Exclusive: After SBI and Indian Bank, BOB cracks down on misselling of insurance, mutual fund products

Bank of Baroda

Public sector lender Bank of Baroda (BOB) has asked its zonal heads to not conduct any wealth business campaigns related to selling life, general and health insurance policies or mutual funds till March 31.

Moneycontrol has accessed and reviewed an internal letter issued by the bank to this effect, dated January 12.

The decision is in view of issues being raised on mis-selling. “To ensure doing insurance and wealth business as per proper product suitability and matching with customers requirements while also taking and recording of customer consent at all stages of the sales process, it has been decided to not run any wealth business in a campaign mode,” said the letter to zonal heads.

BoB is the third bank to issue orders cracking down on misselling.

Earlier, on January 2, State Bank of India (SBI) and Chennai-based Indian bank had instructed senior employees across circles not to conduct any business conclaves, seminars, or felicitation functions till March 31.

"Any deviation in this regard will require prior approval of the undersigned," said an internal circular from SBI, dated December 28, that Moneycontrol has reviewed.

"It is to be ensured that any recognition/felicitation for the qualifier in campaigns of CVEBU (customer value enhancement business unit) will be subject to achievement of certain core business parameters, specified which will be advised in due course," said the circular, signed by Vinay Tonse, managing director of retail business and operations, SBI.

BOB's internal letter added that all existing campaigns announced earlier, as per the annual calendar of campaigns, including the PRIDE 6.0 campaigns, stand withdrawn for the current quarter.

"It is further advised that all zones and field units should not conduct any business conclaves, seminars or reward and recognition programs/ facilitation program during this quarter and until further instructions," the letter stated.

"It is also directed by our top management that no campaigns including any local training programs/reward programs etc, with any of our channel partners shall also be conducted till March 31, 2024, " it added.

An email sent to the bank seeking a response remained unanswered at the time of publishing.

Alarming rise in complaints

Earlier, in a communication to all public sector banks, the Department of Financial Services (DFS) had said there was an alarming increase in the number of complaints arising from customers being forced to buy insurance products.

The DFS letter to heads of public sector banks said that it had received complaints that fraudulent and unethical practices are adopted by banks and life insurance companies to sell policies to bank customers. There have allegedly been instances where life insurance policies were sold to customers aged above 75 years in tier-II and III cities.

Usually, branches of banks push the products of their subsidiary insurers. When resisted by customers, branch officials would sheepishly admit that they were under pressure from the top. Insurance products are flogged when customers go to banks to seek a loan or make a term deposit.

In this regard, the DFS letter had said, the department has already issued a circular stating that a bank should not force customers to get insurance from a particular company.

Orders from above

Last year, several bankers told Moneycontrol , on condition of anonymity, that they were facing immense pressure from the top management to sell third-party products such as insurance. Failure to meet targets invited informal penal actions while meeting targets brought perks such as parties in five-star resorts.

Banks typically cross-sell the insurance products of their subsidiaries, and sometimes of other companies, along with loan products. Often, banks insist on the purchase of policies along with loan products.

“We are forced to sell insurance products. Despite the fact that we are bankers, we have become agents of insurance companies,” lamented a manager-level employee of Bank of Baroda, on condition of anonymity. “In the last 1-2 years, core banking work has been disturbed badly as our workforce was involved more in selling insurance products,” said the official.

CH Venkatachalam, General Secretary of the All India Bank Employees Association (AIBEA), said insurance companies typically offer gifts to bank managers for selling their products.

“Insurance companies also treat some of the bank managers who canvas more insurance products. They entertain them lavishly with trips abroad and here, and other things,” said Venkatachalam.