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Mr. Mundra blasts the banks for mis-selling and bad service

In the past, I have often warned
- Tell your banker to be a waiter or
- Shouldn't bankers be doing what they do the best or
- Don't Trust your Bank, Insurer, Mutual Fund or your Agent.

And now, even the Reserve Bank of India (RBI) has confessed that banks not only 
(a) continue to deliver poor service to their customers, but also 
(b) knowingly and deliberately cause huge losses to them through rampant mis-selling.

This was clearly spelt out by Shri S. S. Mundra, Deputy Governor, RBI in his keynote address at the annual Conference of the Principal Code Compliance Officers. The meet was organized by the Banking Codes and Standards Board of India (BCSBI) on May 23, 2016. 

[BCSBI is an independent and autonomous institution to monitor and ensure that the Banking Codes and Standards adopted by the banks are adhered to in true spirit while delivering their services.]

Some of the seriously damaging observations made by Shri Mundra are detailed below.

Shri Mundra narrated a few instances of mis-selling of the third-party products (particularly insurance) by the bank staff.

Motivated by high commissions and pressurized by steep targets, banks, their officers and agents repeatedly misinform and mislead their unsuspecting customers.

a) A retired senior citizen was forced to withdraw money from his fixed deposits and made to invest in some scheme. The scheme promised 11% p.a. returns after 3 years and zero tax. At the end of three years, the poor customer got a mere 3.5% returns... worse than even the Savings Account. Meanwhile, the person who scammed him, had left the bank for a new job elsewhere.

b) A customer, while availing a loan from a bank, agreed to have it insured. Accordingly, he filled up the necessary insurance forms along with the loan application. However, the loan was sanctioned for a lower amount. Later, upon the unfortunate death of the borrower, bank tried to recover the loan from his family. Its contention was that since the loan sanctioned was for lower amount and the borrower did not submit the revised insurance forms, no insurance was taken. The details, however, revealed that the bank was recovering the amount equal to the insurance premium along with the EMIs. Hence, the bank was adjudicated to be in fault.

Such mis-selling happens every minute of the day. Thousands of lives have been completely destroyed by such willful misguidance... and many more victims will follow. Tragically, no one cares to monitor or stop such unethical selling practices.

Have you been duped by your bank and / or suffered their poor service?

In one instance, an idle account was being used for transacting huge sums of money, without the knowledge of the account holder. This was discovered when the account holder received a notice from the Income Tax Department. The fraud was attributed to the failure of banking systems and poor monitoring processes.

This reason, however, seems far fetched. It is difficult to believe that such manipulation could have happened without the active involvement and connivance of the bank personnel. In other words, don't be under the false impression that your bank accounts are safe and secure.

Non-functional ATMs
Out of around 4000 ATMs surveyed by a team of RBI, nearly 1/3rd (i.e. about 1300) ATMs failed to work. Further, at numerous places, there were no facilities for the differently-abled persons. Even the display material, as stipulated in the regulations, was missing from many ATM sites. All this is tantamount to extremely poor service standards.

Cyber Frauds
There has been a sharp rise in the complaints pertaining to unauthorized fund transfers, fraudulent withdrawals from ATMs with duplicate cards, phishing E-mails, etc. Clearly, banks have to set up robust systems and procedures, to prevent such incidents of fraud. Besides, they must make the customers fully aware of how to safely and securely use such electronic means.

In fact, RBI may issue guidelines to limit the customers' liability, on fraudulent transactions on account of cards and electronic banking.

Excessive Service Charges
Shri Mundra expressed deep concern about the exorbitantly high charges, levied by the banks for various services offered. In fact, sometimes even the RBI guidelines are being violated. 

For example, RBI had notified that banks should not debit the accounts of customers, for not maintaining the minimum balance, which lead to negative balances in their account. Yet, RBI is receiving repeated complaints in this regard. Shri Mundra insisted that this practice has to end immediately.

We often hear the term Caveat Emptor. It means 'Let the Buyer Beware' i.e. we as consumers are supposed to be careful.

Shri Mundra, instead, emphasized on Caveat Venditor:

As you would have rightly guessed, it means 'Let the Seller Beware'. This was a clear-cut warning that the seller (i.e. the banks in this case) would be responsible, for any problem that the buyer may encounter with the service or product.

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