High service charges, mis-selling of insurance products under RBI scanner

While banks had granted autonomy to fix minimum average balance or charge for premium services

The Reserve Bank of India (RBI) would probe into “exorbitant” service charges imposed by banks and mis-selling of third-party products, especially insurance policies, during its supervisory review, RBI Deputy Governor S S Mundra said on Tuesday.

The central bank would also issue final guidelines on customer protection soon, which would limit customers’ liability in cases of unauthorised electronic banking transactions, Mundra said. Last year, the RBI had issued a draft circular in this regard.

Mundra said customers had flagged the issue of high service charges for failing to maintain minimum average balance, among other things.  

While banks had been granted autonomy to fix minimum average balance or charge for premium services, it should not be used as an excuse to deny service or drive away the common man, he said while addressing the annual conference of Principal Codes and Compliance Officers (PCCOs).

The supervisory review for 2016-17, which will begin soon and continue until December, would look into wrong selling of financial products like mutual funds, insurance and retail bonds. Also under scanner would be usurious charges and violation of know-your-customer (KYC) norms, the deputy governor said.  

About the safety of cheques, he said many cases of fake cheques surfacing in customer accounts had been reported. This had compromised information about customers, he said, adding the quality of cheques being printed was not of a high order.

Referring to the complaints made to banking ombudsman in 2015-16, Mundra said the complaints had exceeded over a lakh for two consecutive years.

Also, complaints related to non-adherence to the Banking Codes and Standards Board of India (BCSBI) and fair practices codes rose to 33.9 per cent, against 29.2 per cent in 2014-15 and 26.6 per cent in 2013-14.