NISM Series X-A · Chapter 20: Grievance Redress Mechanism

L1 · Foundation

Foundation — The Consumer Protection Act, the redressal principle, and the features of a robust system

The definition of a consumer under the Consumer Protection Act, 1986, the two-step redressal principle of approaching the provider first and then the regulator, the seven features of a robust grievance recording and redress system, and the display obligations of an Investment Adviser.

18 min read · Worth 5% of the paper · Written from pages 377–396 of the official NISM workbook · Updated 18 September 2026

20.1 The Consumer Protection Act, 1986

Who is a "consumer"?

The definition has two limbs — goods and services — and each limb has the same three-part structure: the buyer, the permitted user, and the person excluded.

(a) Goods. Consumer means any person who BUYS ANY GOODS for a consideration WHICH HAS BEEN PAID OR PROMISED OR PARTLY PAID AND PARTLY PROMISED, OR UNDER ANY SYSTEM OF DEFERRED PAYMENT, and INCLUDES ANY USER OF SUCH GOODS OTHER THAN THE PERSON WHO BUYS THEM, WHEN SUCH USE IS MADE WITH THE APPROVAL OF SUCH PERSON — BUT DOES NOT INCLUDE A PERSON WHO OBTAINS SUCH GOODS FOR RESALE OR FOR ANY COMMERCIAL PURPOSE.

(b) Services. Consumer also means any person who HIRES OR AVAILS OF ANY SERVICES for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and INCLUDES ANY BENEFICIARY OF SUCH SERVICES OTHER THAN THE PERSON WHO HIRES OR AVAILS OF THEM, WHEN SUCH SERVICES ARE AVAILED OF WITH THE APPROVAL OF THE FIRST MENTIONED PERSON — BUT DOES NOT INCLUDE A PERSON WHO AVAILS OF SUCH SERVICES FOR ANY COMMERCIAL PURPOSE.

Three features of that definition are examinable:

Consideration may be PAID OR PROMISED, PARTLY PAID AND PARTLY PROMISED, OR UNDER A SYSTEM OF DEFERRED PAYMENT. A person who has not yet paid in full is still a consumer.
The USER or BENEFICIARY is included, provided the use is with the approval of the person who bought or hired. A son using a policy his father paid for is covered.
A person who buys for RESALE or for a COMMERCIAL PURPOSE is excluded — under limb (a) resale or commercial purpose, under limb (b) commercial purpose.

20.2 The investor grievance redressal mechanism

Investors DEAL WITH DIFFERENT PRODUCT AND SERVICE PROVIDERS when they conduct transactions related to their financial life. REGULATIONS PROVIDE VARIOUS MECHANISMS FOR THE INVESTORS TO ADDRESS ANY GRIEVANCE THEY MAY HAVE WITH RESPECT TO THEIR DEALINGS.

What a grievance may relate to — the workbook's own list:

The ACCURACY AND EXTENT OF INFORMATION OR ADVICE related to a product or service;
FEES OR EXPENSES OR PENALTY CHARGED IN ANY FORM OR NAME;
A situation when A REQUEST FOR A SERVICE RELATED TO A FINANCIAL PRODUCT WAS DELAYED OR EVEN UNATTENDED.

And then the governing principle of this whole chapter, in two sentences:

Provider first, regulator second. Every mechanism in this chapter — capital markets, banking, insurance, pension — is a variation on that one rule. Learn the principle and the four systems become easy to keep apart.

20.3 The features of a robust grievance redress system

The workbook lists seven features. Learn all seven with the reason given for each — the reasons are what distinguish the exam options.

1. Source of receipt of complaint

THIS ENSURES THAT THE RIGHT COMPLAINTS ARE ADDRESSED.

2. Date and time of receipt of complaint

Note the word balance. Too short a window shuts out genuine grievances; too long a window clogs the system with matters no one can now investigate.

3. Nature of complaint

4. Whether it could be resolved internally or escalated externally

5. Status of resolution or action taken

Remember the abbreviation: ATR — Action Taken Report. It reappears in the SCORES process.

6. Time taken for resolution, or ageing report

The workbook's own name for this feature is worth memorising — time taken for resolution, or the AGEING REPORT.

7. Escalation mechanism

A way to hold the seven together. Features 1, 2 and 3 are filters at the gate — is this the right kind of complaint, in time, and genuine? Feature 4 is the route. Features 5 and 6 are about visibility and speed once inside. Feature 7 is the exit to an independent party. Gate, route, progress, exit.

20.4 The grievance redress system of an Investment Adviser

The display obligation:

And the escalation:

Four details are examinable here: the office must display the details; those details cover the compliance officer AND the CEO, partner or proprietor; the fields are name, address, email and phone number; and the escalation is to SEBI through SCORES.

Notice how this section is simply section 20.2's principle made concrete. The client must be able to find the person responsible inside the firm — that is the first line of action. Only if unsatisfied does he go to the regulator.

Think of it like this

The son driving his father's car

A father buys a car; the son drives it and it breaks down. Is the son a consumer? Yes — the definition includes any USER of such goods other than the person who buys them, WHEN SUCH USE IS MADE WITH THE APPROVAL of such person. The same logic covers the beneficiary of a service. But a dealer who bought the same car for resale or for any commercial purpose is excluded.

Complain to the shopkeeper before you complain to the municipality

Nobody goes to the corporation office about a bad packet of biscuits without first speaking to the shop. The whole of Chapter 20 runs on that instinct: the FIRST LINE OF ACTION for the investor is to approach the product or service provider concerned. IF IT IS NOT RESOLVED to the investor's satisfaction, they can approach THE REGULATOR of the respective industry. Provider first, regulator second — in capital markets, banking, insurance and pension alike.

The filter at the gate

Three of the seven features of a robust system are gatekeepers. Source — is it under the SEBI Act, SCRA, Depositories Act or the Companies Act, 2013? Date and time — is it within the period the Act allows, so the system is not clogged with old complaints? Nature — is it genuinely a complaint, so that frivolous complaints can be eliminated and the relevant ones given the required importance?

The courier tracking number

You do not relax because a parcel was accepted; you relax because you can see where it is. That is feature five: the investor should be able to SEE THE PROGRESS made on the complaint, through the ACTION TAKEN REPORT (ATR), and that increases the confidence of the investor that there is action being taken. Feature six adds the clock — an unresolved complaint dragging on erodes confidence in the entire system.

The umpire who is not on either team

The seventh feature exists so that a dissatisfied complainant is not left arguing with the same people who disappointed him: an escalation mechanism will ensure that AN INDEPENDENT PARTY is able to look at the facts and then decide on the complaint. Every ombudsman, tribunal and portal in this chapter is that umpire.

The board on the office wall

SEBI does not leave it to the client to hunt for the right person. Offices of all Investment Advisers are required to DISPLAY the details of the COMPLIANCE OFFICER and the CEO, PARTNER OR PROPRIETOR — name, address, email and phone number. Only if the client is not satisfied with the response of the intermediary does he go to SEBI through SCORES.

Paid, promised, or paid in instalments

A customer paying an insurance premium in instalments is still a consumer: the consideration may be paid or promised, or partly paid and partly promised, or under any system of DEFERRED PAYMENT. Part payment does not put you outside the Act — only buying for resale or for a commercial purpose does.

Balance, not zero tolerance

On the time limit for filing, the workbook does not say "the shorter the better". It says A BALANCE HAS TO BE MAINTAINED in terms of the time period for which complaints will be entertained. Too tight and genuine grievances are shut out; too loose and the system fills with matters that can no longer be investigated. That word balance is often the answer.

Key terms in this chapter

Action Taken Report: The ATR, by which an entity responds to a forwarded complaint within the stipulated time, allowing the investor to see the progress made and increasing confidence that action is being taken.
Ageing report: The feature of a robust grievance system that records the time taken for resolution, since a complaint dragging on for an indefinite period erodes confidence in the entire system.
Appeal to the Supreme Court: An appeal by any person aggrieved by a decision or order of the SAT, to be filed within 60 days from the date of communication of that decision or order.
Banking Codes and Standards Board of India: The BCSBI, set up by the RBI as an independent autonomous watchdog to ensure fair treatment of customers, which published the Code of Banks' Commitments to Customers, voluntarily adopted by most banks as their Fair Practice Code.
Banking Ombudsman: A person appointed by the RBI to address complaints of banking customers related to the services offered by banks, and also complaints related to credit cards issued by banks and by Non-Banking Finance Companies.
Central Recordkeeping Agency: NSDL e-Governance Infrastructure Limited, appointed by PFRDA for the National Pension System, with operations handled only through its Head Office at Mumbai where a Grievance Redressal Officer is appointed.
Consumer: A person who buys goods or hires or avails services for consideration paid, promised, partly paid and partly promised, or under deferred payment, including any user or beneficiary acting with the buyer's approval, but excluding a person obtaining them for resale or for any commercial purpose.
Consumer Protection Act, 1986: An Act enacted to provide for better protection of the interests of consumers and for the establishment of consumer councils and other authorities for the settlement of consumer disputes.
CPGRAMS: The Centralized Public Grievance Redress and Monitoring System, through which grievances are forwarded to concerned organisations for resolution, monitored and periodically reviewed, accessible at www.pgportal.gov.in.
Escalation mechanism: The feature ensuring that a complainant dissatisfied with how a complaint was handled can escalate it so that an independent party looks at the facts and decides.
IGMS: The Integrated Grievance Management System of IRDAI, offering online registration of policyholders' complaints and online tracking of their status, from which complaints are forwarded to the concerned insurer.
Insurance grievance: Any communication that expresses dissatisfaction about an action or lack of action about the standard of service or deficiency of service of an insurance company or any intermediary, or asks for remedial action.
Insurance Ombudsman: A person appointed by the Government of India under the Redressal of Public Grievance Rules, 1998, who may be approached where a complaint is not resolved within the stipulated time, is unattended, or the customer is unhappy.
Integrated Ombudsman Scheme: The redressal forum for complaints against the services of a bank for receipt and payment of funds, interest charged or credited, penalty or fees, ATM, debit and credit cards, and refusal of a loan without valid reasons.
Law of limitation for ODR: The period within which dispute resolution through the ODR portal may be initiated, reckoned from the date the issue arose, the date of the last transaction, or the date of the disputed transaction, whichever is later.
National Company Law Tribunal: The forum, alongside the Consumer Forum, with which a complaint relating to non-repayment of deposits or payment of interest by an NBFC should be registered, in the prescribed form for the area in which the company's registered office is situated.
NPS Trust escalation: Under the PFRDA Redressal of Subscriber Grievance Regulations, 2015, a subscriber whose grievance is unresolved after thirty days with an intermediary registers it with the NPS Trust, which must respond within thirty days, after which an appeal lies to the Ombudsman.
ODR portal: The Online Dispute Resolution portal, which an investor may use after exhausting available options or at any stage of subsequent escalations, and which a market participant may also initiate after due notice.
SCORES: The online investor redressal mechanism set up by SEBI to deal with complaints related to all products and entities regulated by it, including companies that made share issues, mutual funds, PMS providers, venture capital funds and market intermediaries.
Section 15T appeal: The right to appeal to the SAT against an order of the SEBI Board, an adjudicating officer appointed under the SEBI Act, or IRDAI or PFRDA, to be filed within 45 days of receipt of the order.
Securities Appellate Tribunal: The tribunal which under Section 15U of the SEBI Act is not bound by the Code of Civil Procedure but is guided by the principles of natural justice and regulates its own procedure, while holding civil court powers over specified matters.
Speaking award: The award by which the Insurance Ombudsman disposes of a complaint within three months of receipt where settlement by recommendation does not work, acceptance of which must be conveyed within one month to the insurance company.
Three-tier bank complaint system: The typical internal escalation within a bank, comprising the Branch Manager, the Zonal Manager and the GM-Customer Service.

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Original explanatory writing based on the official NISM workbook for Series X-A, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

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