Role of Reserve Bank of India (RBI)

The banking sector is a critical part of any economy, and consumer trust is paramount. In India, the **Reserve Bank of India (RBI)**, as the central banking authority and regulator of the banking sector, plays a significant role in ensuring consumer protection for banking services. While consumer forums under the Consumer Protection Act, 2019, provide a legal avenue for redressal, the RBI supplements this by setting standards, issuing guidelines, and establishing specific mechanisms for grievance redressal within the banking ecosystem.

RBI's Regulatory Role:

The RBI frames policies and issues directives to banks covering various aspects of their operations that directly impact consumers. These include regulations related to:

• **Interest Rates:** Guidelines on transparency and fairness in charging interest on loans and offering interest on deposits.
• **Fees and Charges:** Norms regarding various service charges levied by banks, ensuring transparency and prohibiting unfair charges.
• **Fair Practices Code:** Mandating banks to adopt fair practices in lending, recovery, and customer service.
• **Customer Service Standards:** Setting minimum standards for customer service, including grievance handling within banks.
• **Electronic Banking and Digital Payments:** Issuing guidelines for the safety and security of online transactions, ATMs, mobile banking, etc., and addressing issues like failed transactions and fraud liability.
• **Deposit Insurance:** Overseeing the Deposit Insurance and Credit Guarantee Corporation (DICGC) which provides insurance cover for deposits held by individuals in banks.

Through these regulations, the RBI aims to ensure that banks operate in a transparent, fair, and ethical manner in their dealings with customers.

Banking Ombudsman Scheme

A key initiative by the RBI for consumer protection is the **Integrated Ombudsman Scheme, 2021** (which subsumed the Banking Ombudsman Scheme, 2006, the Ombudsman Scheme for Non-Banking Financial Companies, 2018, and the Ombudsman Scheme for Digital Transactions, 2019). This scheme provides a cost-free and expeditious forum for the redressal of customer complaints relating to services rendered by entities regulated by RBI (like banks, NBFCs, payment system participants) that are not resolved by the entities themselves.

Key Features of the Integrated Ombudsman Scheme:

• **Jurisdiction:** Covers a wide range of complaints related to banking services, NBFC services, and digital transactions.
• **Appellate Authority:** A Deputy Governor of the RBI is the Appellate Authority under the Scheme.
• **Centralised Receipt and Processing Centre:** A common portal/email address for filing complaints.
• **Cost-Free:** Consumers do not have to pay any fee to file a complaint under the scheme.
• **Expeditious Resolution:** The Ombudsman attempts to resolve complaints through mediation or passing an Award if mediation is unsuccessful.
• **Awards:** The Ombudsman can pass an Award directing the regulated entity to compensate the complainant for the loss suffered, subject to a maximum amount (currently ₹20 Lakh). For complaints related to mental agony and harassment, the Ombudsman may award compensation up to ₹1 Lakh.
• **Binding Nature:** The Award is binding on the regulated entity if accepted by the complainant.

Before approaching the Ombudsman, the consumer must first lodge a complaint with the bank/NBFC/payment system participant concerned and either the entity has rejected the complaint, or the complainant has not received any reply within 30 days, or the complainant is not satisfied with the reply or the relief offered by the entity.

The Banking Ombudsman Scheme provides an important alternative or supplementary channel for consumers to seek redressal for grievances against banks, complementing the remedies available under the Consumer Protection Act.

Common Grievances

Consumers interact with banking services on a daily basis, and despite regulations, various issues can arise leading to grievances. These common complaints often become the subject of disputes before consumer forums or the Banking Ombudsman.

Examples of Common Grievances in Banking Sector:

• **Account Operations:**
  • Errors in account statements or ledger entries.
  • Unauthorised debits or credits.
  • Issues with opening or closing accounts, or transferring accounts.
  • Delays in clearing cheques or processing transactions.
  • Issues with nomination facilities.
• **Loans and Advances:**
  • Non-observance of fair practices in lending (e.g., changes in terms after sanction).
  • Charging excessive interest or unagreed fees/charges.
  • Issues with loan recovery agents or practices.
  • Delay in sanction or disbursement of loans.
  • Issues related to foreclosure or pre-payment penalties.
• **ATM and Debit Card Operations:**
  • Cash not dispensed by ATM but account debited.
  • Cloning of cards or fraudulent withdrawals.
  • Issues with PIN security or card usage.
• **Credit Card Operations:**
  • Billing errors or incorrect charges.
  • Charging excessive fees, interest, or penalties.
  • Unauthorised transactions.
  • Issues related to card activation, blocking, or replacement.
• **Mobile and Electronic Banking:**
  • Failed online transactions where amount is debited but not received by beneficiary.
  • Issues with UPI, NEFT, RTGS transfers.
  • Fraudulent transactions due to security lapses or phishing.
  • Issues with mobile banking apps or services.
• **Insurance and Investment Products (Sold by Banks):**
  • Mis-selling of insurance policies, mutual funds, or other investment products by bank staff.
  • Failure to disclose material facts about the product.
  • Issues with claims or maturity of these products (though resolution might involve the product provider as well).
• **Pension and Other Benefits:**
  • Delay in crediting pension or other government benefits.
  • Errors in calculation or disbursement of pension.
• **General Customer Service:**
  • Lack of responsiveness or delays in resolving customer queries and complaints.
  • Rude or unhelpful behaviour by bank staff.
  • Failure to provide services as advertised or promised.

These grievances highlight areas where banks' services may be deficient or where unfair practices may be perceived, leading consumers to seek intervention from regulatory or quasi-judicial bodies like the Banking Ombudsman or Consumer Commissions.

Role of Insurance Regulatory and Development Authority (IRDAI)

The insurance sector is a crucial component of the financial system, providing risk coverage for individuals and businesses. Given the technical nature of insurance contracts and the potential for information asymmetry, a strong regulatory body is essential for protecting policyholders' interests. In India, the **Insurance Regulatory and Development Authority of India (IRDAI)** is the statutory body responsible for regulating and promoting the insurance and re-insurance industries. A key part of IRDAI's mandate is to ensure fair treatment of policyholders and establish mechanisms for grievance redressal.

IRDAI's Role in Consumer Protection:

IRDAI exercises its regulatory powers under the Insurance Act, 1938, and the IRDA Act, 1999, to protect consumers in the insurance sector. Its functions include:

• **Licensing and Regulation:** Issuing licenses to insurance companies and intermediaries (agents, brokers) and setting solvency and operational norms to ensure their financial soundness and ability to pay claims.
• **Policy Wording and Product Approval:** Reviewing and approving insurance products and policy wordings to ensure they are fair, transparent, and easy for policyholders to understand.
• **Protection of Policyholders' Interests:** Issuing regulations specifically for the protection of policyholders' interests, covering aspects like proposal form, policy issuance, premium collection, nomination, assignment, surrender values, and claim settlement.
• **Disclosure Norms:** Mandating insurers to disclose key information to policyholders at different stages, from sale to claim settlement.
• **Market Conduct:** Setting standards for market conduct of insurers and intermediaries to prevent mis-selling, unfair practices, and unethical behaviour.
• **Grievance Redressal within Insurers:** Mandating every insurer to have an effective internal grievance redressal mechanism, including appointing a Grievance Redressal Officer, and adhering to timelines for resolving complaints.
• **Monitoring and Enforcement:** Monitoring the compliance of insurers and intermediaries with regulations and taking penal action against those found in violation.

Insurance Ombudsman Scheme

A dedicated and accessible mechanism for the redressal of grievances against insurance companies is the **Insurance Ombudsman Scheme**. This scheme was established by the Central Government under the Redressal of Public Grievances Rules, 1998, and is overseen by the Council for Insurance Ombudsmen, constituted by IRDAI.

Purpose:

The Insurance Ombudsman Scheme provides an impartial, cost-free, and efficient mechanism for resolving grievances of aggrieved policyholders against insurance companies. It is a forum available to consumers before they decide to approach the more formal Consumer Commissions or civil courts.

Jurisdiction and Scope:

An Insurance Ombudsman can entertain complaints related to the following issues against insurers:

• Partial or total rejection of claims.
• Dispute over the amount of claim sanctioned.
• Delay in settlement of claim.
• Dispute over premium paid or payable.
• Misrepresentation of policy terms and conditions.
• Legal construction of the policy insofar as the dispute relates to claims.
• Service-related issues, including issue of policy document, non-receipt of policy document despite premium payment, etc.
• Non-issuance of insurance policy after receipt of premium.

The complaint must be against an insurer registered with IRDAI. The value of the claim in the complaint **should not exceed ₹30 Lakh**. The complaint must be filed within **one year** of the rejection of the representation by the insurer, or within one year of the expiry of the period within which the insurer should have replied.

Process:

Before approaching the Ombudsman, the policyholder must first make a representation to the insurer for redressal of the grievance. If the insurer rejects the complaint, or the policyholder does not receive a reply within 30 days, or is not satisfied with the reply, they can then approach the Insurance Ombudsman within whose territorial jurisdiction the insurer's office is located or the policyholder resides or works.

The Ombudsman attempts to settle the complaint through mediation. If a settlement is reached, it is recorded and is binding on both parties. If mediation fails, the Ombudsman proceeds to pass an **Award**. The Award is binding on the insurer but is only binding on the complainant if they accept it in writing within 30 days of receipt. If the complainant does not accept the Award, they are free to pursue other legal remedies.

The Insurance Ombudsman scheme serves as an effective dispute resolution channel specifically for insurance grievances, providing an accessible avenue for policyholders to seek resolution outside the formal court system.

Common Grievances

Consumers in the insurance sector often face specific issues that lead to dissatisfaction and complaints. These grievances can arise at various stages, from purchasing the policy to settling a claim.

Examples of Common Grievances in Insurance Sector:

• **Mis-selling of Policies:** This is a very common grievance where agents or bank staff misrepresent the features, benefits, returns, or terms and conditions of an insurance policy to sell it. Consumers complain that they were sold a policy that did not match their needs or understanding (e.g., being sold a ULIP as a fixed deposit, not being informed about lock-in periods, charges, or risks).
• **Claim Rejection or Partial Settlement:** Policyholders often complain about the unjustified rejection of their claims (life, health, motor, etc.) or settlement of a claim amount that is significantly lower than expected, often citing reasons like non-disclosure of pre-existing conditions (in health insurance), policy exclusions, or technical interpretations of terms.
• **Delay in Claim Settlement:** Unreasonable delays by insurers in processing and settling valid claims cause significant distress to policyholders, especially in health or life insurance where timely payouts are critical.
• **Policy Servicing Issues:** Grievances related to issues after the policy is purchased, such as:
  • Non-receipt of policy documents after premium payment.
  • Errors in the policy document (e.g., incorrect name, date of birth, sum assured).
  • Issues with premium payment or premium notice.
  • Difficulties in making changes to the policy (e.g., nomination, address change).
  • Problems with policy revival or surrender value calculation.
• **Unfair Terms and Conditions:** Complaints regarding complex, ambiguous, or allegedly unfair clauses in the policy wording, particularly those related to exclusions, deductibles, co-pay, or terms impacting claim admissibility.
• **Non-Disclosure by Insurers:** Insurers failing to adequately disclose material facts about the policy, including charges, risks, or limitations.
• **Issues with Intermediaries:** Grievances against insurance agents or brokers for unethical behaviour, mis-selling, or failing to provide proper service.
• **Health Insurance Specifics:** Besides claim issues, complaints specific to health insurance include denial of cashless facility, disputes over network hospitals, coverage for specific treatments, or renewal issues.

These types of grievances highlight the areas where consumers in the insurance sector most frequently seek intervention from grievance redressal forums like the Insurance Ombudsman and Consumer Commissions, alleging deficiency in service or unfair trade practices by insurers or their representatives.

The Real Estate (Regulation and Development) Act, 2016 (RERA)**

The real estate sector is one of the largest sectors in India, involving significant investments from consumers, particularly homebuyers. Historically, this sector was largely unregulated, leading to numerous issues like delays in project delivery, diversion of funds by developers, opaque transactions, and lack of quality construction, leaving consumers vulnerable. To address these challenges and bring transparency and accountability to the sector, the Indian Parliament enacted the **Real Estate (Regulation and Development) Act, 2016 (RERA)**.

Protection for Homebuyers

RERA is primarily aimed at protecting the interests of homebuyers (referred to as 'allottees' in the Act) and promoting the real estate sector in a transparent and efficient manner. It provides a comprehensive framework that governs the relationship between promoters (developers) and allottees. Key protections for homebuyers under RERA include:

1. Mandatory Registration of Real Estate Projects and Agents:

Promoters are required to register all residential and commercial projects (where the area of land exceeds 500 sq. meters or the number of apartments exceeds eight) with the respective State Real Estate Regulatory Authority (RERA Authority) before advertising, marketing, or selling any plots, apartments, or buildings. Similarly, real estate agents must also register with the RERA Authority. This brings unregistered projects and agents under regulatory scrutiny.

2. Transparency and Disclosure:

RERA mandates significant disclosures by promoters about the project details, including the sanctioned plan, layout plan, specifications, timeline for completion, details of the promoter, and agreements. This information must be uploaded on the RERA Authority's website, making it publicly accessible. Promoters cannot make any changes to the sanctioned plan or project specifications without the consent of a specific percentage of the allottees.

3. Use of Funds (Escrow Account):**

To prevent diversion of funds collected from homebuyers, RERA mandates that promoters deposit **seventy per cent** of the amounts realised for the real estate project from the allottees in a separate bank account (escrow account). This amount can only be used for construction and land costs of that specific project, subject to certification by a professional. This ensures that funds are used for the intended project.

4. Timely Delivery and Penalty for Delay:

RERA sets clear timelines for project completion and holds promoters accountable for delays. If a promoter fails to complete the project and hand over possession by the agreed date, they are liable to pay interest to the allottee for every month of delay at a prescribed rate. This provides a significant financial incentive for developers to adhere to timelines and compensates homebuyers for delays.

5. Quality of Construction and Defect Liability:

RERA includes provisions related to the quality of construction. Promoters are liable to rectify any structural or other defects in the workmanship, quality, or provision of services or any other obligations as per the agreement for sale, brought to their notice by the allottees within a period of **five years** from the date of handing over possession. Failure to rectify within 30 days makes the promoter liable to compensate the allottee.

6. Rights of the Allottee:

The Act clearly defines the rights of the allottee, including the right to obtain information about the project, know the schedule of completion, claim possession of the apartment, and claim refund or compensation in case of default by the promoter.

7. Establishment of Regulatory Authorities and Appellate Tribunals:

RERA mandates the establishment of a Real Estate Regulatory Authority in each State/Union Territory for registration of projects, protecting allottees' interests, and resolving disputes. It also provides for the establishment of a Real Estate Appellate Tribunal to hear appeals against the orders of the RERA Authority.

Regulation of Real Estate Agents

RERA also brings real estate agents under its regulatory ambit to professionalise the sector and protect homebuyers from malpractices by intermediaries.

• **Mandatory Registration:** Real estate agents involved in the sale or purchase of properties in registered projects must register with the RERA Authority.
• **Duties:** Agents have specific duties, such as facilitating the sale/purchase, maintaining books of accounts, and not indulging in any unfair trade practices.
• **Prohibited Practices:** Agents are prohibited from advertising or selling properties in unregistered projects, making false representations, or indulging in other unfair practices.

Non-compliance by agents can lead to penalties, including revocation of their registration.

RERA has significantly transformed the real estate landscape in India by introducing much-needed regulation, transparency, and accountability, specifically targeting the relationship between promoters and homebuyers.

Consumer Protection under CPA, 2019 for Real Estate Services

Apart from RERA, the **Consumer Protection Act, 2019 (CPA, 2019)**, also provides a crucial avenue for redressal for homebuyers. Real estate construction and related services fall within the definition of 'service' under the CPA, 2019, allowing homebuyers to approach consumer forums for grievances.

Real Estate as 'Service' under CPA:

The definition of 'service' in **Section 2(42)** of the CPA, 2019, is inclusive and explicitly lists "**housing construction**" as a covered service. This inclusion, upheld by numerous judicial pronouncements, confirms that activities undertaken by builders/developers for the construction and sale of residential or commercial units constitute 'service' under the Act. A person who books or purchases a flat, house, or plot from a developer for consideration is considered a 'consumer' of these services, provided it's not for commercial purposes (with the self-employment exception).

Common Real Estate Grievances Actionable under CPA:

Many of the issues faced by homebuyers constitute a 'deficiency in service' under the CPA and can be brought before the consumer forums. These include:

• **Delay in Possession:** Failure by the developer to deliver possession of the property within the time frame promised in the builder-buyer agreement. This is a common deficiency in service leading to complaints seeking compensation and/or timely possession.
• **Construction Defects / Deficiency:** Issues with the quality of construction, materials used, workmanship, or failure to provide promised specifications or amenities in the property. This constitutes a deficiency in the 'quality' or 'manner of performance' of the housing construction service.
• **Failure to Provide Amenities:** If the developer fails to provide common facilities, infrastructure, or amenities (like parks, club house, swimming pool, parking) as promised in the brochure or agreement, it is a deficiency in service.
• **Demanding Excessive Charges:** Charging amounts from the buyer that are not included in the agreement or are not legally permissible (e.g., inflated maintenance charges, arbitrary additional costs). This can be considered an unfair trade practice or deficiency in service.
• **Unfair Terms in Agreement:** The CPA, 2019, specifically includes 'unfair contract' (Section 2(46)) as a ground for complaint before the State and National Commissions. Many clauses in builder-buyer agreements (e.g., one-sided clauses favouring the builder, exorbitant penalties on the buyer but minimal on the builder) might be challenged as unfair contracts.
• **Failure to Execute Sale Deed or Transfer Ownership:** Delay or refusal to execute the final sale deed or transfer ownership rights after receiving full payment.
• **Issues with Registration and Completion Certificates:** Delay or failure to obtain and provide necessary statutory certificates like Completion Certificate or Occupancy Certificate.

Concurrent Jurisdiction (RERA vs. CPA):

A significant aspect of consumer protection in real estate is the **concurrent jurisdiction** of RERA Authorities/Tribunals and the Consumer Commissions. The Supreme Court of India has clarified in several judgments that the remedies available under the Consumer Protection Act are **in addition to and not in derogation of** the provisions of any other law. Therefore, homebuyers have the **option** to approach either the RERA Authority/Appellate Tribunal or the Consumer Forum (District, State, or National Commission depending on pecuniary value and territorial jurisdiction) for redressal of their grievances. They cannot, however, pursue remedies for the same cause of action simultaneously in both forums (doctrine of election). The choice of forum often depends on the specific grievance, the desired remedy, and the perceived speed and effectiveness of each forum.

Comparison of Focus: RERA vs. CPA for Homebuyers:

In conclusion, homebuyers in India benefit from dual protection under both RERA and the CPA, 2019. RERA provides a dedicated regulatory framework and specific remedies for project-related issues, while the CPA offers a broader consumer protection law that covers construction as a service and provides recourse for various types of deficiencies and unfair practices by developers and agents.