In a decisive move to enhance customer grievance redressal in the banking and financial services sector, the Reserve Bank of India (RBI) has released the draft Master Direction – Reserve Bank of India (Internal Ombudsman for Regulated Entities) Directions, 2025. The RBI is now inviting public comments on the draft until October 28, 2025.
This draft builds upon the existing framework notified in December 2023, which institutionalized the Internal Ombudsman (IO) mechanism within various Regulated Entities (REs), such as banks, NBFCs, and other RBI-supervised institutions. The objective is clear: to strengthen independent internal review of customer complaints that are proposed to be rejected by REs.
Why Internal Ombudsman Matters
The Internal Ombudsman mechanism is a crucial safeguard in India’s financial consumer protection architecture. Before a customer’s complaint is rejected outright by a financial institution, it is referred to the Internal Ombudsman—an impartial officer independent from the decision-making structure of the institution.
This ensures:
- Objective scrutiny of complaints before rejection
- Fair treatment of customers
- A check against arbitrary or biased complaint disposal
- Improved transparency and accountability within financial entities
What’s New in the 2025 Draft?
The RBI, based on its review of the 2023 framework and feedback from stakeholders, is proposing a more robust set of guidelines. While the full draft is available on the RBI’s website, here are some key areas expected to be enhanced:
- Operational Autonomy of the Internal Ombudsman
– Strengthening independence in terms of reporting structure, tenure, and functioning
– Ensuring no undue influence from senior management on IO decisions - Scope of Review
– Possibly expanding the type and number of complaints that must be routed through the IO
– Standardizing exceptions and defining “non-routable” complaints more clearly - Time-bound Redressal
– Introducing stricter timelines for IO review and resolution
– Improving turnaround time in favour of faster grievance handling - Transparency and Reporting
– Mandating detailed internal reporting of IO observations
– Regular disclosures to the RBI to monitor quality of grievance redressal - Training and Qualification
– Prescribing minimum qualifications, experience, and training requirements for IOs
– Ensuring uniform standards across REs
Public Participation Encouraged
The RBI has encouraged all stakeholders—including consumers, financial institutions, and consumer advocacy groups—to submit feedback by October 28, 2025. Suggestions can be submitted via:
- The ‘Connect 2 Regulate’ section on the RBI’s website
- Or post to the RBI’s Consumer Education and Protection Department, Mumbai
Why This Is Important Now
As India’s financial landscape becomes more digital and customer-facing, grievances related to service quality, digital payments, loan processing, and fraud have increased. Strengthening the Internal Ombudsman mechanism ensures customers are heard fairly within the institution before escalating to external ombudsman schemes or legal remedies.
This move also aligns with RBI’s broader goal of fostering responsible banking and customer-centric regulation.
Conclusion
The draft Internal Ombudsman Directions, 2025 represent a timely step in refining India’s financial grievance redressal ecosystem. By strengthening internal checks, the RBI is empowering customers and compelling financial institutions to be more accountable. Stakeholders now have an opportunity to shape this important regulatory instrument through informed feedback.