"We Were Deceived": Bank Customers Call Out Unethical Selling of Third Party Products

“Being illiterate, I was helpless in understanding the bank procedures and rules, and was being misled by bank people. I realised this only when I was given a notice of repaying Rs. 97,000 which they claimed to be borrowed by me” – Ashok Ghosh (51), a construction worker based in Kolkata duped by employees of the SBI Golf Green Branch told Kanal. In the name of debit card, Ashok was misled by giving a credit card thus losing Rs. 26,000 from his account.

This incident sheds light on the increasing menace of mis-selling of Third Party Products(TPPs), exposing the manipulative tactics employed by banks to coerce customers. Private parties often profit from these actions, leaving customers vulnerable to deceptive practices. Ashok's case is not an isolated incident. Bank customers across India are raising their voices against the unethical selling of TPPs.

Coercion Tactics by Banks
Customers, like Ashok Ghosh, reveal that bank staff manipulate them into purchasing TPPs. These products are sometimes indirectly made mandatory for loan disbursal, locker facility access, and other benefits. Lack of disclosure and limited knowledge of banking procedures further contribute to the coercion. Soumya Datta, a former banker and the Joint Convener of Bank Bachao Desh Bachao Manch (BBDBM), highlights the violation of banking ethics and the absence of details provided in the local language, compounding the issues faced by customers. BBDBM has set up a legal helpline for victims of bank frauds, cyber crimes and consumer right violations. 

Soumya Datta highlighted the widespread fraud occurring in both public and private banks through the sale of third-party insurance products. According to Datta, many of these products, particularly personal accidental insurance policies, are sold without the customers' knowledge. Datta explained, "Most of such products are personal accidental insurance policies. Premium for a policy worth 1-2 lakhs is just around 100." This leads to significant collections for the bank, often without customers realising they are entitled to claims. Datta emphasised the unethical nature of these practices, stating, "Customers lose track of such small amount transactions, and most of them do not notice Rs 100 deductions once a year." Despite the minimal premiums, private parties benefit greatly from these manipulative sales, while policyholders remain unaware of the specifics and are unlikely to claim their benefits. “Many times, the top cross-sellers are being felicitated by the banks. The best performer awardees are often found to be involved in frauds later”, Datta added.

Vulnerable Sections Targeted
More affected individuals share their experiences. The common thread is the lack of transparency and the exploitation of customers' limited understanding of banking procedures. 

Chandi Sardar's plight echoes the distress faced by many unsuspecting customers. She is a non-literate woman who can neither read nor write, and struggles to earn her living as a domestic help. In a complaint on her behalf accessed by Kanal, it was revealed that despite knowing her background, she was issued a State Bank Card from a Branch in Kolkata without her consent. The letter states, "It's really a sorry state of affairs that a person like her has been misguided by the staff and issued her a State Bank Card... without her consent." Subsequently, deductions began from her account against the unused card, prompting her to seek resolution from the branch authorities, to no avail. The letter highlights the unjust treatment meted out to customers and urges prompt action to resolve the matter and refund the deducted amount.

In Pune, an SBI official revealed a case where a home loan customer was coerced into purchasing a Rs. 6 lakh SBI Life insurance policy as a prerequisite for opening a locker. The pressure on customers to buy insurance products reveals a systemic issue within certain banks.

Compulsion and Pressure on Bankers
The compulsion to sell TPPs is attributed to target pressures from top-level management. Lavish rewards and incentives further drive the rat race among bank employees. Threats of vindictive actions if targets are not achieved add to the coercive atmosphere, putting both customers and employees in a vulnerable position. Bank of Baroda also witnessed instances of target pressure mounting on Bankers.

Soumya Datta of BBDBM argued that the instances of forced selling of TPPs cannot be viewed as isolated incidents. "The real problem lies at the policy level. Though most of the banks have given guidelines against mis-selling of TPPs, unrealistic targets and pressure on bankers persist, leading to forced selling and frauds. Therefore what we want is a solution at the policy level, not a scapegoat in a common banker”, Datta explained.  

The issue continues to be a cause for concern, with many a time banks targeting customers from vulnerable backgrounds. The intervention of advocacy groups like BBDBM becomes crucial in exposing such unethical conduct. As more cases come to light, there is a growing need for regulatory bodies, like the Reserve Bank of India (RBI), to take action against the mis-selling of TPPs, ensuring the protection of customers and the integrity of the banking system.

(Additional Inputs: Saurav Kumar)