Commuters walk past a bank sign along a road in New Delhi.(REUTERS)
Commuters walk past a bank sign along a road in New Delhi.(REUTERS)

Public sector banks offering incentives to staff to achieve cross-selling targets

Cross-selling targets have been given to bank executives at the branch level, and to achieve the targets, staff sometimes even missell such products to gullible customers like account holders under the Pradhan Mantri Jan Dhan Yojana (PMJDY), the three persons said.
By Rajeev Jayaswal | Hindustan Times, New Delhi
UPDATED ON DEC 12, 2019 01:58 AM IST

After the government banned direct payment of commissions to employees of public sector banks (PSBs) for pushing third-party products such as insurance policies and mutual funds to existing customers, business associates of banks are now offering incentives such as junkets to encouraging cross-selling, three persons with direct knowledge of the matter said, requesting anonymity.

Cross-selling targets have been given to bank executives at the branch level, and to achieve the targets, staff sometimes even missell such products to gullible customers like account holders under the Pradhan Mantri Jan Dhan Yojana (PMJDY), the three persons said. The government banned the practice of paying commissions directly to employees on September 10, 2018.

In order to bypass the government directive, banks and their business associates, such as insurance firms and mutual fund houses, have devised a new system. Instead of commissions, they now offer incentives to employees through prepaid “achiever” cards, which work like debit cards and come the incentive amount credited to them by a third party for pushing its products among customers of public sector banks (PSBs).

The firm also offers trips to exotic destinations such as to bank executives in the name of imparting training and education, the persons mentioned above said.

“We have raised this matter with top officials of finance ministry, DFS (Department of Financial Services) and senior management of PSBs. Promotions, transfers and of bank executives are now largely dependent on cross-selling mainly because the lion’s share of these incentives are cornered by senior executives of PSBs,” State Bank of India Officers’ Association (Chandigarh Circle) general secretary Deepak K Sharma said.

He said this “unscrupulous practice is rampant in all PSBs” and it has reached an “alarming level” as banks’ executives are even being “forced to miss-sell” these products to account holders in rural and semi-urban areas, including accounts under the PMJDY, the government’s financial inclusion programme.

“Even the newly created FI&MM [Financial Inclusion & Micro Market] network is not left alone. It is pertinent to mention that the target customer group of the financial inclusion initiative of the government is from the lower income group and special low cost insurance products have been designed and rolled out for them, but even they are being compelled to purchase the products of SBI Life which carry a hefty premium,” he said in a letter dated November 21 to the SBI management. The letter has been reviewed by Hindustan Times. SBI Life is a joint venture between SBI and global insurance company BNP Paribas Cardif.

A government official mentioned in the first instance said several complaints against PSBs related to this issue have been received by the government and the matter is under investigation.

Spokespersons for the finance ministry, the Reserve Bank of India (RBI), DFS, SBI and SBI Life did not respond to queries sent to them on this matter.

“The government is likely to issue appropriate instructions to PSBs to stop this unethical practice,” the government official cited above said. He said the government had issued instructions to all PSBs on September 30, 2011 to take action against misselling products such as insurance policies and mutual funds.

“The Reserve Bank of India guidelines prohibit the banks to adopt coercive methods or other unfair means to market or sell these products to their customers. However, instances have been brought to the notice of the Government that the branches/officers of the banks continue to adopt unfair and barred practices/tactics for cross-selling of products. This has been viewed seriously. Such practices are exploitative in nature, violative of rights of the customers and carry an inherent risk for the reputation of the institution,” the 2011 circular of DFS that was issued to all PSB chairmen had, instructing them to take action against such practices.

Soumya Datta, general secretary of the All India Bank Officers’ Confederation (AIBOC), said several complaints of misselling from various PSBs had been received, which is because of undue pressure on employees to achieve targets at the cost of their core banking business. “We have raised this matter with the government and expect some instructions in this direction soon,” he said.

“We have highlighted the pressure exerted on field-level officers by the banks in promoting unethical practices to sell third party products of private companies and the payment of incentives and other rewards being encouraged by PSU [public sector undertaking] banks,” four bank associations said in a joint circular issued on September 29, 2019.

The circular, signed by the AIBOC, the All India Bank Officers’ Association (AIBOA), the Indian National Bank Officers’ Congress (INBOC) and the National Organisation of Bank Officers (NOBO), added: “We categorically emphasised this is one of the main pain points of the bankers, who were losing focus on core business of the banks due to the pressure created by the top management.”

Chartered accountant Vijay Kumar Gupta said,”Cross-selling is a revenue stream for banks and there is nothing wrong with it. But, it should be done ethically after assessing needs of the banks’ customers and explaining pros and cons of such products. Misselling such third-party products to gullible customers just to achieve targets and avail {of} incentives is not only unethical but also illegal. The government and RBI should take up the matter and come out with a detailed policy on this matter.”

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