Moneylife Foundation memorandum to RBI on mis-selling by banks
Moneylife Digital Team 19 April 2013

Moneylife Foundation has sent a memorandum to the governor of the Reserve Bank of India on behalf of more than 21,500 members to free the system of mis-selling of financial products by bankers, misusing the savers’ trust

Moneylife recently reported a case of a 79-year old senior citizen duped by IndusInd Bank to transfer Rs7 lakh from a fixed deposit to a mutual fund scheme locked in for five years. (Read: Will this 79-year old’s protest move the government and the RBI to stop mis-selling by banks?) The RBI Ombudsman had rejected the senior citizen’s appeal without a detailed study of the case. Moneylife campaigned against this malpractice and the senior citizen got back his money (Read: Mangelal Sharma gets his Rs7 lakh back—another Moneylife victory). We have been reporting such malpractices for the last several years. Now, after receiving numerous such complaints about banks cross-selling risky investment products, many of which are from senior citizens, Moneylife Foundation on behalf of its 21,500 members took up this issue with the Reserve Bank of India (RBI).


Over the past few years, we have heard numerous such cases where banks have used the financial information of their clients and have exploited this to sell products that more often than not are not suited to the client’s needs. Such hard-selling bankers are aptly described as banksters these days, operating with a license to cheat from top management. The RBI is fully aware of problems as well as solutions.


When the RBI set up the Damodaran Committee on Customer Services, we expected this issue to be taken up seriously. Yet, despite 13 months of deliberation, the committee failed to even address this issue. In August 2011, Sucheta Dalal, founder and trustee, Moneylife Foundation, wrote in Moneylife: “One of the biggest omissions is the absence of a detailed discussion on the rampant mis-selling of financial products-including insurance, mutual funds and derivatives or structured products by target-driven Relationship Managers and Wealth Managers.” (Read: Damodaran Committee: More talk, less substance)


Recently at a seminar in Pune, Dr KC Chakrabarty, deputy governor, RBI, raised a few important points on consumer protection. However, this needs to be converted into rules and best practices that need to be followed by banks. Moneylife Foundation has mentioned these points in the memorandum as well as a few suggestions drawn from complaints of its members. The memorandum below has been sent to Dr D Subbarao, governor, RBI.



Vinay Joshi
1 decade ago
Ms. Sucheta,

Don’t you think, this ‘Holi’, SEBI added colours, ‘product labeling’, for MF, can eliminate misselling? This came after IRDA on health & life insurance products.

Now where is the scope for banks misselling? July’13 onwards.

However is it not the primary responsibility of the retail investor[s] to ascertain ROI? Risk!

You admit banks are in fiduciary capacity, DISCLAIMER was always there so is in the new ‘product labeling of MF’.

Will this not help the retail investor[s], customer[s] take informed decision?

Yes, the fund performance is a grey area which labeling can’t indicate or can’t be ascertained w/o thorough analysis, dependence by retail investors on advisors. Be it a bank apart from certified FA’s. This labeling can’t be synonymous like ‘Agmark’.

Some consolation as AMFI introducing EUIN [employee unique identity no.] to be mentioned in the application form & correlation automatic – answering the logic of investment advised.

In no way can complex products be explained by colour coding but at least it highlights the safety band, inherent risk disclaimer.

Why retail investors have been pulling out of MF?

Nothing am I talking on FSLRC, neither Damodaran committee headed report which was not presented by him. [it never was a report in full.]

Ashish Sharma
1 decade ago
The pressure of achieving the individual targets of the bankers forced them to do mis selling of financial product. It is not greed but the fear to losse the job.
Vaibhav Dhoka
1 decade ago
Banks should do banking business only.The status of one point financial product sell should stop.The related changes be made in licences issued by RBI.This will reduce cheating to some extent.
Raajeev Chawla
1 decade ago
Hats off to Ms. Sucheta for taking up this crucial matter with RBI.
Banks should not be allowed to sell such financial products.
Hope RBI will take the matter seriously and impose restrictions on Banks.
Gopalakrishnan T V
1 decade ago
This is an excellent move from Money Life.New generation banks in particular have appointed some relationship managers and they trap innocent and some gullible customers by making them invest in some of their toxic products assuring the best of return. Once the money is invested these relationship manager are not to be seen in picture and banks cut their commission and brokerage from the money invested. The relationship gets spoiled once for all but banks win in the process. There does not seem to be any check either by the RBI or SEBI on such practices and the banks fail to tell as to whether the products in question have the approval from SEBI.Once the investor comes to know of the trap and insists on refund of the amount the banks refund part of the amount depending on the investors influence, contacts, position and fighting spirit etc. Most of the investors suffer and they being senior citizens have to either forgo this money and forget it for ever. RBI or SEBI should ask the details of such traps and the fate of these investments. Being Senior citizens, they lose track of these transactions and they do not know whom to approach and how to get back the money.The banks indulgence in such unethical practices should be nipped in bud itself and for this SEBI and RBI should have a joint system of supervision. Mr Sharma's case is one such instance which Money Life beautifully tackled and brought to a sensible and logical conclusion.
nagesh kini
1 decade ago
I firmly believe that banks should not go beyond their core activity of collecting deposits and advancing loans. In the name of universal banking or one stop financial mall servicing hawking insurance, MF, gold and mass housing finance is no banking.The essential activity of monitoring the advances and preventing their slippages only encourages chronic defaulters and build up of NPAs.
Just providing for NPAs in the accounts or permitting, forced from the top, corporate debt restructuring should be ended. The marketing staff deployed on these activities should chase bad loan recovery. Thank god, the RBI has at long last come to realize this!
1 decade ago
You have made it difficult to read the video.

I am not sure whether all pages are shown in the video
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