BOB Joins SBI & Indian Bank In Crackdown Against Mis-Selling Of Insurance, Mutual Funds
Bank of Baroda (BOB) has directed its zonal heads to halt wealth business campaigns involving the sale of insurance policies and mutual funds until 31 March. The bank's internal letter, dated 12 January, cited concerns over mis-selling and stressed the importance of aligning insurance and wealth business with proper product suitability and customer requirements.
BOB is now the third bank, following State Bank of India (SBI) and Indian Bank, to take action against mis-selling practices. This move comes in response to a surge in customer complaints regarding the alleged coercion of buying insurance products.
Earlier, the Department of Financial Services (DFS) had communicated to all public sector banks, highlighting a significant rise in complaints related to customers being pressured into purchasing insurance products. The DFS letter stated that fraudulent and unethical practices were observed in selling policies to bank customers. Instances were reported where life insurance policies were allegedly sold to customers above 75 years of age in tier-II and III cities.
The DFS had already issued a circular instructing banks not to force customers into obtaining insurance from a particular company. In light of this, BOB's recent decision reflects an industry-wide concern over mis-selling practices and the need to address customer complaints regarding forced insurance purchases.
In response to these developments, several banks have taken measures to curb business conclaves, seminars and reward programs. BOB's internal letter specified the withdrawal of existing campaigns, including the PRIDE 6.0 campaigns, for the current quarter. Furthermore, it outlined the prohibition of business conclaves, seminars, and reward programs during this quarter until further instructions from top management.
The banking industry has faced scrutiny for alleged mis-selling practices and undue pressure on employees to meet third-party product sales targets. Such practices, as reported by bank employees, have disrupted core banking activities, leading to increased regulatory scrutiny and internal measures by banks to address these concerns. The recent decisions by BOB, SBI, and Indian Bank highlight the sector's commitment to addressing these issues and restoring customer trust by curbing mis-selling practices.
