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Ombudsman Scheme for Non-Banking Financial Companies (NBFCs)

Topic covered:

          Important aspects of governance, transparency and accountability.

 

Ombudsman Scheme for Non-Banking Financial Companies (NBFCs)

 

What to study?

For prelims and mains: key features, need and significance of the scheme.

 

Context: The Reserve Bank of India (RBI) has extended the coverage of Ombudsman Scheme for Non-Banking Financial Companies (NBFCs), 2018 to eligible Non Deposit Taking Non Banking Financial Companies (NBFC-NDs).

The coverage will be extended to Non Deposit Taking Non Banking Financial Companies having asset size of Rs 100 crore or above with customer interface.

However, Non Banking Financial Company-Infrastructure Finance Company (NBFC-IFC), Core Investment Company (CIC), Infrastructure Debt Fund-Non-banking Financial Company (IDF-NBFC) and NBFCs under liquidation are excluded from the ambit of the Scheme.

 

Background:

The Reserve Bank of India (RBI), in February 2018, issued an ombudsman scheme for non-banking finance companies (NBFCs), offering a grievance redressal mechanism for their customers.

 

Who will be the ombudsman?

An officer at the RBI not below the rank of general manager will be appointed by the regulator as the ombudsman with territorial jurisdiction being specified by the central bank. The tenure of each ombudsman cannot exceed three years and can be reduced by the regulator if needed.

 

Who can file the complaint?

Any customer or person can file a compliant with the ombudsman on various grounds like non-payment or inordinate delay in payment of interest, non-repayment of deposits, lack of transparency in loan agreement, non-compliance with RBI directives on fair practices code for NBFCs, levying of charges without sufficient notice to the customers and failure or delay in returning the securities documents despite repayment of dues among others. Only written complaints or those in electronic format will be accepted.

 

Appeal:

If a complaint is not settled by agreement within a specified period as the ombudsman may allow the parties, he may, after affording the parties a “reasonable opportunity to present their case, either in writing or in a meeting, pass an award either allowing or rejecting the complaint”. The scheme also allows a person to appeal in case of dissatisfaction with any award by the ombudsman.

 

Compensation:

The ombudsman may also award compensation not exceeding one hundred thousand rupees to the complainant, taking into account the loss of time, expenses incurred, harassment and mental anguish suffered by the complainant.

 

Report:

The ombudsman will be required to send a report to the RBI governor annually on 30 June containing general review of the activities of his office during the preceding financial year and other information required by the central bank.

 

Sources: The Hindu.