The Reserve Bank of India issued new directions requiring in-scope non-banking financial companies (NBFCs) to appoint an Internal Ombudsman and embed an independent review step for customer complaints that are partially resolved or proposed to be rejected, before the NBFC issues its final response. The framework is intended to strengthen internal grievance redress and make complaint outcomes subject to apex-level scrutiny within the NBFC. The directions apply, based on eligibility as of March 31, 2025, to deposit-taking NBFCs with 10 or more branches and to non-deposit-taking NBFCs with assets of INR 5,000 crore and above that have a public customer interface, while excluding specified NBFC categories and entities under insolvency, liquidation or winding up, or under Reserve Bank directions. Requirements cover governance and resourcing of the Internal Ombudsman office, eligibility and independence criteria for Internal Ombudsman and Deputy Internal Ombudsman appointments, a fixed-term tenure structure, and board oversight including periodic reporting and board visibility where an Internal Ombudsman decision is overruled. Operationally, NBFCs must run an automated complaint management system that auto-escalates partially resolved and wholly rejected complaints for Internal Ombudsman review, record reasoned decisions, communicate the final decision to the complainant within 30 days of complaint receipt, and direct complainants to the RBI Ombudsman route where applicable, including incorporating the Internal Ombudsman view when complaints are escalated. The directions also introduce internal audit expectations, supervisory review linkage, and prescribed reporting to the Reserve Bank. Most provisions take effect immediately, with specified requirements including annual board determination of the number of Internal Ombudsman and Deputy Internal Ombudsman, use of only three complaint status categories in the system, and controls to prevent complaint closure by the same originating unit required to be complied with by June 30, 2026. NBFCs that meet the eligibility thresholds after March 31, 2025 come into scope six months after meeting the criteria, and the Reserve Bank repealed the 2023 master direction on Internal Ombudsman for regulated entities with existing appointments and actions carried forward under the new directions.

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