The Reserve Bank of India has issued new Directions requiring eligible small finance banks to strengthen internal grievance redress by putting an Internal Ombudsman at the apex of the complaints process, including a mandatory review of complaints that are partially resolved or proposed to be rejected before a final response is issued to customers. The framework takes effect immediately, with specified governance and system-related requirements to be met by June 30, 2026. The Directions apply to small finance banks with 10 or more banking outlets in India as on March 31, 2025, and to banks that cross the threshold after that date from six months after meeting the criteria. Each in-scope bank must appoint at least one Internal Ombudsman and may appoint Deputy Internal Ombudsmen, subject to eligibility, independence and age conditions, and fixed contractual terms of at least three years with a total tenure capped at five years. The Internal Ombudsman is administratively accountable to a whole-time or executive director responsible for customer service and functionally to the board’s Customer Service Committee, where the Internal Ombudsman is a permanent invitee. Banks must implement a fully automated complaint management system that auto-escalates all partially resolved or wholly rejected complaints to the Internal Ombudsman within set timelines and ensures a final decision is communicated within 30 days of receipt by the bank, with a reasoned decision recorded and escalation routes to the RBI Ombudsman communicated where applicable. The Directions also prescribe annual internal audit coverage of implementation, quarterly analysis of complaint patterns, read-only access for the Internal Ombudsman to the RBI’s Complaint Management System, and periodic reporting to the RBI, including notification within five working days of an Internal Ombudsman or Deputy Internal Ombudsman appointment. The Master Direction on Internal Ombudsman for Regulated Entities issued in December 2023 is repealed, with prior appointments and actions deemed to have been made under the new Directions. Compliance with clause 7(2) and clauses 14(2) and 14(4) is required by June 30, 2026.
Reserve Bank of India 2026-01-14
Reserve Bank of India mandates Internal Ombudsman review for small finance banks with 10 or more outlets and requires automated escalation of rejected complaints by June 30 2026
The Reserve Bank of India has mandated eligible small finance banks to enhance grievance redress mechanisms by appointing an Internal Ombudsman to oversee complaints, with immediate effect and full compliance required by June 30, 2026. The Directions apply to banks with 10 or more outlets as of March 31, 2025, and include requirements for automated complaint management, internal audits, and reporting to the RBI.