The banking regulator is mulling to extend the ambit of Treating Customers Fairly (TCF).
Following the Cobrapost (an online news agency) allegations of mis-selling by banks, RBI has planned to tighten norms for the banks involved in selling third party products like mutual funds and insurance by extending the ambit of its policy called ‘Treating Customers Fairly’ (TCF).
Treating Customers Fairly (TCF) is a consumer protection policy designed to address the problem of asymmetric information in the financial services industry where financial service providers possess certain information that the consumers do not. TCF was introduced by the Financial Services Authority (FSA), UK in 2006. In recent years South Africa has also adopted TCF based on the UK version. It is a regulatory initiative, where firms are required to consider their treatment of customers at all the stages of the product life-cycle, including the design, marketing, advice, point-of-sale and after-sale stages.
In a report, RBI says, “The intent and basic structure for TCF is in place in India for banking products of scheduled banks. However, it is now being considered to extend the TCF structure to third party products, viz., mutual funds, capital market and insurance products sold by banks and also extend the Banking Ombudsmen Scheme (BOS) to non-scheduled banks.”
Earlier, Cobrapost had reported the alleged involvement of banks in routing black money with the help of financial systems including insurance, multiple accounts opening in banks etc. So far, RBI has issued show cause notices to 36 banks and imposed a monetary penalty on 31 banks, shows a report.
"Based on the thematic reviews and the follow-up action taken, the Reserve Bank has provided a list of actionable issues to banks. It has been felt that inspections and scrutiny have to be more targeted and the focus should be on the results, rather than the mere processes," RBI said.
