Banking
Not just customers, bank staff are also fed up with unrealistic targets and mis-selling of insurance products
These revelations are part of a letter written by Harshavardhan Madabhushi, general secretary of Associate Banks' Officers' Association-SBH unit to the MD of SBI’s Associate Banks Department
 
While customers accuse bank staff of mis-selling and arm-twisting them to buy insurance policies, a revealing letter from a State Bank of India (SBI) Officers’ Association exposes the pressure tactics employed by banks on their own officers to earn meagre commissions. 
 
The letter also makes the interesting point that bank officers and staff face tremendous pressure to sell insurance, which involves huge manpower costs and time of the parent bank, for meagre commission earned from the insurance subsidiary, which is a separate entity. The letter further says that it would be far more fruitful to have bank officers and field agents putting in the same time and effort in recovering non-performing assets (NPAs) of banks. 
 
The contents of the letter provide clear proof of how Reserve Bank of India (RBI) continues to ignore consumers and non-governmental organisation (NGOs), which have protested against the mis-selling of insurance policies by banks without regard to customer harassment. The travails of bank officers forced to meet targets and the cost of selling insurance, which is transferred from the insurance subsidiary to the public sector entity and its staff, are also issues brought out in the letter.
 
All these revelations are part of a letter written by Harshavardhan Madabhushi, general secretary of the Associate Banks' Officers' Association (State Bank of Hyderabad Unit) to managing director (MD) of SBI Associate Banks Department. It was uploaded on the Facebook Page on the SBOP Officers' Mitra Mandal (Patiala) on 28 January 2015. In the letter, the Secretary lists issues that plague cross-selling portfolios in associate banks of SBI, and also makes few recommendations to address them. 
 
According to Mr Madabhushi, crossselling is the main source of income for most associate banks. Hence, the certified insurance facilitators (CIFs) are mandated to meet unrealistic targets in a limited time, putting them under extreme pressure. They end up selling policies in haste – they are unable to provide proper information or advice to their customers. The poor customers are left saddled with an insurance scheme that offers no real benefits. The CIFs are also given monetary incentives for cross-selling schemes. However, the performance pressure far supersedes any positive motivation that may result from these incentives. They often end up resorting to unethical practices such as arm-twisting the borrowers to purchase SBI Life Policies in order to get a loan sanctioned, or debiting insurance premiums to the borrowers' account without their knowledge. 
 
Moreover, associate banks receive no separate commission for after-sales service, because of which it is mostly neglected. On top of that, yearly renewals also take a backseat, when the original CIF, who sold the policy, is transferred to another location. Either there is no CIF appointed in time to take over from his predecessor, or the new appointee is too busy meeting his own targets to spare any time for the existing customers. There is no commission offered for renewals. Therefore, the CIFs have neither the time not the incentive to look into them. 
 
The Secretary, in his letter, insists that is important to ensure that no officer in the entire hierarchy is offered any commission from the sale of SBI Life products. He cites the example of Life Insurance Corp of India (LIC), where the field staff is offered incentives without keeping the administrative set-up in the loop. If any officer is offered a commission, he is sure to pressure his juniors and other field staff to meet targets that would end up benefiting him more than any customer. Moreover, when the field staff finds themselves in such impossible situations, they end up resorting to unethical practices, as mentioned above. 
 
Another observation in the letter is that since cross-selling accounts for most of the income for associate banks, a large fraction of their resources are concentrated towards it. Consequently, the core business of banking is neglected. 
 
Furthermore, the bank staff are specifically trained and recruited to discharge only banking services. Moreover, these people sell us insurance policies after they pass an examination to become CIFs. They have neither the training nor the technical knowledge to even understand the business of insurance and all its nitty-gritties, let alone explain that to customers. It is not surprising, then, that mis-selling of insurance is so rampant in our country. How can somebody who is himself largely ignorant of the nuances of insurance be expected to provide sound advice to all customers? 
 
The Secretary offers a few suggestions in order to address these issues. Firstly, it is important to set realistic targets for all branches and ease the unnecessary pressure on the field staff. They will be able to focus better on each of their customers, and have the time for providing after-sales service. Secondly, apart from just insurance products, banks can focus cross selling of other products such as credit cards in order to increase their non-interest income. Lastly, it would be useful to set up a separate vertical in all associate banks that focus on cross selling. It would ensure that the regular officers are able to focus solely on banking services, while ‘specialised’ officers can work on facilitating cross selling other products. 
 
Another significant point to be noted here is that the commissions earned from cross-selling are meagre when compared to the number of man hours spent on it. It would perhaps be more fruitful to channelise these efforts in the recovery of NPAs, rather than exhausting all resources in something that provides neither a proportionate income nor any consumer satisfaction.
 
Here is the letter sent by the Associate Banks' Officers' Association…
 

 

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COMMENTS

Dayananda Kamath k

2 years ago

It is strange that IRDA is silent on my complaint about how banks are selling even compromising credit decisions. violating their own regulations regarding eligibility of a person to sell insurance. where there are no licensed/approved insurance advisers also are given insurance targets by banks.

R S Murthy

2 years ago

When bankers were asked to open accounts under JANDHAN yojana, none commented.

Selling of insurance products all reactions are coming.

Both AP and Telengana CMS wanted to implement rural debt waiver and pressurised all bankers to provide details, the pressure was not felt.
Any subject matterbecomes an issue according to our perception.

Nifty, Sensex headed lower – Friday closing report

Nifty has some support around 8,750   

 

We had mentioned in Thursday’s closing report that the gain on the Indian indices may be capped and NSE’s 50-share CNX Nifty closing below 8,860 may weaken it. The benchmark opened high and hit its high at the same level. This is the new lifetime high for Nifty. Except for a range bound session between 11.45am to 2pm the index fell gradually.
 
The S&P BSE Sensex opened at 29,802 while Nifty opened at 8,997. Sensex hit a high at 29,844. Sensex moved lower to hit a low of 29,070 while Nifty hit a low at 8,775. Sensex closed at 29,183 (down 499 points or 1.68%) while Nifty closed at 8,809 (down 143 points or 1.60%). NSE recorded a higher volume of 129.91 crore shares. India VIX rose 3.81% to close at 20.1725.
 
The weak result from Bank of Baroda and ICICI Bank’s December quarter earnings showed that asset quality continued to remain under pressure. This further affected the market sentiment.
 
Minister of State for Finance Jayant Sinha Friday said the Indian economy has the potential to become a $4-5 trillion economy in the next 10-12 years and it is the great time to invest in India.
 
A UN report says India's FDI increased by 26% in 2014 to nearly $35 billion with maximum growth in the services sector.
 
Coming back to the Indian stock markets, Hindustan Construction Co (19.18%) was the top gainer in ‘A’ group on the BSE. The company posted an improved December 2014 quarter result, after market hours on Thursday.
 
Bank of Baroda (11.08%) was the top loser in ‘A’ group on the BSE. Posting a huge fall in the bottom line of December 2014 quarter pulled the stock lower.
 
Tata Power (2.90%) was the top gainer in Sensex 30 pack. It has entered into a binding understanding with Nelco to acquire group firm Nelco's defence business of Unattended Ground Sensors (UGS) for about Rs8.3 crore.
 
All the bank stocks in the Sensex 30 stock were among the laggards. SBI (5.13%) and
ICICI Bank (4.95%) were the top two losers. Axis Bank (1.75%) and HDFC Bank (1.67%) were also among the losers.
 
US indices closed Thursday in the green.
 
The number of people who applied for US unemployment-insurance benefits plunged 43,000 to 265,000 in the week that ended January 24, hitting the lowest tally in 14 years, according to Labor Department data released yesterday.
 
Pending home sales cooled in December, which the National Association of Realtors attributed to fewer homes available for sale and a slight rise in prices. The pending home sales index fell 3.7% during December, though the year-on-year gain was 11.7%, the highest since June 2013.
 
US crude turned positive on Thursday afternoon after earlier falling below $44 a barrel for the first time since April 2009, while benchmark Brent sharply pared early gains after data showing additions to already record-high US oil inventories.
 
Except for Jakarta Composite (0.51%) and Nikkei 225 (0.39%) all the other Asian indices closed in the red. Shanghai Composite (1.59%) was the top loser.
 
China's fiscal revenue growth dipped to a 23-year low of 8.6 per cent last year due to a slump in the demand raising concerns of a prolonged slowdown.
 
Japan's industrial output rose a seasonally adjusted 1% in December from the previous month, government data showed today. The rise in December came after a 0.5% fall in November.
 
Taiwan's gross domestic product rose 3.17% from a year earlier in the final quarter of 2014, the lowest rate in five quarters, and 1.17% from the previous quarter, an initial official reading showed today, 30 January 2015. The economy expanded 3.63% in the third quarter of 2014.
 
European indices were trading lower. US Futures too were trading in the red.
 
German retail sales rose less than expected in December, but the annual figures suggest that consumption continued to act as a pillar to economic growth in the final quarter of last year. Retail sales in December rose 0.2% in calendar- and inflation-adjusted terms compared with November, the Federal Statistics Office said Friday.
 

User

Callous regulator and bourses leave investors to the mercy of shady brokers

Investors duped by Unicorn securities are being made to run from pillar to post for grievance redress. While the regulator and its touted SCORES acts like a post office, stock exchanges, who boast single screen national trading are making the hapless individual run from one office to another

 

UPDATE: Updated to add response from NSE.

 

Unickon Securities Pvt Ltd (formerly known as Unicon Securities) was expelled by National Stock Exchange (NSE) on 5 September 2014 for violating various stock broker norms. At that time, NSE had asked investors to file claims against Unicon Securities within three months. However, the maximum compensation limit per investor, if found due and payable out of the Investor Protection Fund (IPF) was Rs15 lakh, the bourse clarified.
 
Kumar (name changed), a UPSC student and investor filed a complaint before SEBI to get back his shares and cash balances worth Rs1.5 lakh from Unicon Securities. It has been now more than 10 months, and Kumar has neither received his money nor any shares in his demat account. In addition, he is being made to run from one office to another for getting his money back despite clear directions from SEBI to release certain amount to investors with claims of less than Rs10 lakh, during the claim proceeding itself from the Investor Protection Fund. 
 
When Kumar first filed his complaint, SEBI, the post office, forwarded it to NSE's office in Delhi. It held one arbitration meeting at Delhi, attended by Kumar and issued a letter sanctioning a claim Rs86,696 based on their calculations. 
 
The letter also stated that in case the broker fails to give Kumar his shares within seven days, then NSE will block the amount equal to prevailing price of the shares and release the fund as per SEBI directions (CIR/MRD/ICC/30/2013 dated 26.09.2013) to the investor. 
 
According to the circular, if the member (broker) does not opt for arbitration, then the stock exchange would release the blocked amount to the investor after the seven day's timeframe. SEBI said, in case, the member opts for arbitration and the claim value admissible to the investor is not more than Rs10 lakh, the monetary relief from IPF would be given to the investor as per the case status (50% of the admissible claim value or Rs75,000, whichever is less).
 
During the arbitration meeting, representative of Unicon Securities also agreed to release Rs850, the outstanding balance in Kumar's account on submission of account closure form.
 
However, Kumar did not get any money and after several enquiries, NSE's Delhi office asked him to file fresh complaint before its Investor Grievance Redressal Committee (IGRC) at Mumbai. Kumar submitted his complaint along with all relevant documents.
 
Yet, time and again, he is asked to submit more documents without even acknowledging his submission or refunding his money from the IPF.  
 
In an email reply, an official from NSE said its Delhi office had spoken with Kumar. The official said, "(Our) Delhi team spoke to Kumar and explained to him that since there are large number of claims the Defaulters Committee is looking into it and he will get his dues soon."
 
What is more frustrating in this whole episode is Kumar is a student and preparing for UPSC examination. After his graduation, he worked for about two years and whatever he could save, invested in the stock market. Now, with his little saving remaining in abeyance due to lethargic attitude of stock exchanges and the market regulator, Kumar is finding it difficult to even support his day-to-day life, forget about buying books for his studies.
 
An investor believes in his stockbroker and it is this trust element between that allows the investment to grow, depending upon the market conditions. However, when this trust is broken, the investor goes broke and nothing really happens to the broker. With stock exchanges (the first line of regulators) and market regulator Securities and Exchange Board of India (SEBI), either turning a blind eye or showing lethargic attitude, there rarely is any action against brokers. No wonder, every day we hear stories of losses suffered by investors from markets. 
 
For resolving investor grievances, the market regulator has established the SEBI Complaints Redressal System (SCORES). SEBI and the two main stock exchanges, BSE and National Stock Exchange (NSE) continue to put out glowing reports about their successful redressal of complaints. Yet, inexplicably, investors are extremely unhappy, partly because their complaints go into a black hole and partly because the SEBI Act simply does not allow for it to provide damages or grant compensation, even by recovering the amounts from defaulting or fraudulent entities. 
 
In most of the cases, SCORES merely acts like a post office and forwards investor complaints to the stock exchanges or the depositories. However, since there is no check on the outcome, investors, like Kumar, continue to suffer. 
 
After NSE expelled Unicon Securities, on 10 December, SEBI barred the brokerage and its directors, Gajendra Nagpal and Ram Mohan Gupta and its two key management personnel, Pawan Dhanuka and Pritam Pandya from markets for violating various stockbroker norms.  
 
In April 2014, Moneylife raised the issue of the broker's non-functioning trading platform. The broker was neither honouring payout requests from its investor customers not its customer services and offices were reachable. (Read: Has Unicon Securities shut shop?)
 
As of 31 March 2014, there are 315 complaints registered by customers against Unicon Securities during FY2013-2014 on NSE, out of which 52% were not resolved.
 
The investors, who have their trading account with Unicon Securities were worried about their investments as they are not able to trade and withdraw money from their account. The non-existence of its customer services and offices too raised a question in April 2014 about what went wrong with Unicon Securities and when will the regulators step in? NSE took action against the brokerage only in September while SEBI barred Unicon Securities only in December 2014. However, this has not helped investors in any manner. There are several investors who had trading account with Unicon Securities and still waiting for their money and demat shares.
 
Hope the regulators wake up to the cries of helpless investors, especially those, whose trust is breached by the broker, and give timely justice.
 

User

COMMENTS

Mike Smith

2 years ago

No wonder Indians are mostly investing in Precious Metals, Real Estate and FDs.

sanjay

2 years ago

it is serious

sanjay

2 years ago

regultors should look at it seriously

Kiran Aggarwal

2 years ago

This is a shocking story .
Esp. the case of UPSC student
the boy just wants to trade in market
and he landed in the soup .

---------------------
GOOD RESEARCHED STORY ML
KEEP IT UP
MANY PITFALLS IN PROCEDURE TO SUCCESSFUL INVESTING .

REPLY

sanjay

In Reply to Kiran Aggarwal 2 years ago

it is shocking but sadly a true state of the mrket

sanjay

2 years ago

this is a big organized sham on investors

manoharlalsharma

2 years ago

why only UNICORN ? there r plenty like ORKAY,UNIQ OILS and so a big data available with exchange.so please take whole episode.

Radhakrishnan Subbiah

2 years ago

My conviction ( repeated in no of earlier such comments) is confirmed for the 100th time in succession.
We have one huge corrupt machinery ( starting from the businesses, banks,exchanges to the government & its various agencies) whose fodder is the common man . It thrives on grinding & squeezing out the life-blood of the common man.The only way a common man can escape from this corrupt machinery is to stay away , as far as possible, from investing in any of these despicable entities.

Vaibhav Dhoka

2 years ago

Callous regulator or I will say callous government machinery is legacy we inherited from Britishers.The two worst things we kept with us is JUDICIAL system and suppressing the public VOICE. We never bothered to inherited discipline punctuality and HARD work from Britishers.With this inheritance came corruption and judicial delay.
Corruption and NO ACCOUNTIBILITY plays the biggest role in this CALLOUS attitude in government machinery. As there is NO ACCOUNTIBILITY and NO PUNITIVE ACTION the corruption goes unabated. That doesn’t mean that whole system is rot. There are officers and judges with exemplary track record who works fearlessly whose count is superseded by corrupts. Revenue tops the graph followed by police and the regulator SEBI.
As mentioned SEBI act as postmaster for investors’ complaint. Then to shrug its responsibility it INVENTED the system of SCORES that is you get automated reply to investors. When SEBI itself is not taking up INVESTORS complaint then why it is flooded with highly paid officers in MIRDS department and others? Will SEBI chief reply? The below complaint will expose SEBI.
Kotak Sec.Ltd appointed franchisee Mateo Consultant Ltd. In Pune.A franchise works under the registration of its PRINCIPAL i.e all board and papers are in name of PRINCIPAL.SLBS was then in 2004 was permitted for three entities and Kotak was one of them. With help of franchisee Kotak got 1000 shares of Ranbaxy (Now 2000) in SLBS agreement. After four months franchisee vanishes. When complained to SEBI the act of postmaster started and complaint referred to NSE,BSE who are in hands of brokers. In mean time one Dheeraj Balkrishnan came to Pune to offered 50% shares back, which I refused to accept. Then in 2005 Ms Priya Subbarman Vive Pres. appeared on behalf of Kotak at NSE and again offered 50% shares back. Which was not accepted?
When complaint was with EOW of Pune police they said approach SEBI at the instance of Kotak official. Even though there was fraud which was criminal action police failed to act which shows to what extent we have stooped due to corruption. All the system of ARBITRATION and extra judicial process is SHAM. The ARBITRATORS are in hand s of brokers. Very rarely in petty case they decide in favor of INVESTOR.
I have heap of correspondence with SEBI,NSE,BSE and Pune Police. This substantiates my allegation leveled in beginning. Why no answer is given to complainant the reason for NO ACTION by concerned department if this system of reply is enacted it will bring TANSPARENCY AND WILL REDUCE CORRUPTION to great extent. Will SEBI,NSE,BSE and Pune Police dare to reply my above allegation.

REPLY

Sweena Jain

In Reply to Vaibhav Dhoka 2 years ago

Why did Kotak officials offered only 50%shares back when it took 1000 shares before NSE authority which shows that all are guilty and are embedded in web corruption.This shows that all these authorities are corrupt and there is no Messiah for Investor.No action speaks lot in favor of investor.

RAMESH VASWANI

2 years ago

Sir,

If the system of redressing grievances of investor is not being served properly and effectively, why not abolish all these post office like institutions. I feel these institutions have been created only to milk the cow and put some one in good humour ( not an expert or effective administrator).
Better avoid middle post offices and act effectively; if not able to
manage, then give authority to some one to act (not simple post office).

R Balakrishnan

2 years ago

SEBI exists merely to serve interests of large and corrupt corporates.Each SEBI official should also be investigated by EOW and CBI along with IT or Enforcement

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