Public sector bank, Bank of Baroda (BOB), has taken preventive action against mis-selling of financial products, following the lead of State Bank of India (SBI) and Indian Bank.
The move comes in response to growing complaints and concerns regarding mis-selling practices within the banking sector.
Campaign Suspension: BOB has directed its zonal heads to refrain from conducting wealth business campaigns related to selling life, general, and health insurance policies or mutual funds until March 31. This decision is driven by the need to address complaints about mis-selling practices.
Product Suitability and Customer Consent: The bank emphasized the importance of conducting insurance and wealth business in line with proper product suitability, ensuring alignment with customers’ requirements. Customer consent at all stages of the sales process is mandated for transparency and compliance.
Withdrawal of Existing Campaigns:
All existing campaigns, including the PRIDE 6.0 campaigns, announced earlier as per the annual calendar, stand withdrawn for the current quarter. The directive extends to refraining from conducting business conclaves, seminars, reward and recognition programs, or facilitation programs during this period.
Top Management Directive: BOB’s top management has instructed that no campaigns, including local training programs, reward programs, etc., with any channel partners, should be conducted until March 31, 2024.
Alarming Rise in Complaints: The move follows an alarming increase in complaints related to customers being compelled to purchase insurance products. The Department of Financial Services (DFS) had communicated to all public sector banks, highlighting fraudulent and unethical practices by banks and life insurance companies.
Pressure on Bankers to Sell: Last year, there were reports of bankers facing immense pressure from top management to sell third-party products, including insurance. There were instances of banks cross-selling insurance products, often pushing them along with loan products.
Response to DFS Letter: The DFS had issued a circular stating that banks should not force customers to purchase insurance from a particular company. The rise in complaints and unethical practices led to the directive for corrective actions.
Industry Concerns: Representatives from the banking sector, including CH Venkatachalam, General Secretary of the All India Bank Employees Association (AIBEA), expressed concerns about the disruptive impact of selling insurance products on core banking work. Instances of pressure from top management and rewards for meeting targets were reported.
The recent measures by BOB, aligning with the DFS guidelines, highlight the banking sector’s commitment to addressing mis-selling practices and ensuring customer protection. This move underscores the significance of ethical sales practices and transparency in financial transactions.