The Reserve Bank of India (RBI) has released strict guidelines to curb Mis-selling of third party products by Banks. RBI has also said that incentives should not be provided to bank staff.
What is Mis-selling?
The RBI has defined Mis-selling as:
- Sale of a product / service, which is neither suitable nor appropriate in view of the customer’s profile even if with his / her explicit consent;
- Sale of a product / service without providing correct or complete information or by giving misleading information;
- Sale of a product / service without customer’s explicit consent;
- With the sale of a requested product / service compulsory bundling of another product / service;
- Sale of a product / service involving any other element defined by the financial sector regulator concerned as mis-selling.
Third-party Financial Product or Service is a product or service offered by a bank to its customers on behalf of a third party company such as selling insurance on behalf of an insurance company.
Guidelines for DSA
A bank, availing the services of DSAs / DMAs, shall maintain an up-to-date list of DSAs / DMAs empanelled / engaged with it. Such list shall include the name and other details of the DSAs / DMAs, the period of engagement, etc. Further, an updated list of such DSAs / DMAs shall be displayed on the bank’s website for reference by the members of public.
A bank shall ensure that its employees or DSAs / DMAs engaged in the sale of own or third-party products / services possess the requisite qualification / certification, if any, prescribed by the respective sectoral regulators.
A bank shall ensure that its employees or DSAs / DMAs:
- make telephonic contacts and / or visits to customers normally between 09:00 hours and 18:00 hours. Calls / visits earlier or later than the prescribed time period shall be done only when the customer has expressly given a request or authorisation to do so;
- do not call a customer regarding products already sold to him / her and if a customer calls for any such product, advise him / her to contact the customer service staff of the bank and provide the contact details.
No Incentive
A bank shall ensure that its policies and practices (e.g., organizing competitions among business units for sale of products / services, earmarking specific days of the week / month for targeted selling of particular products / services, etc.) neither create incentives for mis-selling nor encourage employees / DSAs to ‘push’ the sale of products / services. It shall be ensured specifically that no incentive is directly / indirectly received by the employees engaged in marketing / sales of third-party products / services from the third-party.
Customer Complaint and Feedback
A bank shall establish a mechanism to seek feedback from customers, within a period of 30 days from the sale of any product / service to ensure that customers have understood the features of product / service and also the risks associated with such product / service. Customers can lodge complaint regarding mis-selling of a product / service with the bank within the timeline specified by the respective financial sector regulators. In cases where no such timeline has been specified, customers can lodge complaint within 30 days of receiving the signed copy of the terms and conditions / agreement.
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