The Reserve Bank of India issued new Directions requiring eligible payments banks to appoint an Internal Ombudsman and strengthen internal grievance redress by mandating an independent review of complaints that are partially resolved or wholly rejected before a final response is issued to the customer. The framework applies to payments banks with 10 or more banking outlets in India as at 31 March 2025, and to any payments bank that later meets the threshold from six months after it becomes eligible. Banks must appoint at least one Internal Ombudsman, with provision for Deputy Internal Ombudsmen, subject to eligibility, independence restrictions and fixed contractual terms of at least three years and up to five years in total. The Internal Ombudsman function reviews only complaints already handled by the bank and then partially resolved or rejected, records a reasoned decision, can recommend compensation in line with Reserve Bank guidance and the bank’s policy, and must analyse complaint patterns at least quarterly for root-cause remediation. Procedurally, banks must run a fully automated complaints management system that auto-escalates relevant cases to the Internal Ombudsman in time for review, and ensure the customer receives a final decision within 30 days of the bank’s receipt of the complaint. Governance and oversight requirements include functional reporting to the Customer Service Committee of the Board, restrictions on when Internal Ombudsman decisions can be overruled, annual internal audit of implementation, supervisory review by the Reserve Bank, and periodic reporting to the Reserve Bank on appointments and the ombudsman function. Most requirements take effect immediately, while specified provisions must be complied with by 30 June 2026. The Directions also repeal the 2023 Internal Ombudsman Master Direction, with prior appointments and actions deemed to continue under the new framework.

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