Internal Ombudsman
Team Finserv | finserv@vinodkothari.com
In the Monetary Policy Statement dated October 1, 2025, the RBI Governor announced several measures to strengthen consumer protection. Some of the measures introduced for enhancing consumer protection are as follows:
- The RBI has issued the draft Reserve Bank – Ombudsman Scheme, 2025 (“Draft IOS Scheme”), inviting public comments till October 28, 2025. This seeks to replace the Reserve Bank – Integrated Ombudsman Scheme, 2021 (“RBI-IOS, 2021”) and will come into force three months after its final notification by the RBI.
- Further, the RBI has issued the Draft Master Direction – Reserve Bank of India (Internal Ombudsman for Regulated Entities) Directions, 2025 (‘Draft Internal Ombudsman Directions’), with public comments invited till October 28, 2025. The same will replace the Master Direction – Reserve Bank of India (Internal Ombudsman for Regulated Entities) Directions, 2023.
The Draft IOS Scheme has enhanced the scope of the grievance redressal mechanism and introduced a more structured procedural framework for complaint processing. The Draft Internal Ombudsman Directions further strengthen grievance redressal, enhance procedural clarity, and improve transparency through reporting requirements. This write-up analyses the proposed changes.
Reserve Bank – Integrated Ombudsman Scheme, 2021 (“RB-IOS, 2021”) and Reserve Bank – Ombudsman Scheme, 2025 (“Draft Scheme”)
| Heads | Current Requirement | Proposed Requirement/Change | Implication |
| Definition of Customer | The term “Customer” is not defined | Defined under Para 3(1)(j) as: “Customer” means any person who engages, in a financial service /product or activity related thereto with a Regulated Entity, irrespective of whether such person has an account-based relationship with the Regulated Entity; | The scope of financial services included within the ambit of the Scheme has been widened. For eg:All types of credit facilities extended by the borrower to the customer;Guarantees or other non-fund based facilities offered by RE to customer;Demand Draft facilities offered by Banks; Services by RE, acting as an LSP, to other REs; |
| Compensation Ceilings | Up to ₹20 lakh for consequential loss ₹1 lakh for consolatory damages | Increased to ₹30 lakh for consequential loss & ₹3 lakh for consolatory damages | There was no cap on the value of dispute that can be brought before the Ombudsman. The same has been retained. Increment in the compensation limits |
| “Advisory” Mechanism | Not provided | Para 14(4) empowers the Ombudsman to encourage settlement between parties through a written agreement, subject to the fact that all communications are documented. Para 14(6) allows the Ombudsman to issue advisory for settlement as a measure for the resolution of complaints. | RBI Ombudsman can now help parties resolve disputes by settlement.Draft IOS Scheme permits advisories i.e., communications from the Ombudsman advising REs to take actions for full or partial complaint resolution.Advisories are non-binding and serve as a pre-award tool to facilitate quicker settlements. |
| Change in the Appellate Authority | Executive Director in charge of the Department of the Reserve Bank administering the Scheme; | The Draft IOS Scheme clearly mentions that the executive director in charge of the Consumer Education and Protection Department (CEPD) is the Appellate Authority | Explicitly mentions the independent department under the RBI to act as the Appellate Authority. |
| Guidance on filing of the complaint form | Guidance was provided under the Scheme at several places, but not at one place, along with the form | Added under Part A of Annexure, along with the Complaint Form | Minor edits in the complaint form with guidance to clarify the process for filing complaints and reduce errors.It will enable quicker allocation and segregation of complaints.The clear filing mechanism will improve ease and understanding for customers.Improved accessibility by the Launch of a 24×7 Contact Centre (#14448) with multilingual IVRS support. |
| Ombudsman Report | Earlier, the Ombudsman was required to submit an annual report to the Deputy Manager of the RBI; however, the RBI was not obligated to publish it | Under the Draft IOS Scheme, it has now been made mandatory for the RBI to publish an annual report on the functioning and activities carried out under the Scheme. | It will enable the regulator to understand the issues raised under the complaints and assess the effectiveness of the measures introduced. |
| Addition of an RE as third party to proceedings | Not provided | The Ombudsman can make any other RE as a party to the proceedings. | Expands the powers of the ombudsman to include connected REs as well (for instance, in the case of co-lending or TLE transactions) |
| Power of CRPC to classify and close complaints | Not explicitly mentioned | RBI Ombudsman and CRPC remain responsible for receipt and examination of complaints.The Complaints shall be treated as follows:Complaints in the nature of suggestions or queries shall be treated as non – valid at the stage of CRPFFurther, Para 10 specifies certain grounds for non maintainability of complaints for complaints to be rejected by the RBI Ombudsman.However the grounds of non-maintainability under Para 10 shall be specifically provided by the Competent Authority. | This clarifies the hierarchy for complaint handling and enables early elimination of frivolous or ineligible complaints before they reach the RE. |
It may also be noted that the RBI has, vide notification dated 07th October 2025, extended the applicability of the existing RBI-IOS to include State Co-operative Banks and Central Co-operative Banks.
Draft Master Direction – Reserve Bank of India (Internal Ombudsman for Regulated Entities) Directions, 2023
| Particulars of the Provision | Current Requirements | New Requirements | Implication |
| Eligibility of the IO (Para 5) | No such requirement prescribed | If the person is a serving officer, he/she is required to relinquish the same before assuming charge as IO. The IO shall previously not have been employed, nor presently be employed, by the RE or a holding, associate or subsidiary company of the RE. | To ensure the IO’s independence and impartiality, in case the proposed IO is a serving officer, he/she must relinquish the existing position before assuming charge, enabling objective and credible grievance redressal within the RE. Further, conflict of interest positions clarified by specifically defining the scope of Related Parties of the RE. |
| Same IO appointment in a number of entities | No such clause restricting the number of REs. | The IO can work in more than one RE simultaneously, with specific approval from the CEPDSuch approval shall be obtained by the appointing RE.However, the deputy IO cannot be appointed in more than one RE simultaneously | IO (but not deputy IO) has been permitted to be appointed in more than one RE simultaneously, subject to the approval from CEPD. Approval to be obtained by the appointing RE. Impact:To allow efficient deployment of an experienced IO across multiple REs under CEPD oversight, while ensuring sufficient focus at each entity so that the role and effectiveness are not compromised. |
| Terms of Appointment of IO | No clause that specifies the minimum no of IOs or the responsibility of the Board or its Committees w.r.t assessing the need for multiple IOs or the factors to be considered when doing so. | Every RE shall appoint at least one IO. The Board or its committees shall, at least annually, determine the number of IO/ Dy. IO to be appointed. This must be determined with due regard to the volume and complexity of the complaints received. | To ensure effective grievance redressal, clarity has been provided on the minimum number of IOs to be appointed and the annual assessment of the need for IOs. Actionables for the REs:All REs shall appoint at least one IO The Committee of the RE shall be required to assess the need of the no of IOs at least once in a yearFactors to be considered include complexity of complaints, sufficiency of the time, diversity of experience etc |
| Auto-escalation of complaints | All complaints that are partly or wholly rejected by the RE’s internal grievance redress mechanism shall be auto-escalated to the IO within 20 days of receipt for a final decision. | Auto-escalation of partly resolved or wholly rejected complaints to the office of the IO has been specified to be 25 days in case of CICs (Credit Information Companies) | To ensure timely escalation of unresolved complaints, the draft directions require auto-escalation to the IO within 20 days, with a relaxed timeline of 25 days for CICs, balancing prompt redressal with operational feasibility for CICs. |
| Board oversight – rotation of IOs | No such clause to ensure rotation of IOs in REs with multiple IOs exists in the current directions. | In REs having multiple IOs, a view shall be taken by the Board or Customer Service Committee / Consumer Protection Committee of the Board to have representation of more than one IO or having a system of rotation. | Actionables for REs:To ensure diversity in perspectives in grievance handling, REs with multiple IOs should consider Board-approved rotation or representation of more than one IO, enhancing fairness and effectiveness in complaint resolution. |
| Complaint Management System (CMS) | Under the current directions, REs do not have to provide specific categories in the CMS. | The REs shall provide only three categories i.e. ‘Fully Resolved’, ‘Partly Resolved’ and ‘Wholly Rejected’ in its CMS for recording the decision on the complaints before escalation to the office of IO. | RE shall be required to have in place a fully automated Complaint Management System. To standardise complaint recording, REs must limit CMS decision categories to ‘Fully Resolved’, ‘Partly Resolved’, and ‘Wholly Rejected’ before escalation to the IO, ensuring consistency and clarity in complaint tracking. |
| Procedure for Complaint Redress by IO / Dy. IO | The current directions allow the IO to only rely on documents that are furnished to it by the RE. | The IO / Dy. IO may, if they find it necessary, seek written or oral submission (including additional information and documents) from the complainant. | Strengthening the principle of hearing, enhances procedural transparency, and facilitates effective complaint redressal. |
| Reporting to Reserve Bank | The current directions have different disclosure requirements pertaining to categorisation of complaints and periodicity of reporting. | In addition to the existing details to be provided to the CEPD, the draft directions have included the additional details to be included such as Date of Birth and the Date of intimation to the Reserve Bank in its intimation to the CEPD. Further an additional periodic reporting requirement on quarterly basis instead of the previously annual requirement has been introduced for the REs. | These additional details enable the regulator to verify that the eligibility of the IO, as prescribed in the regulations, is being complied with specifically, ensuring the age limit of 70 years based on the date of birth and that the intimation to the RBI is duly sent. Further, the quarterly reporting requirement allows the CEPD to track the status of complaints and the IOs reported, enabling the regulator to assess implementation and the overall compliance position of the entity. |
Leave a Reply
Want to join the discussion?Feel free to contribute!