RBI amended the Banking Ombudsman Scheme in which it has allowed the banking ombudsman to impose a fine of up to Rs20 lakh on banks for mis-selling of third party products such as insurance and mutual funds.
So far, banking ombudsmen were allowed to impose a fine of Rs10 lakh on banks for mis-selling.
In a circular, RBI said, “The Reserve Bank of India has widened the scope of its Banking Ombudsman Scheme 2006, to include, inter alia, deficiencies arising out of sale of insurance/mutual fund/other third party investment products by banks. The pecuniary jurisdiction of the Banking Ombudsman to pass an Award has been increased from existing rupees one million to rupees two million.”
In addition, RBI has allowed banking ombudsmen to award a compensation of up to Rs1 lakh to the complainant for loss of time, expenses incurred and mental anguish. “Compensation not exceeding rupees hundred thousand can also be awarded by the Banking Ombudsman to the complainant for loss of time, expenses incurred as also harassment and mental anguish suffered by the complainant.”
This will come into effect from July 1, 2017.
