For long, the banking regulator, Reserve Bank of India (RBI), did not agree that complaints related to mis-selling of third-party products by banks was a problem that it needed to address. This was a problem for other regulators. What this meant was that bank customers had nowhere to go to complain since the sector-specific regulators did not have effective jurisdiction over banks’ staff. However, on 23 June 2017, the central bank took the onus of bank mis-selling on itself. According to the amended banking ombudsman scheme (bit.ly/2sRJNAT), which will come into effect on 1 July this year, complaints relating to mis-selling, as well as mobile and electronic banking will be included in RBI’s banking ombudsman scheme. Here is a look at what has changed for you.
Insurance and mutual funds: So far, the banking ombudsman only accepted complaints about banking products and services. Third-party products sold by banks, such as insurance and mutual fund products, were kept out of its ambit. However, with the amendment, from 1 July 2017, the banking ombudsman scheme will include the sale of insurance, mutual funds and other third-party investment products by banks.
Under the amended scheme, any person can file a complaint with the banking ombudsman against a bank for non-adherence to the central bank’s guidelines on para-banking activities such as sale of insurance, mutual fund and other third-party investment products by banks in case of improper, unsuitable sale of such products; non-transparency or lack of adequate transparency in sale; non-disclosure of grievance redressal mechanism available; delay or refusal to facilitate after-sales service by banks and any other matter relating to the violation of the directives issued by the central bank in relation to banking or other services.