Experts Call For Reforms As RBI Ombudsman Complaints Jump 68%
There have been a total of 7,03,544 complaints received by the Offices of RBI Ombudsman (ORBIOs) and Centralised Receipt and Processing Centre (CRPC) in financial 2022-23 (FY23) as against 4,18,184 complaints during FY22, which is an increase of 68.24 per cent, highlighted a report by the Reserve Bank of India (RBI) on Integrated Ombudsman Scheme, 2021. The complaints disposed at the ORBIOs have an average turnaround time (TAT) of 33 days during FY23, which has improved from 44 days during FY22.
“Complaints relating to mobile or electronic banking were the highest contributor to the total number of complaints received against banks as well as non-bank payment system participants, while complaints relating to non-adherence to fair practices code were the highest in respect of non-banking financial companies (NBFCs),” RBI said in its report.
According to the report, Union Territory of Chandigarh, National Capital Territory of Delhi, Haryana, Rajasthan and Gujarat were the top five contributors to Ombudsman complaints. Meanwhile, the states of Mizoram, Nagaland, Meghalaya, Manipur and Arunachal Pradesh were the lowest contributors during the year.
The report by RBI points out the occurrence of unauthorised or fraudulent digital transactions due to a lack of robust fraud prevention mechanisms in regulated entities (REs) as well as customers divulging sensitive information as one of the primary reasons behind the increase in the number of complaints.
“This has serious consequences, not just for customers who lose money, but also for the entire financial system. Financial institutions often struggle to identify and stop fraudulent transactions while complying with complex regulations. This results in a rise in digital frauds which erodes trust, damage economies, and fuel further fraudulent activity,” said Ankit Ratan, Co-founder and chief executive officer (CEO) at Signzy, a digital banking infrastructure provider.
In November 2021, the three erstwhile Ombudsman schemes were integrated into a single scheme namely the Reserve Bank - Integrated Ombudsman Scheme (RBIOS), 2021, based on the recommendations made by an internal working group.
“The integrated ombudsman scheme of RBI was a major step forward in the direction of improving customer service and complaint redressal mechanisms for the regulated entities in a comprehensive manner,” said Jyoti Prakash Gadia, Managing Director at Resurgent India.
Gadia further added that while customers need to be suitably educated and cautioned regarding passwords, OTPs, etc., banks need to remain ever vigilant and careful in preventing online transaction frauds, which are one of the major causes of complaints.
The report by the central bank also indicated inordinate delay in reversal of failed transactions due to lack of daily reconciliation by the REs, lack of proper communication from REs regarding terms and conditions of the loan such as applicable interest rate, foreclosure and other charges, cross selling or mis-spelling of products due to information asymmetry between the customer and the REs as some of the reasons behind increase in complaints.
“By leveraging artificial intelligence (AI) and machine learning (ML), Regulatory technology (RegTech) can automate critical processes like customer due diligence (CDD), risk assessments and transaction monitoring. This empowers financial institutions to detect suspicious activity much faster and prevent financial crimes before they happen,” said Ratan from Signzy.
The report further emphasised on the REs’ failure to sensitise their recovery agents regarding extant regulatory guidelines on recovery operations.
“The key point customers should be cognizant of here is that for know your customer (KYC) updation or any such activity, they shouldn’t use any platform that does not originate from the bank’s official website. So someone asking you to come on Zoom, Skype or any other platform should be seen as a red flag,” said Ashok Hariharan, CEO at IDFy.
Resurgent's Gadia said that overall a lack of customer-centric approach and lackadaisical attitude along with inadequate processes and procedures with indifference in implementation are leading to the major causes of complaints. A more proactive approach supplemented with proper customer education is required to minimise the complaints and ensure happy customers, he concluded.
