Fraud Registry and Integrated Ombudsman Scheme

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Context

• Given that borrowers indulging in fraud typically take advantage of the lack of information with banks, The Reserve Bank is considering setting up a fraud registry.

About Fraud Registry

• The Fraud Registry will have a database of fraudulent websites, phones and various modus operandi for digital fraud.

Objective

• The mechanism is aimed at preventing fraudsters from using banking infrastructure.

Access

• While there is no definite timeline for setting up of the fraud registry, payment system participants will also be provided access to this registry for near-real time fraud monitoring.

Significance of Fraud Registry

• The Reserve Bank of India has taken many steps over the years including strengthening the fraud governance and response system, improving the Early Warning System (EWS) framework and introducing a dedicated Market Intelligence (MI) Unit for frauds. Fraud Registry is another step in the right direction. The aggregated fraud data will be published to educate customers on emerging risks.

Furthermore, RBI recently talked about the Integrated Ombudsman scheme launched by Prime Minister Narendra Modi in November 2021 to strengthen the grievance redressal mechanism for customer complaints against banks, non-bank payment system participants, non-bank financial institutions (NBFCs) and other entities regulated by the RBI.

Note: Ombudsman IS an official who deals with the complaints made by the public against the government, or against organizations such as banks or insurance companies:

Integrated Ombudsman Scheme

• To make the alternate dispute redressal mechanism simpler and more responsive to the customers of regulated entities, the prime minister last year had launched 'One Nation One Ombudsman'.

About

The integrated ombudsman scheme amalgamates three ombudsman scheme of RBI -

1. Banking ombudsman scheme of 2006,
2. Ombudsman scheme for NBFCs of 2018 and
3. Ombudsman scheme of digital transactions of 2019.

• The three abovementioned ombudsman schemes evolved over different periods of time and contained different grounds of complaints and different compensation structures. This led to uneven redress across customers of different financial entities, resulting in unequal treatment of aggrieved customers.
• Therefore, there was a strong impetus for integrating the existing ombudsman schemes into one and centralizing the receipt and initial processing of complaints to impart process efficiency.

Features

• The unified ombudsman scheme will provide redress of customer complaints involving deficiency in services rendered by RBI regulated entities viz. banks, NBFCs and pre-paid instrument players if the grievance is not resolved to the satisfaction of the customers or not replied within a period of 30 days.
• The new scheme also includes under its ambit non-scheduled primary co-operative banks with a deposit size of Rs 50 crore and above.
• It will no longer be necessary for the complainant to identify under which scheme he/she file complaint with the ombudsman. Previously, the customers were required to file complaints under the correct scheme, depending on the Regulated Entity (RE). The complaints had to be filed with the correct ombudsman office, based on the territorial jurisdiction. It was observed that complaints were disposed of as non-maintainable largely due to the following reasons.

• Being outside the territorial jurisdiction,
• Being ‘first resort complaints’ (frcs) – these are complaints made with the ombudsman directly without having approached the concerned bank or re first
• Not represented properly.

The current Integrated Scheme addresses this concern by integrating all REs into one scheme with a single point of reference for all complaints.

• The scheme includes a wider definition of deficiency of services which ensures complaints will not go unaddressed or rejected simply on account of “not covered under the grounds listed in the scheme”.
• The scheme is jurisdiction neutral and a centralized receipt and processing centre has been set-up in Chandigarh for initial handling of complaints in any language.
• RBI says the Regulated Entity (RE) will not have any right to appeal in cases where an award is issued by the ombudsman against it for not furnishing satisfactory and timely information. The current Integrated Scheme prescribes a 15-days’ timeline for the REs to furnish information/documents to the office of the Ombudsman. By non-furnishing timely and satisfactory replies/documents, REs will lose the right to appeal in cases where an award is issued by the ombudsman against them. Additionally, the responsibility of representing the regulated entity and furnishing information in respect of complaints filed by customers would be that of the ‘Principal Nodal Officer’ in the rank of a ‘General Manager’ in a Public Sector Bank or equivalent.
• The ‘One-Nation Ombudsman’ is based on one portal, one email, and one address for the customers to lodge their complaints.
• There is no limit on the amount in a dispute that can be brought before the Ombudsman for which the Ombudsman can pass an Award. However, for any consequential loss suffered by the complainant, the Ombudsman shall have the power to provide compensation up to Rs 20 lakh, in addition to, up to Rs One lakh for the loss of the complainant’s time, expenses incurred and for harassment/mental anguish suffered by the complainant.

Implementation of the Scheme

• Customers will be able to file complaints, submit documents, track status, and give feedback through a single email address.
• There will also be a multilingual toll-free number that will provide all relevant information on grievance redress.
• Now, there will be a single point of reference for customers to file their complaints, submit the documents, track status, and provide feedback.

Significance of the Scheme

• The first ombudsman scheme was rolled out in the 1990s. One of the primary concerns with earlier ombudsman was the lack of maintainable grounds on which the consumer could challenge the actions of a regulated entity at the ombudsman or a rejection of the complaint on technical grounds. It led to in a preference for the consumer court notwithstanding the extended timelines for redressal.
• With the growing prominence of digital payments, the current ‘Integrated Ombudsman Scheme’ may come to the rescue of customers more efficiently. A grievance redressal mechanism that promotes financial consumer protection will boost customer confidence in the country.

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