RESERVE BANK OF INDIA

The Reserve Bank of India (RBI) is India’s central bank and regulatory organisation in
charge of banking regulation. It belongs to the Indian government’s Ministry of Finance. The
Indian rupee is issued and distributed by it. It also oversees the country’s major payment
networks and aims to further the country’s economic growth. The RBI’s Bharatiya Reserve
Bank Note Mudran division prints and mints Indian banknotes and coins. To regulate India’s
payment and settlement systems, the RBI formed the National Payments Corporation of India
as one of its specialised divisions. The Reserve Bank of India formed the Deposit Insurance
and Credit Guarantee Corporation as a specialised division to provide deposit insurance and
credit guarantee to all Indian banks.
THE ROLE OF RBI AND RESPONSIBILITIES
Role of Reserve Bank of India (RBI)
It is in charge of deciding on the country’s monetary policy. The Reserve Bank of India’s
(RBI) primary responsibility is to preserve financial stability and appropriate liquidity in the
economy.
Some of the significant functions of the Reserve Bank of India are mentioned and explained
below:
Monetary Management – The formulation and seamless execution of monetary policy are one
of the Reserve Bank of India’s main responsibilities. Various policy instruments are used by
monetary policy to impact the cost and availability of money in the economy. The goal
remains to encourage economic growth while maintaining price stability. It assures a steady
supply of credit to the economy’s productive sectors.
The issuer of Currency – Currency management and issuance are critical central banking
functions. The Reserve Bank of India (RBI) is in charge of the country’s currency design,
manufacture, distribution, and overall management. It aims to ensure that the state has a
sufficient supply of clean and legitimate notes. Its goal is to lower the risk of counterfeiting.
Counterfeit notes are frequently used for terrorist financing, which has a variety of negative
consequences.
Banker and debt manager of the Government – The Reserve Bank of India (RBI) is in charge
of the government’s banking transactions. The Reserve Bank of India also holds the cash
holdings of the Indian government. It can also serve as a lender to state governments. It
appoints other banks to act as its agents in carrying out the government’s transactions. On
behalf of the federal and state governments, it also manages public debt and offers new loans.
Banker to Banks – The RBI is also responsible for the settlement of interbank transactions.
This is normally accomplished through the employment of a “clearing house,” which allows
banks to present cheques and other similar instruments for clearing. The central bank serves
as a common banker for all of the banks.
Financial Regulation and Supervision- The regulatory and supervisory powers of the RBI are
extensive. Through a variety of policy initiatives, it aims to ensure general financial stability.
Its goal is to ensure the orderly development and conduct of banking activities, as well as
bank liquidity and solvency.
Developmental Role – The Reserve Bank of India (RBI) actively supports and enhances
development efforts in the country. It guarantees that the productive sectors of the economy
have access to sufficient credit and establishes organisations to support the development of
financial infrastructure. It also tries to ensure that everyone has access to banking services.
Oversees Market Operations – The Central Bank implements its monetary policy through
government securities, foreign exchange, and money market operations. It also regulates and
develops market instruments such as the term money market, repo market, and others.
Foreign Exchange Management – The foreign exchange market is regulated by the Reserve
Bank of India (RBI). It has also opened practically all areas to international investment.
Some of the major causes of inflation in India are an increase in money supply, deficit
financing, increase in government expenditure, inadequate agricultural and industrial growth,
rise in administered prices, rising import prices and rising taxes.
Other roles of RBI: The central Bank performs a number of development works, these works
include the function of arranging credit for agriculture, collecting and publishing the
economic data, buying and selling of government securities (treasury bills), buying and
selling of valuable commodities, providing license to open a new bank, etc., it also acts as the
representative of the government in the international monetary fund (IMF) and represent the
membership of India.
THE ROLE OF RBI– MONETARY POLICY:
The concept of monetary policy is derived from the fact that these are the set of regulations
by the central bank in order to achieve supply of money, availability, and cost of credit in the
economy. Through monetary policy, the interest rates of lending are fluctuated from time to
time. Monetary policy is the tool to adjust inflation, deflation, credit growth, stability of the
financial institutions. Price stability is the main objective of the monetary policy keeping in
the mind the economic growth.
THE ROLE OF RBI- “THE KEY MONETARY POLICY INSTRUMENTS OF RBI”:
Repo Rate: This is the interest rate (Fixed) at which the central banks provide overnight
liquidity requirements of Banks under LAF (liquidity adjustment facility) of course security
like Government security or other approved securities are taken by RBI.
Reverse Repo Rate: As the name suggests in this case central bank gives interest (Fixed) to
banks so as to absorb the liquidity on an overnight basis under LAF arrangements and of
course by providing government and approved security.
Bank Rate: It is also called the rediscount rate. It is the rate at which the central bank gives
funds to commercial banks in the purchase of bills and commercial papers.
Cash Reserve Ratio (CRR): This is the percentage of NDTL (Net demand and time
liabilities) that banks need to keep with the central bank. The central Bank (amendment) bill
2006 empowers RBI to prescribe CRR cash that banks deposit with the RBI without any floor
rate and ceiling rate.
Statutory Liquidity Ratio (SLR): It is the ratio of a liquid asset that all commercial banks
have to keep in the form of cash and gold and unencumbered approved securities equal to not
more than 40% of their NDTL(Net demand and time liabilities). In SLR the money goes into
investment predominantly in the central government securities which means the banks earn
some amount of interest on that investment as against CRR where it earns no interest.
Open Market Operation (OMO): In this operation, RBI sells government securities in the
open market.
Banking Ombudsman, Power and Functions:
Introduction:
The Banking Ombudsman Scheme was introduced under section 35A of the Banking
Regulation Act, 1949 by RBI. The Scheme is introduced in the Year 1995. The present
Ombudsman Scheme was introduced in the year 2006.
Banking Ombudsman Scheme is a mechanism created by RBI to address the complaints
raised by bank customers. It is run by the RBI directly to ensure customer protection in the
banking industry. Banking Ombudsman is a quasi-judicial authority functioning under the
Banking Ombudsman Scheme, 2006. According to RBI, “The Scheme enables an expeditious
and inexpensive forum to bank customers for resolution of complaints relating to certain
services rendered by banks.”
Meaning of Ombudsman:
The Banking Ombudsman is a senior official appointed by the RBI.
He has the responsibility to redress customer complaints against deficiency in certain
banking services.
All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-
operative Banks are covered under the Scheme.
The Banking Ombudsman can receive and consider any complaint relating to number of
deficiencies related to banking operations including internet banking.
At present 15 ombudsmen were appointed by the RBI to settle complaints and they are
appointed in state capitals.
RBI has mentioned a large number of service deficiencies by banks to customers where the
customers can approach the Ombudsman through a complaint.
Scope of Banking Ombudsman Scheme:
Under the amended scheme, a customer would also be able to lodge a complaint against the
bank for its non-adherence to RBI instructions with regard to mobile banking/electronic
banking services in India.
As per the amendment, the pecuniary jurisdiction of the Banking Ombudsman to pass an
award has been increased from existing Rs. 10 lakh to Rs. 20 lakh.
Compensation not exceeding Rs. 1 Lakh can also be awarded by the Banking Ombudsman
for loss of time, expenses incurred, as also harassment and mental anguish suffered by the
complainant.
The RBI extended the scope of Banking Ombudsman Scheme under which banks could not
be penalized for mis-selling third-party products like insurance and mutual funds via mobile
or electronic banking.
Powers and Functions of Ombudsman:
[Link] important function of Ombudsman is to protect the rights and freedoms of citizens and
needless.
[Link] ombudsman shall have the power to supervise the general civil administration. On this
point the duty of ombudsman is closely connected with the public administration. Because
the protection of freedom, execution of policies and other fall within the jurisdiction of public
administration and whether these are properly performed or not that requires to be examined-
and ombudsman does this job.
A common experience is that people’s rights and freedoms are not properly protected and
public administration does not always take care of it. In this regard the Ombudsman has a lot
of duties to perform. In many states the problems of common men are neglected and the
general administration does not always rise to the occasion.
[Link] many states Ombudsman supervises the general administration. It is also called general
surveillance of the functioning of the government.
[Link] some countries the Ombudsman enjoys enormous power. For examples in Sweden the
Ombudsman has been empowered to investigate the cases of corruption (in any form) not
only against the government officers but also against the judges of the highest court. But the
supervising power of Ombudsman over the judges does not erode the independence of the
judiciary. The judges are prosecuted or fined for corruption, negligence of duties, or delay in
delivering judgment.
[Link] important function of Ombudsman is the exercise of discretionary powers. The
discretionary powers are really vast and how to use these powers depend upon the person
concerned. Discretionary powers include corruption, negligence, inefficiency, misbehavior
etc.
[Link] receive complaints relating to the provision of banking services to consider such
complaints and facilitate their satisfaction or settlement by agreement, by making a
recommendation, or award in accordance with this scheme.
[Link] banking ombudsman's authority will include:-all complaints concerning deficiency in
service such as:- non-payment/inordinate delay in the payment or collection of cheques,
drafts/bills etc.; non-acceptance, without sufficient cause, of small denomination notes
tendered for any purpose, and for charging of commission in respect thereof; non-issue of
drafts to customers and others; non-adherence to prescribed working hours by branches;
failure to honour guarantee/letter of credit commitments by banks.
IRDA
The Insurance Regulatory and Development Authority is the main organization or
supervisory body that regulates the insurance sector in the country. It sets rules and
regulations for the functioning of the insurance industry. Its sole purpose is to protect the
interest of policyholders and to develop the industry on the whole.
The IRDA or IRDAI regularly issues advisories to insurance companies in case of changes to
the rules and regulations. The regulator guides the insurance industry in promoting the
efficiency in the conduct of insurance business all the while controlling the rates and other
charges related to insurance.
Objective of IRDA:
The main objective of the Insurance Regulatory and Development Authority of India is to
enforce the provisions under the Insurance Act. The mission statement of the IRDA is:
 To protect the interest and fair treatment of the policyholder.
 To regulate the insurance industry in fairness and ensure the financial soundness of
the industry.
 To regularly frame regulations to ensure the industry operates without any ambiguity.
Functions of IRDA:
Below are the important functions of the IRDAI in the insurance industry in India:
Grant, renew, modify, suspend, cancel or withdraw registration certificates of the insurance
company.
Protecting the interests of the policyholder in matters concerning the grant of policies,
settlement of claims, nomination by policyholders, insurable interest, surrender value of the
policy and other terms and conditions of the policy.
Specify code of conduct, qualifications and training for intermediary or insurance agents.
Specify code of conduct for loss assessors and surveyors.
Levying fees and charges for carrying out the provisions of the Act.
Undertaking inspection, calling for information, and investigations including an audit of
insurance companies, intermediaries, and other organizations associated with the insurance
business.
Regulate and control insurance rates, terms and conditions, advantages that may be offered
by the insurance providers.

How Does IRDA Work?

The apex body of the insurance industry, the IRDA, ensures it frames rules and regulations
without any ambiguity towards any particular insurance company. To ensure fairness and the
financial soundness of the industry, the main work of IRDA revolves around the
policyholder’s interests. Refer to the following roles that the IRDA is mainly involved in:
Issues certificate of registration to new insurance companies.
Sets rules and regulations to ensure the interests of the policyholder are taken care of.
Monitors all claims are settled in all fairness and that no insurer will deny any claim on their
own free will.
Regulates the code of conduct of the insurance companies, insurance intermediaries, and
others associated with the insurance industry.
Provides solutions in case of disputes through the IRDA ombudsman.
Controls and regulates the rates of insurance to prevent unwanted price hikes in the insurance
premium.
The apex body is responsible for setting the minimum percentage limit of insurance
companies for General and Life Insurance, thereby developing both urban and rural sectors.
The role of the IRDAI in the insurance sector:
 IRDAI issues a certificate of registration to the life insurance company and also
renews, modifies, withdraws, suspends and cancels the registration.
 The regulatory body secures policyholder’s interests in areas like assigning of policy,
nomination by policyholders, insurable interest, settlement of insurance claim,
surrender value of the policy, and other terms and conditions applicable to an
insurance contract.
 It specifies the requisite qualifications, code of conduct and practical training required
for insurance intermediaries and agents.
 IRDAI makes certain that the code of conduct is followed by surveyors and loss
assessors.
 The autonomous body promotes efficiency in the conduct of the insurance business.
 It also promotes and regulates professional organisations connected with the insurance
and reinsurance business.
 It levies fees and other charges for carrying out the purposes of the IRDAI Act.
 IRDAI carries out functions like inspection, conducting inquiries and investigations,
including an audit of the insurers, insurance intermediaries and other organisations
involved with the insurance business.
 The rates, advantages, terms and conditions that may be offered by insurers with
respect to general insurance business are also controlled and regulated by the
regulatory body.
 It also specifies the form and manner in which books of account should be
maintained, and the statement of accounts should be rendered by insurers and
insurance intermediaries.
  IRDAI monitors the investment of funds by insurance companies and governs the
maintenance of the margin of solvency.
 It also judges the disputes between insurers and intermediaries or insurance
intermediaries.
 It supervises the functioning of the Tariff Advisory Committee.
 IRDAI specifies the percentage of premium income of the insurer to finance schemes
for promoting and regulating professional organisations referred to in clause (f).
 It specifies the percentage of life insurance and general insurance business to be
undertaken by the insurer in the rural or social sector.
With so many roles, the IRDAI maintains the standard of the industry and takes measures to
eliminate insurance frauds.
What is an Insurance Ombudsman?
You must approach your insurance company for any query or distress concerning your
policy. However, if you feel your issue is not resolved, you can approach the Insurance
Ombudsman, which plays the role of grievance redressal forum for policyholders. It is a
scheme launched by the Central Government for impartial, efficient, and cost-effective
settlement of grievances of a policyholder.
You can employ Insurance Ombudsman in case of:
 Claim settlement delay
 Dispute over insurance premium
 Total or partial rejection of the claim by the insurance company
 Conflict over policy terms and conditions
 Disputes over legal aspects of the policy
 Disputes related to policy services
 Any breach of rules or regulations of the Insurance Act, 1938
You can lodge a complaint in writing, duly signed by the complainant or by employing any
legal heirs or nominees. You can complain either in person or via email/post/fax along with a
hard copy.
Powers and functions of Insurance Ombudsman:
 The ombudsman shall receive and consider complaints or disputes
 To decide what procedure to be followed.
 Settle disputes without hearing parties based on facts.
 Dismiss the case if the complaint has no merit.
 Ombudsman important function is award making.
 Ombudsman must act fairly and equitably.
 Ombudsman should not decide the case when he has interest over the subject matter
  The ombudsman shall act as counsellor and mediator relating to matters where there
is written consent of the parties to the dispute.
 Central Government or IRDAI can refer matter to the insurance ombudsman
Grounds for complaints before Insurance Ombudsman:
 delay in settlement of claims, beyond the time specified in the regulations, framed
under the Insurance Regulatory and Development Authority of India Act, 1999;
 any partial or total repudiation of claims by the life insurer, General insurer or the
health insurer;
 disputes over premium paid or payable in terms of insurance policy;
 misrepresentation of policy terms and conditions at any time in the policy document
or policy contract;
 legal construction of insurance policies in so far as the dispute relates to claim;
 policy servicing related grievances against insurers and their agents and
intermediaries
 issuance of life insurance policy, general insurance policy including health insurance
policy which is not in conformity with the proposal form submitted by the proposer;
 non-issuance of insurance policy after receipt of premium in life insurance and
general insurance including health insurance;
 any other matter resulting from the violation of provisions of the Insurance Act, 1938
or the regulations, circulars, guidelines or instructions issued by the IRDAI from time
to time or the terms and conditions of the policy contract.
Procedure for complaints:
Any person who has a grievance against an insurer, may himself or through his legal heirs,
nominee or assignee, make a complaint in writing to the Insurance Ombudsman within whose
territorial jurisdiction the branch or office of the insurer complained against or the residential
address or place of residence of the complainant is located.
The complaint shall be in writing, duly signed by the complainant or through his legal heirs,
nominee or assignee and shall state clearly the name and address of the complainant, the
name of the branch or office of the insurer against whom the complaint is made, the facts
giving rise to the complaint, supported by documents, the nature and extent of the loss caused
to the complainant and the relief sought from the Insurance Ombudsman.
No complaint to the Insurance Ombudsman shall lie unless:
The complainant makes a written representation to the insurer named in the complaint and
Either the insurer had rejected the complaint; or
The complainant had not received any reply within a period of one month after the insurer
received his representation; or
The complainant is not satisfied with the reply given to him by the insurer;
The complaint is made within one year
After the order of the insurer rejecting the representation is received; or
After receipt of decision of the insurer which is not to the satisfaction of the complainant;
After expiry of a period of one month from the date of sending the written representation to
the insurer if the insurer named fails to furnish reply to the complainant.
The Ombudsman shall be empowered to condone the delay in such cases as he may consider
necessary, after calling for objections of the insurer against the proposed condonation and
after recording reasons for condoning the delay and in case the delay is condoned, the date of
condonation of delay shall be deemed to be the date of filing of the complaint, for further
proceedings under these rules.
No complaint before the Insurance Ombudsman shall be maintainable on the same subject
matter on which proceedings are pending before or disposed of by any court or consumer
forum or arbitrator.
After 2021 amendment to insurance ombudsman rule 2017 ICT (Information and
Communication Technology) was introduced for complaint redressal. So now insured can file
complaint through online without paying any fees. It enables the insured to track the status of
their case and video conference hearings. These amendments will strengthen the timeliness
and cost-effectiveness of the mechanism.
Award under Insurance Ombudsman rule:
Where the complaint is not settled by way of mediation, the Ombudsman shall pass an award,
based on the pleadings and evidence brought on record.
The award shall be in writing and shall state the reasons upon which the award is based.
Where the award is in favour of the complainant, it shall state the amount of compensation
granted to the complainant after deducting the amount already paid, if any, from the award:
Provided that the Ombudsman shall:
not award any compensation in excess of the loss suffered by the complainant as a direct
consequence of the cause of action;
not award compensation exceeding rupees thirty lakhs (including relevant expenses, if any).
The Ombudsman shall finalise its findings and pass an award within a period of three months
of the receipt of all requirements from the complainant.
A copy of the award shall be sent to the complainant and the insurer named in the complaint.
The insurer shall comply with the award within thirty days of the receipt of the award and
intimate compliance of the same to the Ombudsman.
The complainant shall be entitled to such interest at a rate per annum as specified in the
regulations, framed under the Insurance Regulatory and Development Authority of India Act,
1999, from the date the claim ought to have been settled under the regulations, till the date of
payment of the amount awarded by the Ombudsman.
The award of Insurance Ombudsman shall be binding on the insurers.