India’s banking industry changed dramatically in the year 1969 when the government nationalized 14 largest commercial banks. The next development took place in the 1990s when private banks began operations as a result of the liberalization of the economy. The next stage of development expanded the banking system by the entry of Non-Banking Finance Companies (NBFC). NBFCs such as housing finance, chit fund, leasing, and insurance serve the needs of customers providing a variety of financial services. With the advent of technology, a new breed of financial services companies took root known as Fintech companies. These offer financial services leveraging the power of new technologies operating in the financial services industry.
The regulator of the banking industry is the Reserve Bank of India (RBI). It regulates as per the provisions of the RBI Act, 1934. One of the main features of the Act is the protection of the rights of bank customers through the Banking Ombudsman Scheme (BOS). As of today, the Banking Ombudsman Scheme 2006 (as amended up to July 1, 2017) is in vogue.
A similar scheme is now extended to the operations of NBFCs to protect the rights of NBFC customers. In line with this objective, and in recognition of the growing influence of NBFCs in offering financial services to a wide cross section of people, the RBI has brought the NBFCs under the BOS through a notification issued on 23 February, 2018 (https://rbidocs.rbi.org.in/rdocs/Content/PDFs/NBFC23022018.pdf).
The salient points articulated in the BOS (Banking Ombudsman Scheme) for NBFCs include
- Establishment of office of ombudsman – presently 4 offices in Chennai, Mumbai, New Delhi and Kolkata operate with specific jurisdictions covering the whole of India
- Procedure for redressal of grievance – grounds of complaint, procedure for filing complaint, power not to entertain a complaint, power to call for information, settlement of complaint by agreement, award by the ombudsman, rejection of the complaint and appeal before appellate authority
In essence, the ombudsman scheme receive customer complaints such as delay in collection of cheques to delay in providing certain services such as issue of demand drafts to non-adherence to prescribed working hours to levy of charges without due notice. The ombudsman is a form of appellate body as the customer can approach the ombudsman only in the event of unsatisfactory reply from the concerned NBFC.
Tata Capital is a premier NBFC offering a variety of financial services to customers to acquire homes, cars and two wheelers, and consumer durables. It provides loans for higher education and businesses. It offers personal loans for all other purposes. Its use of technology to process and disburse loans ensures transparency and minimizes disputes. The company welcomes the introduction of BOS to NBFCs, which will strengthen the ethical practices prevailing in the company and build upon the already high trustworthy nature of its business.