RBI is worried about the growing instances of mis-selling of third party products such as mutual funds and insurance in banks.
In fact, the former RBI Deputy Governor, SS Mundra is quoted in the annual report of Banking Ombudsman Scheme, 2016-17 that the underlying reasons for mis-selling in banks were the challenging targets set for employees, incentive linked quotas, lack of training and fast rotation of frontline staff. These along with the lack of co-ordination between back and front office, impacted customer protection and made it inconvenient for the complainants to easily approach the appropriate authorities for redressal. He has urged that the commitment of the top managements of banks should also percolate down the line so that the customers received efficient services as well as due care at all touch points. With regard to complaint management, he said that the banks should seek to study the patterns and undertake root cause analysis of complaints, which would be possible by adopting end-to-end automation of the grievance redressal mechanism and deployment of latest analytical tools, he added.
The annual report shows that the Office of Banking Ombudsmans (OBO) handled over 1.36 lakh complaints of which 92% were disposed off within the year. Most complaints were related to unfair practices including third party sales of financial products.
PSUs accounted for 62% of the total complaints out of which 27% complaints were against SBI and associates. On the other hand, complaints against private banks had risen during the last three years to 26.5% while foreign banks accounted for 2.5% of complaints received.
These complaints include unsuitable sale of third party financial products, non-transparency and lack of adequate transparency in sale, non-disclosure of grievance redressal mechanism available and delay or refusal to facilitate after sales service by banks.
The report also mentioned few instances of mis-selling relating to fixed deposits and insurance by banks.