Huge Incentives to Staff Trigger Mis-selling
RBI deputy governor SS Mundra urges lenders to work on portability of accounts
Mumbai: A senior RBI official on Monday blamed huge incentives given by banks to their staff for mis-selling financial products. Deputy governor SS Mundra also urged lenders to work on the portability of accounts.
“Challenging targets set for employees, incentive-linked quotas, lack of training and fast rotation of frontline staff ” lead to mis-selling of products, Mundra said at the annual conference of banking ombudsmen, and asked the top management of banks to look into it. In the past, Mundra has warned banks of making “penal provisions more stringent to deal with the problem”.
Banks could deploy latest analytical tools to address customer grievances, he said, while pointing out that lack of coordination between back and front offices was affecting measures towards customer protection.
Banking correspondents (BCs) are now equivalent to banking outlets, he said, adding: So banks should “pay close attention to services rendered by BCs, especially in rural and semi-urban areas, and take precautions to curb misselling of products and address the problem of illiterate customers getting duped by aggressive marketers of financial products.”
Mundra urged the banks to work towards account number portability as the telecom industry has implemented, whereby a custom- er can retain his account number even if he switches to another bank. This “will be a far-reaching step towards enhancing competition and improving customer service,” he added. He urged banks to move away from seeking ‘negative confirmation’ from customers on legal agreements that often have several fine prints. Instead, he said, banks should obtain ‘positive confirmations’ from customers that they have read and understood the terms and conditions of the product or the service.