Banking Ethics Under Scrutiny: ‘Save Banks Forum’’ Urges RBI Action on Mis-selling of TPPs

In a scathing letter addressed to the Governor of the Reserve Bank of India (RBI), the Bank Bachao Desh Bachao Manch (BBDBM) has raised grave concerns regarding the rampant mis-selling of third-party products(TPP) by both nationalised and private banks. The civil society forum, representing various sections of society, has urged the apex regulator to address the unethical and fraudulent practices prevalent in the banking sector. Bankers and unions have been vocal against this issue of cross-selling of TPPs and the associated target pressure on common bankers from the higher level management.  

(Image: The letter from Bank Bachao Desh Bachao Manch addressed to the RBI governor.)

In their detailed letter, the BBDBM has documented numerous instances of mis-selling, particularly targeting retirees and senior citizens, who often fall victim to misleading advice when visiting banks to make fixed deposits. The letter highlights several modus operandi employed by banks, including coercion tactics during locker allotment, channelling fixed deposits into insurance and mutual funds, and forced purchases of general insurance policies.

In our comprehensive coverage on the mis-selling of TPPs through banks, Kanal has exposed numerous concerning instances in the past. This includes our detailed reports on the debiting of unauthorised accidental insurance policy premiums without customer mandate, the coercive tactics pressuring bankers to meet TPP targets, and the intricate cases involving SBI Life and India First Life Insurance in BOB. The revelation of lavish rewards and commissions on  meeting TPP targets despite official restrictions were also reported by Kanal.

(The BBDBM has been organising citizens’ meets to mobilise public opinion against Bank Privatisation. Picture from the gathering organised on 23 December at Barasat, 24 Parganas (North), West Bengal.) 

In their letter to the RBI governor, the BBDBM has also expressed concerns over the impact of mis-selling on vulnerable sections of society, emphasising the need for immediate regulatory intervention. The letter points to the toxic work environment created by high-pressure targets set by bank managements, leading to instances of abuse, humiliation, and tragically, suicides among bank personnel. The letter also proposes a series of recommendations to address the issue, including conducting spot audits in branches with significant cross-selling growth, investigating cases of quick mortality of loans, and imposing caps on commissions paid to banks for selling insurance products.

Furthermore, Bank Bachao Manch calls for regulatory intervention to review the sales model of third-party products through banks, urging the RBI to ensure that banks have robust systems to track and review cross-selling activities. The letter also emphasises the importance of customer awareness campaigns and proper disclosure of commissions and expenses incurred by banks. The letter demands immediate action to protect the interests of common depositors, as the banking industry faces increasing scrutiny over the ethical implications of cross-selling practices. 

(The citizens’ meet at Barasat on 23 December witnessed participation of around 700 people.)

The copy of the letter was sent to the Secretary of the Department of Financial Services, and the managements of all the major banks. Soumya Datta, the Joint Convenor of the BBDBM told Kanal that they haven’t received any response or acknowledgement yet."The need of the hour is to put an end to these unethical practices on the part of the management of Banks, as it is beyond the core operational goals of banks. Manipulating customers is no way of expanding business. Such policy decisions to sell third-party products leads to toxic work culture, customer harassment, and reputational loss of Banks", he added. He also stated that BBDBM will be writing to the Central Vigilance Commissioner soon, if the respondents are not willing to intervene.