The Reserve Bank of India (“RBI”), through a press release dated August 6, 2020, issued a statement on developmental and regulatory policy. This policy sets out various measures to enhance liquidity support for financial markets and other stakeholders and ease financial stress caused due to the COVID-19 pandemic while strengthening credit discipline. Among others, the policy also seeks to encourage digital payments. In this context, the RBI has proposed introduction of Online Dispute Resolution (“ODR”) systems for resolution of customer disputes and grievances pertaining to digital payments, using a system-driven and rule-based mechanism with zero or minimal manual intervention.

In furtherance of this policy, the RBI, on August 6, 2020, has advised authorized Payment System Operators (PSOs) – banks and non-banks – and their participants i.e., Payment System Participants (“PSPs”) to implement an ODR system for disputes and grievances. As an initial step, authorized PSOs will be required to implement an ODR system for disputes and grievances in relation to the transactions in their respective payment systems by January 1, 2021 and provide access to such a system to its PSPs. Based on the experience gained, the ODR arrangement would later be extended to cover disputes and grievances other than those related to failed transactions.

The directive for introduction of ODR has been issued under Section 10(2) read with Section 18 of Payment and Settlement Systems Act, 2007.

The minimum requirements of the ODR System are, inter alia, as follow:

1. The PSO and its PSPs must provide its customers access to the ODR system for lodging of disputes and grievances relating to failed transactions, irrespective of the transactions being on-us or off-us in nature.
2. The scope of the ODR system extends to all transaction types including, Automated Teller Machines (“ATMs”) including Micro-ATMs, card transaction, Immediate Payment System (“IMPS”), Unified Payments Interface (“UPI”), Aadhaar Enabled Payment System (including Aadhaar Pay), Aadhaar Payment Bridge System (“APBS”), National Automated Clearing House (“NACH”), Prepaid Payment Instruments (“PPIs”) – Cards/Wallets, as mentioned in the RBI circular DPSS.CO.PD No.629/02.01.014/2019-20 dated September 20, 2019 on “Harmonisation of Turn Around Time (TAT) and customer compensation for failed transactions using authorised Payment Systems”.
3. The PSO and its PSPs must provide its customers 1 (one) or more channels – web-based or paper-based complaint form, IVR, mobile application, call centre, SMS, through branches or offices, with a mechanism to link/access the ODR system – for lodging of disputes and grievances.
4. In case of mobile phone-based systems like UPI, third party app providers (“TPAPs”) must also provide customers with a facility to lodge disputes and grievances through the same mobile app used for making payments, which must be integrated with the ODR system.
5. The process of lodging the dispute or grievance must be simple and involve only necessary minimum details.
6. The ODR system should be made capable of automatically fetching full details based on the information provided by the customer. Additionally, data confidentiality must specifically be taken care of while designing the parameters of the ODR system.

In case the grievance remains unresolved up to 1 (one) month, the customer may approach the respective ombudsman for digital transactions within whose jurisdiction the branch or office of PSPs complained against, is located.

Please find a copy of the notification dated August 6, 2020 here.

This update has been contributed by Suchita Ambadipudi (Partner) and Mitali Jain (Associate).