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Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

De-jargoned: Ombudsman for NBFCs

RBI has decided to introduce an ombudsman scheme for NBFCs to provide customers of NBFCs with a cost-free and expeditious grievance redress mechanism

The Reserve Bank of India (RBI) has announced plans to introduce an ombudsman scheme for customers of non-banking finance companies (NBFCs). The ombudsman will first be introduced for the deposit-taking NBFCs.

The RBI said, it has decided to introduce an ombudsman scheme for NBFCs to provide “customers of NBFCs with a cost-free and expeditious grievance redress mechanism." So far, the RBI had put in place a banking ombudsman scheme to resolve customers’ complaints related to banking services. The banking ombudsman was launched in 2006, and this is the first time RBI has decided to introduce an ombudsman for NBFCs. “The scheme will cover all deposit-taking NBFCs and those with customer interface having asset-size of Rs100 crore and above...the scheme will be operationalised by the end of this month for all deposit-taking NBFCs," the RBI said in a statement.

In the past, there have been many cases where companies have failed to pay back their depositors and have defaulted on public deposits, such as: Helios and Matheson, Birla Shloka EduTech Ltd, Ansal Properties and Infrastructure Ltd, Unitech Ltd, Jaiprakash Associates Ltd, Avon Corp. Ltd, Micro Technologies (I) Ltd and Neesa Leisure Ltd. In the current scenario, in case of default, the depositors have to either approach the Company Law Board or the Economic Offences Wing (EOW) of the Central Bureau of Investigation to address their grievances. The depositor can also directly approach the consumer and civil courts.

In case of banking-related complaints, after approaching your bank, if you are not satisfied, you can escalate the issue with the banking ombudsman. Currently, there are 20 banking ombudsman centres in India.

It is likely that the RBI will take a similar approach for NBFCs as well. Thus, to file a complaint, like with the banking ombudsman, you will need to have proof that you have already filed the complaint with the NBFC. If you are not satisfied with the NBFC’s response, you will be able to approach the ombudsman for NBFCs. Lawyers and financial planners say that setting up an ombudsman for NBFCs may bring defaulters under the regulator’s radar faster. It may also help to surface a stronger voice if there are many cases of default in the same NBFC, which is not possible in the current situation. However, it is still too early to say whether ombudsman for NBFCs will resolve the complaints faster.

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