The Reserve Bank of India has decided to introduce the Internal Ombudsman Scheme (IOS) for certain categories of NBFCs which have higher customer interface.

“The increased strength and reach of NBFCs across the country has necessitated various measures by the Reserve Bank for protection of customers,” RBI Governor Shaktikanta Das said in the monetary policy statement on Friday.

According to the Statement on Developmental and Regulatory Policies, the IOS for NBFCs will be on the lines of IOS for banks and non-bank payment system participants.

Consumer protection

“… will require select NBFCs to appoint an internal ombudsman (IO) at the top of their internal grievance redress mechanism to examine customer complaints which are in the nature of deficiency in service and are partly or wholly rejected by the NBFCs,” it further said.

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Over the last few years, the RBI has initiated various measures for consumer protection and grievance redress for customers of NBFCs, which include requiring NBFCs to appoint a nodal officer for grievance redress and launch of the ombudsman scheme for NBFCs, it further said.

Maintain credit flow

Further, in a bid to sustain the revival in credit flow to underserved segments, the RBI has decided to extend the facility of bank lending to registered NBFCs (other than MFIs) for on-lending to agriculture, MSME and housing to be classified as priority sector lending (PSL).

“This facility, which was available from August 13, 2019 till September 30, 2021 is being further extended for another six months up to March 31, 2022,” Das said.

“With a view to increase the credit flow to certain priority sectors of the economy which contribute significantly to growth and employment, and recognising the role played by NBFCs in providing credit to these sectors, bank lending to registered NBFCs (other than MFIs) for on lending to agriculture (investment credit), micro and small enterprises and housing (with an increased limit) was permitted to be classified as priority sector lending up to certain limits in August 2019,” said the Statement on Developmental and Regulatory Policies on Friday.

“Loans disbursed under the on-lending model will continue to be classified under priority sector till the date of repayment or maturity whichever is earlier,” the RBI said in a notification.

Increased regulation

“By introducing an Ombudsman for NBFCs on one hand and strengthening their role in PSL operations for the support that they provide to the banks on the other hand, the RBI continues to increase its regulatory ambit over NBFCs,” said Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas and Co.

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YS Chakravarti, MD and CEO, Shriram City, said, “The RBI has also extended PSL status for bank’s lending to NBFCs for on-lending to MSMEs till March 2022, thus regulatory measures, reliefs, and benefits to MSMEs will aid struggling small businesses hit by the pandemic.”