Unified grievance redressal being considered for financial sector

The Union government has initiated the process of setting up a unified body to address grievances of customers in the financial sector, in place of the separate grievance redressals for the various segments like banking and insurance, an official statement said on Wednesday.

A Finance Ministry statement said the the report of Financial Redressal Agency (FRA) has been placed in the public domain, inviting comments by January 31.

"FRA design offers a simplified resolution process, allowing retail consumers in distant and remote locations to pursue effective remedies against financial service providers (FSPs), without imposing significant costs on them," it said.

"It will try to resolve all complaints through mediation and discourage court-like processes.

"Cases where the parties are unable to reach a settlement would be resolved through a light-touch adjudication process," it added.

Finance Minister Arun Jaitley in his budget of the last fiscal had announced the creation a sector-neutral FRA to address the grievances of retail consumers.

The task force, constituted as part of the preparatory work for FRA, had submitted its report on June 30, which said the current framework offers only sub-optimal outcomes for consumers, the statement said.

The task force headed by the Pension Fund Regulatory and Development Authoritys' former chairman D.Swarup has stressed that for the FRA to be effective, the preventive aspects to be implemented by the regulators need to be simultaneously strengthened.

"It highlighted the need for basic protections articulated by the Financial Sector Legislative Reforms Commission to be provided in law through a new financial consumer protection and redress legislation to empower FRA to provide redress, and strengthen preventive regulatory framework on consumer protection for implementation by the regulators," the ministry said.

Accoerding to the task force report, "this law should be created by adopting the relevant consumer protection provisions from the Indian Financial Code (IFC) 1.1," it added.

On the issue of implementation, the task force recommended first empowering the FRA to redress complaints being handled by the Insurance Regulatory and Development Authority of India (IRDAI), Insurance Ombudsman and the PFRDA.

In the second phase to be implemented after one year, the task force said that FRA should be given power to redress complaints by retail consumers against financial service providors regulated by Securities and Exchange Board of India as well as retail complaints that are handled by Reserve Bank of India and the banking ombudsman.

--IANS

bc/vd