The Reserve Bank of India has introduced an important reform to improve how banks and financial companies handle customer complaints.
Under the new rule, all banks and NBFCs must appoint an Internal Ombudsman.
The goal is simple: make sure customer complaints are properly examined instead of being ignored or closed without fair review.
This move is expected to give customers a stronger voice and ensure faster, more transparent complaint resolution within financial institutions.
What Is the Internal Ombudsman System?
The Internal Ombudsman will act as an independent authority within the bank or NBFC.
Their role is to review complaints that have been rejected or only partly resolved by the institution.
This means customers will now get a second, senior-level review of their complaints before the case is closed.
The RBI believes this system will create a stronger and more reliable grievance redressal framework across the financial sector.
New Rules for Appointing an Internal Ombudsman
According to RBI guidelines, only experienced professionals can be appointed as Internal Ombudsman.
The person must have at least seven years of experience in areas such as banking, NBFC operations, regulation, payment systems, consumer protection, or credit information.
Senior officials who have worked at the level of General Manager or above in the RBI or other financial regulators are also eligible.
Every regulated institution must appoint at least one Internal Ombudsman.
Which Institutions Must Follow This Rule?
The RBI has made it clear that this directive applies to a wide range of financial entities.
These include commercial banks, small finance banks, payment banks, NBFCs, prepaid payment instrument issuers, and credit information companies.
By bringing all these institutions under one framework, the RBI aims to ensure a uniform and transparent complaint handling process across the entire financial system.
RBI to Closely Monitor Complaint Handling
Customer service and grievance redressal will now fall under the regular supervision of the RBI’s Department of Supervision.
This means banks and NBFCs that fail to handle complaints properly could face direct regulatory scrutiny.
This step is expected to improve accountability and boost customer confidence in the banking system.
Final Rules Now in Effect
The RBI had released a draft of these rules in October 2025 and invited feedback from the public and stakeholders.
After reviewing the suggestions, the final Master Direction has now been implemented.
This clearly shows the RBI’s focus on protecting customer interests and strengthening trust in the financial system.
Overall, the mandatory appointment of an Internal Ombudsman marks a major step toward better customer service.
It gives customers a stronger platform for complaint resolution and reinforces transparency and trust in banks and NBFCs.
