- Date : 19/06/2020
- Read: 7 mins
The RBI has taken measures to make banks and other financial institutions accountable to their customers. Read on to find out how you can claim compensation from financial services providers, including the income tax department, for common discrepancies.
As the RBI introduces new consumer-friendly policies, financial service providers are expected to be that much more transparent and accountable. Whether it’s insurance companies, mutual funds, banks/NBFCs, or the income tax department, one can now escalate the matter and claim compensation for poor service.
Being aware of your rights as a consumer is necessary to avoid being misled or taken advantage of, especially when it comes to financial services. This is especially so in light of recent incidents involving individuals impersonating bank employees and duping customers.
Banks and other financial institutions are also required by the RBI to provide compensation to customers due to delays or discrepancies at their end. This initiative has been taken to improve public confidence in the country’s financial institutions and to pave the way for greater accountability and transparency.
Here is a list of situations in which banks, insurance companies, mutual funds, and the tax department are liable to provide compensation:
- Account debited, cash not dispensed by ATM
Banks have been ordered by the RBI to proactively credit failed ATM transactions to the savings accounts of affected customers within seven days. In case the issuing bank fails to do so, it has to pay a penalty of Rs 100 per day. To the relief of consumers, the RBI ruled there’s no need for a formal complaint by the customer for the compensation to be paid.
- Account debited, card-to-card transfer failed
In such a situation, the issuing bank is required to reverse the debit charge within two days, including the date of the transaction. The penalty applicable is Rs 100 per day after the two-day time frame.
- Card debited, payment receipt not generated
When a card is swiped at a merchant’s point-of-sale (POS) terminal, and the transaction is approved but a payment receipt is not generated, credit is to be applied within six days, including the date of the original transaction. If the process takes more time, compensation at the rate of Rs 100 per day is payable by the issuing bank.
- Card debited, online transaction failed
If an online card transaction is declined but the amount is debited, a penalty of Rs 100 per day is applicable if the transaction is not reversed within six days.
- IMPS/UPI payment debited, not received by beneficiary
If an IMPS/UPI payment is not reversed within two days of failing to reach the beneficiary’s account, a compensation of Rs 100 per day is payable until the claim is settled.
2. LIFE INSURANCE COMPANIES
If a life insurance firm does not approve or deny a death claim within 30 days of receiving the claim documents or raise queries within 15 days, interest at the rate of 2% above the prevailing bank rate is payable as penalty on the claim amount from the date of submission of documents.
If the claim needs further review, any queries on the claim must be raised within 15 days of the date of claim filing. Any underwriter reviews should take no more than 90 days.
Policyholders must be informed of the underwriter’s final decision within 30 days of document submission. In case of delays beyond 30 days, penalty interest at the rate of 2% of the claim amount is awarded to the policyholder, calculated from the date of final document submission.
- Settlement of survival benefits, maturity or annuity claims
If there is a delay in settlement, the life insurance policyholder must be notified by the insurer before the due date. It should also arrange for payment to be credited by bank transfer or post-dated cheque on the date of maturity. Failure to do this can result in a penalty of interest at 2% above the bank rate, calculated from the date of final submission of documents.
- Delay in refunds
According to regulations, a policyholder who decides to opt-out after the free-look period, asks for the proposal deposit to be returned, surrender, or withdraw it is to be compensated thus: Interest is charged at 2% above the prevailing bank rate from the date the final document was submitted unless refunds are paid within 15 days of surrender/opt-out request or final document submission, whichever is later.
3. MUTUAL FUNDS
If there is a delay of more than 10 days from a request for redemption or declaration of dividend, interest penalty at the rate of 15% is applicable for every extra day.
4. GENERAL INSURANCE
If the insurer takes more than 30 days to settle a claim from the date of receiving the final valuation report and claim documents, a penalty of interest calculated at the rate of 2% above the bank rate from the date of submission of the last claim document till the date of settlement will be applicable.
5. HEALTH INSURANCE
According to IRDAI guidelines, your health insurer is responsible for processing a claim settlement request within 30 days of receiving all supporting documents. Any further reviews are to be completed in no more than three days from the point of final submission of documents. If the claim is not settled within 45 days of documents being provided, interest at the rate of 2% above market rate is to be paid as compensation from the point of submission of last document to the date of settlement.
6. INCOME TAX
If an income tax refund is delayed, the taxpayer is entitled to receive compensation as follows:
- Refund applicable when advance tax or TDS includes an additional amount:
Interest calculated at the rate of 0.5% per month is payable as income tax penalty. Depending on whether returns were filed before 31st July, the term of interest is taken from 1st April of the current financial year to the date the tax credit is reimbursed. In case returns were filed after 31st July, interest is calculated from that point onward.
- Refunds applicable when excess self-assessed tax has been paid
A penalty interest of 0.5% per month is payable from the date of tax payment or return submission. If the refund amount is less than 10% of the outstanding tax, interest is not applicable.
Contact information for designated complaint resolution officers or departments:
IRDAI Grievance Redressal Cell, Department of Consumer Affairs:
Tel: 155255 or (1800) 4254 732
Visit the RBI's Complaint Management System (CMS) portal online and fill out the prescribed application form.
National Consumer Helpline, Department of Consumer Affairs
Tel: 1800114000 OR 14404
It is necessary to follow the proper channels when claiming compensation from banks and other financial services. Before approaching regulators like IRDAI or the banking ombudsman, you should first escalate any discrepancies directly to the respective institution. If a satisfactory resolution cannot be achieved, you can approach the regulatory agencies or the consumer court for assistance.