Blitz Bureau
NEW DELHI: India’s banking sector is witnessing a sustained and broad-based rise in customer complaints, reflecting growing stress points in digital transactions, grievance redressal systems, and service quality across regulated entities.
Fresh data from the Reserve Bank of India (RBI) shows that grievances under the Integrated Ombudsman Scheme (RB-IOS) climbed to 13.34 lakh cases in FY25, up from 11.75 lakh in FY24, signalling deeper structural issues as the financial ecosystem expands.
The bulk of complaints continue to originate from private sector banks and small finance banks, with digital transaction failures, unauthorised debits, mis-selling and service-charge disputes emerging as the dominant categories.
Downside of digital growth
Sector analysts indicate that the rapid adoption of UPI, mobile banking, card payments and instant lending platforms has significantly increased both the volume and complexity of transactions. As digital usage expands, so do frictions — failed payments, delayed reversals, merchant disputes and cyber fraud.
RBI’s own fraud statistics point to a sharp surge in technology-driven fraud, particularly in card-not-present transactions, phishing attacks and app-based scams. Private banks account for a substantial share of these incidents.
Deputy Governor Swaminathan J, speaking at Standard Chartered Bank’s annual event, noted that the financial system has become “more granular, deeper and highly interconnected,” adding that traditional risks — including credit, liquidity and market risk — now carry new dimensions.
Service quality to blame too
A parallel rise in service-related complaints suggests that customer dissatisfaction is not driven solely by digital issues. Key irritants flagged in RBI’s annual grievance review include:
• Non-transparent service charges and minimum balance penalties
• Mis-selling of insurance, credit cards and investment products
• Delays in loan servicing, EMI adjustments and credit-report corrections
• Harsh recovery practices in retail lending
Consumer forums and Ombudsman decisions highlight repeated instances where banks failed to adhere to prescribed fair-practice codes or provided delayed and inadequate responses to customer queries.
RBI has also observed that a significant share of complaints escalating to the Ombudsman indicates gaps in banks’ internal grievance redress mechanisms, which are expected to resolve most issues at the first point of contact.
Woes of financial inclusion
The expansion of formal banking through Jan Dhan accounts, DBT flows and rising digital penetration has brought millions of first-time users into the system. While inclusion efforts have accelerated settlement efficiency and access to credit, they have also increased the volume of disputes, especially among customers unfamiliar with digital interfaces or vulnerable to online fraud.
RBI notes that over 89 per cent of complaints are now filed through digital channels, and more than half come from metropolitan regions — underscoring both digital adoption and digital friction.
Regulatory response
The RBI and the Government have initiated a series of reforms aimed at improving customer protection, fraud detection and complaint handling across the financial sector.
The Reserve Bank – Integrated Ombudsman Scheme (RB-IOS) has merged earlier grievance redress systems into a common platform for banks, NBFCs and payment system participants. The Centralised Receipt and Processing Centre (CRPC) in Nagpur logs, screens and routes complaints across the Ombudsman network, improving monitoring and uniformity.
Banks are also mandated to appoint Internal Ombudsmen (IOs) for independent review of rejected complaints before they escalate to the RBI.
Governor Shaktikanta Das recently unveiled the National Strategy for Financial Inclusion (NSFI) 2025–30, aligned with the UN Sustainable Development Goals. The strategy places strong emphasis on:
• Equitable access to financial services
• Women-led inclusion models
• Digital financial literacy
• Strengthening customer-protection frameworks
As digital adoption accelerates and the financial customer base expands, strengthening trust, transparency and timely redress will remain central to ensuring the stability and credibility of India’s fast-growing banking ecosystem.
