Digital frauds, grievances worry banks: RBI

Rising consumer grievances continue to be a matter of concern for India’s banking system, even as improvements in customer services have been made, the Reserve Bank of India said in its Trend and Progress of Banking in India 2025 report released on Monday.The central bank said consumer protection is fundamental to strengthening trust and confidence in the financial system and rests on fair treatment of customers and an efficient grievance redressal mechanism. While the RBI noted that “substantial progress” has been achieved in improving consumer services, it stressed that consumer education and protection remain a policy priority.The RBI said its customer protection policies reinforce its commitment to safeguarding consumer rights, improving service quality, enhancing awareness, and ensuring robust grievance redressal. The report also highlighted the need to combat emerging digital and cyber-enabled frauds as part of strengthening customer protection.As part of its consumer awareness efforts, the RBI has been undertaking several initiatives, including town-hall meetings and awareness programmes with a focus on students, senior citizens and women. Awareness booklets are also being distributed to trainees of Rural Self Employment Training Institutes through sponsor banks.Digital and cyber-enabled fraudsBuilding on customer protection measures already in place, the RBI announced a principle-based framework for authentication of digital transactions. It also introduced exclusive internet domains and designated numbering series for regulated entities to reduce cybersecurity threats.The central bank said it continues to work with stakeholders, including the Ministry of Home Affairs, to develop and operationalise measures to curb digital and cyber-enabled frauds. Regulated entities have been advised to put in place robust internal controls, ensure sufficient grievance redress officers at all levels, and enhance digital financial literacy.Also read: India’s banks on firm footing as bad loans decline to 2.1%, says RBIInternal Ombudsman mechanismTo enhance the effectiveness of the Internal Ombudsman mechanism in regulated entities, the RBI issued a Draft Master Direction in October 2025.The draft proposes a two-tier grievance redressal structure within regulated entities before complaints are escalated to the Internal Ombudsman. It also proposes empowering Internal Ombudsmen with compensation powers and access to complainants. The RBI said these measures are aimed at timely and meaningful resolution of grievances, improving service standards, and strengthening consumer confidence.Integrated Ombudsman Scheme expandedThe Reserve Bank – Integrated Ombudsman Scheme (RB-IOS), 2021, which provides customers with a speedy, cost-free and expeditious alternate grievance redress mechanism, was comprehensively reviewed in October 2025 based on operational experience, stakeholder feedback and global best practices.The RBI also extended the scope of the scheme to state co-operative banks and central co-operative banks—earlier under NABARD—with effect from November 1, 2025. The move allows customers of rural co-operative banks access to the RBI’s ombudsman framework, which the central bank said will strengthen grievance redressal and boost customer confidence.Special campaign to clear pending grievancesAs a customer-centric measure, the RBI said it will conduct a special two-month campaign starting January 1, 2026, aimed at resolving all grievances pending with the RBI Ombudsman for more than a month.Complaint Management System 2.0The RBI said it has undertaken the development of Complaint Management System (CMS) 2.0 to upgrade the existing system with an improved customer user interface.Mis-selling and loan recovery practicesMis-selling of financial products and services by regulated entities has significant consequences for customers as well as the financial sector, the RBI said. It proposed issuing comprehensive instructions covering advertising, marketing and sales of financial products and services, including measures to prevent mis-selling.The central bank also proposed reviewing existing instructions on conduct-related matters associated with engagement of recovery agents and recovery of loans, with a view to issuing harmonised instructions.Review of customer liability in unauthorised transactionsThe RBI said instructions issued in 2017 on limiting customer liability in unauthorised electronic banking transactions are being reviewed in view of major shifts in the banking landscape, including higher volumes of digital transactions, the emergence of new payment channels, and evolving fraud patterns. The review is expected to improve customer safeguards.