Check mis-selling, safeguard account holders’ interest: DFS

NEW DELHI: Financial Services Secretary Vivek Joshi has said that public sector banks have been asked to check mis-selling of insurance products and ensure protection of account holders’ interest.

Banks have been sensitised on the matter, as the Department of Financial Services (DFS) regularly gets complaints that fraudulent and unethical practices are being adopted by banks and life insurance companies for procuring policies from the bank customers, he said.

“Banks have been asked to give utmost importance to the interest of account holders,” he said. There have been instances where life insurance policies were sold to customers aged above 75 years in tier-II and III cities.

Usually, banks push products of their subsidiary insurers. When resisted by customers, branch officials would sheepishly admit that they are under pressure from the top. Insurance products are pushed when customers go to seek any kind of loan or buy a term deposit. It is also conveyed that the Central Vigilance Commission (CVC) has raised objection, as incentives for selling insurance products bring not only pressure on the field staff but the core business of banking also gets affected and quality of advances may get compromised in the lure of commission and incentives for staff.

Meanwhile, the DFS has also directed all state-owned banks to review their gold loan portfolio as instances of non-compliance with regulatory norms have been noticed by the government.

The DFS in a communication addressed to heads of PSBs has asked them to look at their system and processes related to gold loan. A directive in this regard was issued last month advising them to fix anomalies relating to collection of fees and interest and closure of gold loan accounts.

The letter flagged various concerns, including disbursement of gold loans without requisite gold collateral, anomalies regarding collection of fees and repayment in cash.