“There is need for a centralised agency which will be a single-window solution for the needs of retail financial consumers,” said the official.
India’s existing consumer redressal system is fragmented and overseen by sectoral regulators such as the Reserve Bank of India (RBI) for banks and the Insurance Regulatory and Developmental Authority (Irda) for insurance-related grievances. The government is of the view that this fragmented regulatory architecture leads to inconsistent treatment of both consumer complaints and micro-prudential regulation.
“The legislative changes required to further empower such an agency will be done in consultation with all stakeholders and accordingly pursued,” said the official cited above.
The Financial Sector Legislative Reforms Commission (FSLRC), which presented a template for comprehensive financial sector reforms in 2011, had also mooted such a redressal body. Subsequently, in 2015, the late Arun Jaitley, then finance minister, had announced in his budget speech a task force to establish a sector-neutral Financial Redressal Agency, which would address grievances against all financial service providers.
Set up under former pension regulator Dhirendra Swarup, the task force had pointed out in its report that existing consumer complaint redressal forums are not always adequately empowered or equipped to handle all categories of complaints. In some instances, regulated Financial Service Providers (FSPs) are not even covered within the scope of that regulator’s redress functions, the task force had noted. It had further supported an FRA on the grounds that such an agency will also lead to an independent feedback loop for regulators on complaints, including information on unregulated entities.
In its recommendations, the task force had recommended a two-phase rollout. In the first phase, the FRA would look into complaints regarding the insurance and pension sectors that are currently being handled by Irda, the Insurance Ombudsman and the Pension Fund Regulatory and Development Authority (PFRDA). Once this is stabilised, it would look into complaints against financial service providers regulated by the Securities and Exchange Board of India (Sebi) as well as retail complaints handled by the RBI and the Banking Ombudsman.