Have you tried to sell a policy that you do not need? Actually, cases of selling such policy have increased in the banking industry. RBI has expressed concern over this. RBI has said that banks’ names are getting spoiled due to this trend. This also shocks the objective of financial inclusion. There are reports that RBI can also issue new guidelines to prevent miss-selling.
RBI deputy governor M Rajeshwar Rao had recently criticized banks for missing insurance and wealth management products. How serious is this case? According to a SEBI’s 2024 report, only FY24 incorrectly incorrectly received complaints of selling insurance-linked investment products. IRDAI has reported that on a year-on-year basis, the complaints of Miss-selling of insurance policy increased by 18 per cent.
Miss-selling does not harm only common people. This also hurts the reputation of banks and has to get entangled in legal matters. This makes a mockery of the purpose of bringing a large part of the population of the population under banking services. Banks have converted their branches into a cell pressure cooker to increase their fees based income. The bank staff sells ULIPs and Mutual Funds products without telling the risk and cost to the customers.
A 2024 report of Center for Financial Inclusion states that banks pressurized 62 per cent of customers in rural areas to buy additional products. This causes many customers to lose their hard earned money. Some customers’ expectations are hurt and some get caught in a big financial crisis.
RBI’s own data suggests that in FY24, complaints related to the use of non -use practices against banks increased by 15 per cent. RBI Deputy Governor Rao said that work is going on on new guidelines to prevent miss-selling. In 2024, the RBI made the rules of bankcise strict. The limit of agreement with the insurance companies of banks was fixed. The RBI has been advising banks to work in a healthy way.
The question is whether the new rules will stop miss-selling? This is not so easy. Miss-selling has taken a deep roots in the backing industry. Despite the strictness of RBI, banks are focusing on earnings from the sale of cross-sale, insurance policy and wealth products. According to a CRISIL report, private banks had a 20 per cent share in non-interest income in FY24. The pressure to sell such products is made on the staff in the branch.
Also read: ITR 2025: Have you not filed ITR? So definitely know these things, otherwise you can get trapped badly
A case was reported in 2024 in Maharashtra, in which a farmer was sold to a risky ULIP instead of an easy saving plan. Later, the investigation of the bank’s practice started as the protest increased. RBI says that there should be audio and visual disclosures for customers about complex products. But, the real problem is about the thinking of the banking sector. They have to focus on the interest of customers instead of focusing on sales. Miss-selling will remain a major problem until the banks change their reward system and do not work with responsibility.