Banks will now pay for not resolving complaints

Have you made a complaint to your bank but the lender has failed to resolve the grievance? From January 2021 onwards ,this is going to result in a tangible financial charge on the bank, according to new changes in regulations brought in by the Reserve Bank of India (RBI). Under the new regime, banks will have to pay if they do not work on resolving consumer complaints.

"It has been decided to put in place a comprehensive framework comprising inter alia of enhanced disclosures on customer complaints by the banks, a monetary disincentive in the form of recovery of cost of redress of complaints from banks when maintainable complaints are comparatively high, and undertaking intensive review of grievance redress mechanism and supervisory action against banks that fail to improve their redress mechanism in a time bound manner," the RBI said in a statement last week.

The framework would be put in place in January 2021, the central bank added. Generally, banks have their own internal consumer complaints redressal mechanisms. And if the bank fails to work on the complaint within the stipulated time period, the consumer has the right to approach the RBI’s Banking Ombudsman, who get the complaint resolved.

According to the central bank, the new monetary disincentive on banks will be in the form of recovery of the costs resulting from the redress of these complaints by the Ombudsman. Going by the latest available figures, the average cost of handling a complaint by the banking ombudsman offices stood at Rs 3,145 in 2018-19. The central bank also said that the move has been initiated to improve the efficacy of Indian banking’s internal grievance redress mechanism and to provide better customer service.

The Banking Ombudsman Scheme (BOS) was first notified by the RBI in 1995, and covers  Scheduled Commercial Banks, Scheduled Primary Urban Co-operative Banks, Regional Rural Banks, Small Finance Banks, and Payment Banks administered through 21 offices across the country.  During 2018-19 the offices received a total of 1,95,901 complaints, up by 19.75 per cent over the previous year and the disposal rate stood at 94.03 per cent.