Are banks deducting insurance premiums for government schemes from customers without consent?

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Some customers of several banks, including those belonging to the country's largest lender State Bank of India (SBI) and Canara Bank, have taken to social media complaining that banks are charging yearly premiums for government insurance schemes without their consent.

Banks, they say, are debiting insurance premiums for Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJY) for life insurance, Pradhan Mantri Suraksha Bima Yojana (PMSBY) for accident insurance and Atal Pension Yojana (APY) for micro-pension from their accounts without seeking prior consent from customers.

Besides Twitter, many customers have posted their complaints on other complaint forums, YouTube and other websites saying they haven’t received any response concerning the same from bank officials on such complaints.

To give an example, Sahil, an SBI account holder, received a notification on November 18, 2022 from the bank saying his savings account has been debited Rs 342 for his annual premium towards the PMJJBY. But, Sahil wasn’t aware of this scheme nor was he informed in advance.

“I did not apply for any government schemes. My account was debited without my consent,” Sahil told Moneycontrol.

“I have written an application to the bank and they told me that they’ll cancel my subscription from the PMJJBY scheme,” Sahil said.

@SBILifeCares Bank has deducted 342 rupees under #pmjjby scheme without even telling me. Now I've gave them a written application on Friday. How would I get update on this matter ? Whether they've closed the scheme or not ?#StateBankOfIndia #Sbi

— Sahil (@TheCyberSahil) December 3, 2022

Similarly, Chirag Mukul Pandey, another SBI customer, said his savings account was registered with the PMJJBY without his consent.

“Last year, my account was debited and I found out that I have been registered with PMJJBY. I wasted two days at the bank to get rid of this scheme. The branch manager ensured that my account will be delinked but even after a year, my account got debited again,” Pandey said.

It’s not just with SBI.

Haroon Arshia, an account holder with Canada Bank, too said that despite not enrolling in any insurance scheme, his account got debited for two-three years.

Emails sent to SBI and Canara Bank seeking a response to this story on customer complaints remained unanswered till the time of filing this copy.

Third-party service providers

Experts Moneycontrol spoke to said third-party agents who are employed by banks to lure more customers in unbanked areas may not be divulging full information to customers regarding such schemes.

These executives are typically employed to attract new customers, especially new savings accounts. In several such cases, customers are not explained the details of the schemes.

“Some people (commission agents) partner with banks and often convince people to open accounts with them without giving all the details,” said a former Canara Bank officer on condition of anonymity.

“They do this for commission purposes and keep the bank unaware of these things,” the officer said.

What are these schemes?

Prime Minister Narendra Modi launched these insurance schemes in May 2015 with a view to providing financial security to the poor and unbanked segments. Among these schemes, the life insurance scheme Pradhan Mantri Jeevan Jyoti Bima Yojana provides a cover of Rs 2 lakh for death due to any reason while accident insurance provides the same amount in case of death or disability due to an accident.

Similarly, the micro-pension scheme Atal Pension Yojana guarantees a monthly pension of up to Rs 5,000 after the age of 60. Life insurance and accident insurance Pradhan Mantri Suraksha Bima Yojana policies get renewed annually and cost Rs 436 and Rs 20 a year, respectively and the fee of the policy varies from customer to customer.

Schemes voluntary

According to the Insurance Regulatory and Development Authority of India's (IRDAI) annual report for the year ending 2020-21, 27.5 crore insurance policies were added in the year, out of which, 2.81 crores were life insurance policies.

The rules particularly for PMJJBY state that the schemes are voluntary and require explicit permission to charge customers. But Sahil and other customers have said that banks are obtaining customer consent without giving them complete information.

Employee unions flag the issue

Bank employee unions have been highlighting the issue of registrations of bank account holders to various insurance schemes without consent.
CH Venkatachalam, General Secretary, All India Bank Employees Association (AIBEA) said banks often have some or other excuse when addressing customer complaints.

“We’ve had customers’ complaints and the banks majorly respond to those by saying it is a technical error and that they will work on it,” Venkatachalam said.

Ashish Mishra, General Secretary of WeBankers Association, a bank employee body, said in a report that unethical enrolments in these schemes are widely practised. He said senior managers who chase promotions abuse branch heads and threaten them with suspension, transfer, loss of pay, etc if they do not deliver a high number of enrolments.

Bank employees are under tremendous pressure to meet targets given by senior officers to add customers to government schemes.

“The big officers of the bank give daily targets to the bank managers to fulfil due to which we are unable to pay attention to our other work,” tweeted Himanshu Choudhary, a banker with Punjab and Sind Bank.

@ravishndtv बैंकर्स की हालत बताने के लिए आपका बहुत धन्यवाद।दरअसल बैंक के बड़े अधिकारी इस हालत के जनक है जो रोज़ के टारगेट बैंक मैनेजर को दे देते हैं जिसे पूरा करने में हम अपने दूसरे काम पर ध्यान नही दे पाते है।इन टारगेट को पूरा करने के लिए बैंक को इनकम होती कर्मचारियों का कोई लाभ

— Himanshu choudhary (@himanshu_eco) February 21, 2018

Echoing similar concerns, Venkatachalam highlighted that banks and bankers are under pressure from the government to complete a certain number of enrolments to its insurance schemes.

Meanwhile, premiums rise

In June 2022, the government increased the premium rates of PMJJBY and PMSBY. The premium rates of PMJJBY were raised from Rs 330 to Rs 436 and for PMSBY from Rs 12 to Rs 20.

Since the launch of PMSBY, Rs 1,134 crore has been collected as premium and claims of Rs 2,513 crore have been paid under PMSBY as on March 31, 2022. Under PMJJBY, Rs 9,737 crore has been collected as premium and claims of Rs 14,144 crore have been paid as on March 31, 2022.

The government aims to increase the coverage from 6.4 crore people to 15 crores under PMJJBY and from 22 crores to 37 crores under PMSBY in the next five years.

Queries sent to the Reserve Bank of India and the Insurance Regulatory and Development Authority were unanswered until this story was published.