Ombudsman Scheme for NBFCs

Introduction to Ombudsman Scheme

Non-Banking Financial Companies (NBFCs) have surely changed the landscape of the financial services sector in India. NBFCs have enabled many people to go on and pursue their goals without worrying for capital by providing credit facilities. Check out: Classifications of NBFCs. The Reserve Bank of India (RBI) released a notification on the 23rd of February, 2018 introducing the Ombudsman Scheme for redressal of complaints against NBFCs registered under RBI under Section 45-IA of RBI Act, 1934  who are in violation of the regulations. See : Regulations Governing NBFCs.

An NBFC although comes under regulations set by RBI, is still a separate legal entity from banks and hence needs close monitoring. RBI has also drilled down hard on compliance requirements of NBFCs to avoid financial grief for customers. Take a look at Annual Compliance requirements of NBFCs in India. Despite all the measures to regulate NBFCs, to ensure a smooth process for customers, the RBI has introduced a "cost-free" and "expeditious complaint redressal mechanism" for deficiencies in services of these institutions.

What is the Ombudsman Scheme?

RBI defines the scheme to be "an expeditious and cost-free apex level mechanism for resolution of complaints of customers of NBFCs, relating to certain services rendered by NBFCs". Ombudsman is a senior official responsible for redressing complaints against NBFCs. The RBI has appointed NBFC Ombudsman at the offices located in the 4 metro cities.  Chennai, Mumbai, Kolkatta, and Delhi. The Ombudsman will be in-charge of complaints arising in their respective zones. According to RBI, they would begin by incorporating all deposit-taking NBFCs(NBFC -D) under the scheme.  Plans are also set to cover NBFCs having a customer interface and an asset size exceeding Rs 100 crores. Gradually, the RBI plans to cover all other recognized types of NBFCs registered with the Central Bank as well.

How and When to use the Ombudsman Scheme

A mechanism to address complaints of the customers is great . However, the scheme cannot just be put into action at the slightest discomfort and has stipulations for the filing of complaints.

Anyone dissatisfied by services provided by the NBFCs has to first approach the concerned NBFC with their complaint first. If the NBFC does not respond to the complaint within 30 days of receiving a receipt of the complaint, consumers are free to approach their zone's  Ombudsman.

The clause 8 of the scheme clearly stipulates the grounds on which Ombudsman can address complaints against NBFCs. One of these includes non-payment or inordinate delay in the payment of interest on deposits.

The RBI charges no costs for filing a complaint. Aggrieved people can file a complaint with the complaint form provided by RBI or via Hand-written/fax/e-mail sources. RBI has not made it mandatory to use the complaint form The Ombudsman, however, is not the final authority on complaint redressal. NBFCs or their customers aggrieved by the decision of the Ombudsman can approach the Appellate Authority, Mumbai.

What happens after filing a complaint with Ombudsman

• NBFC Ombudsman will strive to arrive at a solution by mediating an agreement between complainant and NBFC.
• Ombudsman will pass an order to bind the terms of settlement offered by NBFC(if accepted ) to both the complainant and the NBFC.
• If the complainant does not respond to a notification of compliance of regulations by the NBFC( NBFC not at fault) within a specified time frame, the Ombudsman will pass an order to close the notification.

A complaint mechanism thus brings a relief to many aggrieved customers and helps ensure an even smoother functioning of NBFCs. To stay up to date with the latest on NBFCs, follow our blog.

If you're in the process of your NBFC registration and need professional help, head on over to our comprehensive NBFC registration services.

At Legalraasta, we are helping companies to navigate the legalities of running a business with ease. Shoot us an email at [email protected] or give us a ring at +91-8750008585.