New Delhi [India], February 23 : Union Finance Minister Nirmala Sitharaman on Monday in a message ot the banks said, "You cannot afford to mis-sell. Mis-selling is an offence."
Addressing a press conference, post customary post-Budget meeting with Central Board of Directors of the RBI, the Finance Minister said, "I am glad that the RBI is coming up with guidance on why mis-selling is not going to be entertained. The message should go to the banks that you cannot afford to mis-sell. Mis-selling is an offence..."
Speaking further on the issue of mis-selling, the Finance Minisre said, "the insurance regulator viewed bank-led sales as outside its remit and the RBI treated insurance as a non-banking activity. In between was caught up on their customer, the individual deposit holder, the citizen of this country."
She highlighted the complaints from borrowers being pushed to buy insurance products while availing home loans.
Questioning the rationale behind the practice, she noted that customers already pledge property as collateral. "Why am I being asked to take an insurance when I'm giving my property, my piece of land, and taking a home loan?" she said, adding that many individuals already hold life, health, and fire insurance policies.
A couple of weeks ago, the Reserve Bank of India (RBI) had issued draft amendment directions aimed at strengthening regulations governing the advertising, marketing and sale of financial products and services by regulated entities, including banks and non-banking financial companies (NBFCs).
The RBI said it has decided to introduce comprehensive guidelines covering advertising, marketing and sales practices for all banks and NBFCs. The proposed framework will also apply to third-party financial products and services.
The draft amendments, issued pursuant to the announcement made in the Monetary Policy Committee (MPC) meeting, seek to modify existing "Responsible Business Conduct" directions across a wide range of regulated entities.
These include commercial banks, small finance banks, payments banks, local area banks, regional rural banks, urban and rural co-operative banks, All India Financial Institutions, NBFCs, and housing finance companies.
The draft amendment directions aim at strengthening customer protection norms and curbing mis-selling, compulsory bundling, and deceptive digital practices.
A key highlight of the draft directions is a clear prohibition on "compulsory bundling," defined as making the availability of one product or service conditional upon the purchase of another, whether offered by the bank itself or a third party.
The RBI has also introduced a detailed definition of "mis-selling," covering instances such as selling products unsuitable for a customer's profile, providing misleading or incomplete information, selling products without explicit consent, and forcing bundled purchases.
In cases where mis-selling is established, banks will be required to refund the entire amount paid by the customer and compensate for any loss arising from the transaction, it said.
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