Ombudsman on cards after hike in digital transaction frauds: RBI

The rise in complaints was because of deficiencies in banking services

The Reserve Bank of India (RBI) on Wednesday said it will implement the ombudsman scheme for digital transactions because of a rise in complaints. According to its annual report for 2017-18 (FY18), grievances related to digital transactions were 28 per cent of total complaints till the end of June this year. In 2016-17 (FY17), it was 19 per cent.

The rise in complains was because of deficiencies in banking services, said the report. 

The scheme is being implemented at a time when growth in digital transactions is also robust. The volume and the value of such transactions during the year grew at 44.6 per cent and 11.9 per cent, respectively, against an increase of 56 per cent and 24.8 per cent, respectively, in FY17.

The share of electronic transactions in the total volume of retail payments increased to 92.6 per cent in FY18, up from 88.9 per cent in FY17, according to the RBI. 

There was a corresponding reduction in the share of paper-based clearing instruments, from 11.1 per cent in FY17 to 7.4 per cent in FY18. 

Growth and increasing complexity of complaints, along with the emergence of non-bank service providers in the digital payments space, underline the need for designing a dedicated ombudsman, said the central bank.

The RBI had implemented the ombudsman scheme for non-banking financial companies (NBFCs) on February 23. The offices of the NBFC ombudsman have started functioning in Chennai, Kolkata, Mumbai, and New Delhi.

With growing prevalence of new payments systems in the country and increasing frauds and complaints, the RBI plans to revise guidelines for various payment instruments, both new and existing, during the year.

The RBI is planning a review of the White Label Automatic Teller Machine (WLA) guidelines in 2018-19, looking at entry point norms and deployment targets. These changes might come as a relief to the struggling WLA industry.  

The central bank said a oversight framework for existing and new payment systems is being finalised. This will prescribe the intensity of oversight proportionate to systemic risks or system-wide risks. Payment gateways will soon be fully regulated. They are currently only monitored.

The RBI also said the Committee on Payments and Market Infrastructures has established a task force to look into the security of wholesale payments because of the increasing threat of frauds in the segment.