Misselling Insurance Policy Is An Offence, Accepts RBI

For long, the banking regulator, Reserve Bank of India (RBI), did not agree that complaints related to the misselling insurance policy of third-party products by banks were a problem that it needed to address. This was a problem for other regulators. What this meant was that bank customers had nowhere to go to complain since the sector-specific regulators did not have effective jurisdiction over banks’ staff. However, on 23 June 2017, the central bank took the onus of bank misselling on itself. According to the amended banking ombudsman scheme, which will come into effect on 1 July this year, complaints relating to the misselling insurance policy, as well as mobile and electronic banking will be included in RBI’s banking ombudsman scheme. Here is a look at what has changed for you.

Insurance and mutual funds: So far, the banking ombudsman only accepted complaints about banking products and services. Third-party products sold by banks, such as insurance and mutual fund products, were kept out of its ambit. However, with the amendment, from 1 July 2017, the banking ombudsman scheme will include the sale of insurance, mutual funds, and other third-party investment products by banks.

Under the amended scheme, any person can file a complaint with the banking ombudsman against a bank for non-adherence to the central bank’s guidelines on para-banking activities such as sale of insurance, mutual fund, and other third-party investment products by banks in case of improper, unsuitable sale of such products; non-transparency or lack of adequate transparency in sale; non-disclosure of grievance redressal mechanism available; delay or refusal to facilitate after-sales service by banks and any other matter relating to the violation of the directives issued by the central bank in relation to banking or other services.
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