An autonomous research institute under the Ministry of Finance


Designing a sound GRM: Principles and International Experience

Publication date

Jan, 2022


NIPFP Working Paper No. 366


Sudipto Banerjee and Aditi Dimri


Grievance redress mechanism (GRM) is an essential component of the consumer protection framework in the financial sector. Its presence and performance can have far-reaching effects on the participation of consumers in the financial sector. UsingGRM a consumer can seek expeditious and fair remedy against the wrongs of the financial service providers. While there are various forms of GRM (both judicial and non-judicial), in this paper, we study the design of a non-judicial redress agency. Using first principles we study the design of a financial redress agency by focusing on the critical organisational decisions of — manner of establishment, governance, funding, dispute resolution processes, and performance evaluation. We build on two strands of literature, one studying the GRM design at a conceptual principles level and the other providing practical guidance for setting up a redress agency. Further, the paper analyses four different redress agencies, namely, — Financial Ombudsman Services Scheme in the U.K., Kifid in the Netherlands, Consumer Financial Protection Bureau in the U.S., and Insurance and Financial Services Ombudsman Scheme in New Zealand. The paper contributes by assimilating all the varied resources to map principles, decisions, and case studies to provide an accessible yet comprehensive introduction to designing a GRM for a varied readership.
Keywords: GRM, redress agency, financial ombudsman, dispute resolution, consumer protection in finance
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