Reforming RBI’s Consumer Protection Regime and Enforcement Powers
The need for a comprehensive regime for consumer financial protection
The interaction between the two concepts of consumer protection and financial literacy encourages financial inclusion and contributes to improved efficiency, transparency and access to financial markets by reducing information asymmetries and power imbalance among providers and users of financial services. In India, while the Consumer Protection Act, 1986, allows consumers to initiate proceedings in relation to deficient products, including financial products, the principles of law that apply to consumer protection in general are not necessarily suitable for financial products, thereby giving rise to the need for a comprehensive regime for consumer financial protection. This Vidhi report comprises two sections. Section I focuses on: identifying the basic elements of an effectively functioning consumer protection regime by studying the frameworks adopted by the United Kingdom, the United States of America and Australia, as well as the G20 High Level Principles on Financial Consumer Protection and the World Bank’s Good Practices for Financial Consumer Protection; the scope of the Reserve Bank of India’s (‘RBI’) lawmaking powers in the context of consumer protection; institutional structures in place for various consumer protection regulators; disclosure practices for providing information to consumers; business practices that should be embedded into the consumer protection regime; and initiatives required to be undertaken for improving consumer literacy efforts. Section II focuses on reforming the enforcement powers of the RBI and makes recommendations with the overall aim of improving the consumer financial protection framework in India.