The Reserve Bank of India (RBI) has directed banks and other regulated entities to review their internal grievance redressal processes and strengthen complaint management systems to ensure that eligible customer complaints are referred to the Internal Ombudsman without exception. 
The observations were made by RBI Deputy Governor Swaminathan J during his keynote address at the Internal Ombudsman Conference organised by the central bank in the past week. The speech was later published on the RBI's website. 
Swaminathan said the relationship between customers and financial institutions is built on trust, as customers rely on banks and financial institutions not only with their savings and financial security but increasingly with their digital financial activities. He said this trust depends not only on financial strength, adequate capital and technology but also on how fairly and promptly institutions respond when customers face problems. 
He noted that over the years, RBI has consistently treated consumer protection as an important part of financial stability. To support this, the central bank has developed a structured customer protection framework through the RBI Ombudsman mechanism, the Internal Ombudsman framework and regulatory standards for customer service. 
According to him, a strong financial system is one where customers are confident that their complaints will be heard, reviewed independently and resolved within a reasonable time. 
Swaminathan further said that every unresolved customer complaint carries a wider impact beyond financial costs. It affects customer confidence, damages an institution's reputation and may invite greater regulatory scrutiny. He added that unresolved complaints also represent missed opportunities for institutions to demonstrate fairness, accountability and responsiveness. 
Highlighting the role of governance, he said an effective Internal Ombudsman framework depends largely on the approach adopted by the board of directors and senior management. He stated that if customer service is viewed only as a regulatory compliance requirement, grievance redressal will become a routine compliance exercise. However, when boards treat customer service as an important element of good governance, the same approach reflects across the organisation and improves customer interactions. 
The deputy governor also advised boards and their Customer Service Committees not to treat complaint data merely as management information. Instead, complaint trends should be analysed as valuable business intelligence, as an increase in complaints relating to a particular product, region, delivery channel or operational process often indicates underlying weaknesses that require corrective action. 
Swaminathan also expressed concern that a significant number of complaints which were eventually decided in favour of customers by the RBI Ombudsman had never been referred to the Internal Ombudsman at the institutional level. He said this weakens the purpose of the Internal Ombudsman framework, which was introduced to provide an independent review of customer complaints before they reach the RBI Ombudsman. 
He urged all regulated entities to examine their internal grievance redressal mechanisms and ensure that every complaint eligible for Internal Ombudsman review is referred promptly. He also said complaint management systems should be designed in a way that prevents complaints from bypassing the Internal Ombudsman because of classification errors or process-related deficiencies. 
The RBI introduced the Internal Ombudsman framework to strengthen customer protection by ensuring an independent review of complaints that are either rejected or only partially accepted by regulated entities before customers approach the RBI Ombudsman. Over the years, the central bank has expanded the framework across banks, non-banking financial companies and other regulated entities as part of its efforts to improve customer service standards and strengthen consumer confidence in the financial system. 
The deputy governor also highlighted the changing role of technology in financial services. While digital banking has significantly improved convenience and expanded access to formal financial services, it has also raised customer expectations regarding service quality and speed. 
He pointed out that customers who are able to complete financial transactions within seconds naturally expect failed or erroneous transactions to be resolved with similar efficiency. Although grievance resolution may not always be immediate, he said financial institutions should continuously work towards reducing delays while making complaint resolution simpler, more transparent and more responsive. 
Source PTI