RBI notifies Internal Ombudsman Directions for NBFCs; aims at strengthening Internal Grievance Redress mechanism and speedy resolution of complaints

The Reserve Bank of India (“RBI”) has issued the Reserve Bank of India (Non-Banking Financial Companies – Internal Ombudsman) Directions, 2026 (“2026 Directions”) with a view to strengthen the Internal Grievance Redress mechanism within a Non-Banking Financial Company (NBFC) and ensure a speedy and meaningful resolution of customer complaints.

The 2026 Directions will gain effect immediately except specific clauses (listed below) which has to be complied by within 30^th June , 2026:

• clause 7(2) – which deals with determining the number of IO/Dy. IO
• clause 14(2) – which deals with providing three categories i.e. ‘Fully Resolved’, ‘Partially Resolved’ and ‘Wholly Rejected’ in the Complaint Management System
• clause 14(4) – which requires NBFC to ensure that a complaint is not closed by the same branch / unit / other touch points, whether it has been resolved (fully or partially) or rejected. A complaint which is being wholly rejected or partially resolved shall be reviewed at a fairly senior level, which the NBFC may decide as deemed fit, before sending it to the office of IO

Applicability:

The 2026 Directions will apply to NBFCs (excluding Housing Finance Company, Core Investment Company, Infrastructure Debt Fund-Non-Banking Financial Company, Non-Banking Financial Company – Infrastructure Finance Company, Non Operative Financial Holding Company, Primary dealers, Mortgage Guarantee Company) and fulfilling the following criteria as on March 31, 2025:

• Deposit-taking NBFCs (NBFCs-D) with 10 or more branches;
• Non-Deposit taking NBFCs (NBFCs-ND) with asset size of Rs.5,000 crore and above and having public customer interface

The 2026 Directions will also be applicable to an NBFC, which meets the above mentioned criteria after March 31, 2025, with effect from six months from meeting the eligibility criteria.

Repeal:

The 2026 Directions repeal the “Master Direction – Reserve Bank of India (Internal Ombudsman for Regulated Entities) Directions, 2023”. However, all appointments / actions under the aforesaid Master Direction, prior to the coming into effect of the 2026 Directions, will be deemed to have been made under these Directions

Key Takeaways:

1. Appointment of Internal Ombudsman (“IO”) and Internal Ombudsman (“Dy. IO”). Such appointment will be contractual.

2. The NBFC has to ensure that the post of the IO does not remain vacant at any point of time. During the temporary absence of the IO, the Dy. IO may function as the IO.

3. Every NBFC must appoint at least one IO.

4. The Board of the NBFC have to determine, at least once in a year, the number of IO/ Dy. IO to be appointed having due regard to volume and complexity of the complaints received, and ensuring that the IO/ Dy. IO get sufficient time to apply his/her mind on the principles of fairness, equity and natural justice while reviewing the resolution provided by the NBFC.

5. The Internal Audit Department of the NBFC has to conduct an audit of the implementation of these Directions on an annual basis.

6. The 2026 Directions provide for the role and responsibility of the IO/Dy. IO.

7. The IO WILL be designated as a permanent invitee to the meetings of the Board. In NBFCs having multiple IOs, a view shall be taken by the Board to have representation of more than one IO or having a system of rotation.

8. NBFCs have to put in place a fully automated Complaints Management System and access to the system has to be given to IO/Dy. IO. Additionally, the NBFC has to provide only three categories i.e. ‘Fully Resolved’, ‘Partially Resolved’ and ‘Wholly Rejected’ in its Complaint Management System for recording the decision on the complaints before escalation to the office of IO.

9. NBFC has to formulate a Standard Operating Procedure (SOP) for flow of complaints and information in a time bound manner.

10. The NBFC must, within five working days of appointment of the IO or Dy. IO, furnish the details of the official so appointed to the Consumer Education and Protection Department, Central Office, Reserve Bank of India (email: iocepd@rbi.org.in).

Please refer to the hyperlink below for a detailed read of the 2026 Directions:

Source: Reserve Bank of India