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Guard yourself against mis-selling

Monday, November 28, 2016
By Anand Aras

Anand Aras  
CEO, Banking Codes and Standards Board of India

Have you ever had the experience of visiting your Bank to open a simple Fixed Deposit but ended up being convinced by the Bank officials to invest the money in Schemes you had never heard of? This is mainly done under the garb of “need based” cross-selling. However, there have been numerous instances where “cross-selling” has led to “mis-selling”. Mis-selling can have an adverse impact on how customers perceive the value and trust of their banks long known for their personal service and integrity.

A typical example of mis-selling or bundling of products is when a bank tells a customer that a Fixed Deposit (FD) account of an amount more than allowed by the Regulator is mandatory for opening a locker; or when a customer is persuaded to buy an insurance policy instead of depositing money in a PPF account, because it fetches higher returns and has better loan terms.

The Charter of Customer Rights enshrines broad, overarching principles for protection of bank customers and enunciates the Right to Suitability as one of the basic rights of bank customers. “The products offered should be appropriate to the needs of the customer and based on an assessment of the customer’s financial circumstances and understanding”.

Senior citizens are often lured into investing their retirement savings in products that do not meet their financial needs. By the time they realise they have been misguided it is too late. The ensuing redressal process can be tediously protracted and stressful. Hence it is important that one is aware of all the financial risks and other conditions which are associated with an investment / mutual fund product.

Higher incidence in non-metros
With many such instances coming to light, the Reserve Bank of India (RBI) has warned banks against mis-selling to customers, and reminded the banking sector that the relationship between banks and customers is based on trust and not just financial benefits. The central bank is putting in place a number of checks including incognito visits to strictly control this avoidable practice.

To protect rights of Bank customers, the Banking Codes and Standards Board of India (BCSBI) — an independent and autonomous body promoted by the RBI, formulates and prescribes codes for banks. Although member-banks are committed to adhere to these codes, it is the responsibility of customers to understand the same and question their respective banks in the event of non-compliance.

Ombudsman to the rescue
In the event customers are compelled to go in for products they can do without, they should report the matter immediately to the branch manager or senior officials. They can, if they wish, give their banks a chance to set things right, as such products normally have a look-in period. However, if a customer has a genuine grievance, under grievance redressal mechanism, he should lodge a complaint with the bank. In case the bank fails to respond within one month or rejects the complaint, or if the complainant is not satisfied with the action taken by the bank, the customer can approach the Banking Ombudsman. The Ombudsman is a senior official appointed by the RBI to address, and subsequently redress, escalated customer grievances.

In conclusion, customers in their own interest, should be aware of their rights and avoid falling prey to being sold irrelevant products by banks. While banks need to be more ethical while servicing their customers, the latter must have a good grasp of financial products and services offered by their banks — before signing on the dotted line. Well informed is to be empowered.

The bank-customer relationship works on trust, commitment and communication.

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