Rajinder Singh walked into the bank to finalise his loan—an anxious father hoping to secure his daughter’s college fees. The paperwork was routine, the officer courteous. But just before signing, a brightly colored insurance form was slid across the desk. “It’s mandatory,” the officer said, gesturing to a folder labelled BANK and handing over an orange slip marked INSURANCE. Rajinder hesitated. He didn’t understand the policy, didn’t ask for it and couldn’t afford it.
Similarly, Ram Bharose entered another branch hoping for a loan to rebuild his small business. The officer nodded—but with a caveat. “You’ll need to take this insurance policy too. It’s mandatory.” Ram didn’t need insurance. He needed credit. But the message was clear: no policy, no loan.
This wasn’t anecdotal. It was systemic. And amid this widespread practice, one group of officers chose to act—not for personal gain, but to restore the ethical foundations of banking.
The officers’ resistance wasn’t rooted in defiance—it was rooted in duty. They saw how customers were being coerced into signing documents they didn’t understand. They saw how service was being replaced by sales. And they saw how their own roles were being distorted—from stewards of public trust to vendors of bundled products.
Systemic Breach – When Ethics Were Engineered Out
The ethical collapse exposed in Rajinder Singh’s story wasn’t confined to one bank or one branch. It was the result of a nationwide drift—where banks, under corporate agency agreements with insurance companies, began tying insurance sales to loan disbursals. What began as a financial inclusion strategy quietly morphed into a pressure system.
In 2004, Punjab & Sind Bank entered into a corporate agency agreement with Aviva Life Insurance. But this was not unique. Across India, banks—public and private—signed similar agreements, becoming distribution arms for insurance firms. Under these arrangements, officers were incentivised to sell policies through schemes that offered:
- Cash rewards for meeting monthly targets
- Foreign tours under the guise of training
- Performance-linked evaluations tied to insurance conversions
These incentives weren’t just internal. They were institutional. The 'Business Promotion Scheme' at Punjab & Sind Bank mirrored similar programmes across other banks. The difference? Only one bank’s officers chose to challenge it.
In 2013, after years of internal escalation, the All India Punjab & Sind Bank Officers Union filed WP(C) 1639/2013 in the Delhi High Court. It was a rare act of institutional conscience—one that documented how:
- Insurance policies were being bundled with loans, often without informed consent
- Officers were pressured to meet sales targets, compromising their fiduciary role
- Incentives were being paid in violation of the Banking Regulation Act, IRDAI norms, and RBI circulars
The petition didn’t just allege wrongdoing—it provided evidence. It cited internal memos, incentive records, and customer complaints. It showed how the Bank’s agreement with Aviva Life Insurance had created a structure where sales pressure overrode service ethics.
The RBI responding to the officers’ petition —including one submission from the Central government—confirmed to the Court:
“Bank employees were offered commissions and foreign trips in violation of regulatory norms.”
The Court was informed that the Aviva–Bank agreement had been terminated in 2012. The union demanded recovery of Rs25 crore in incentives paid to executives between 2005–2012. The bank’s Board passed Resolution No. 21294 (dated 12.08.2014) initiating recovery. But the Court did not record whether recovery actually occurred—leaving a gap in accountability.
“This wasn’t just a petition—it was a mirror held up to the entire banking system.”
The union’s filing didn’t expose one bank’s failure. It exposed a systemic breach—and it did so through lawful, principled resistance. The officers didn’t act for personal gain. They acted to restore the dignity of their bank, their profession, and the rights of their customers.
Judicial Affirmation – WP(C) 1639/2013 as Moral Reckoning
The Delhi High Court case wasn’t just a legal filing—it was a moral intervention. Filed by the All India Punjab & Sind Bank Officers Union, the writ petition documented a systemic breach of banking ethics that had quietly taken root across India. It didn’t merely allege wrongdoing; it presented irrefutable evidence of how forced insurance selling had become institutionalised.
The petition laid bare the mechanics of mis-selling:
- Insurance policies were routinely bundled with loans, often without informed consent
- Officers were pressured to meet sales targets, compromising their fiduciary role
- Incentives were paid in violation of the Banking Regulation Act, IRDAI norms and RBI circulars
Internal memos, incentive records and customer complaints were submitted to the Delhi High Court. These documents showed how the Bank’s corporate agency agreement with Aviva Life Insurance had created a structure where sales pressure overrode service ethics. Officers were no longer evaluated on the quality of service—they were judged by how many policies they could push.
RBI, responding to the landmark petition—including one submission from the Central government—confirmed to the Court:
“Bank employees were offered commissions and foreign trips in violation of regulatory norms.”
This admission was pivotal. It validated the union’s claims and placed the burden of reform squarely on the shoulders of the regulators. The Court was informed that the Aviva–Bank agreement had been terminated in 2012. The union demanded recovery of Rs25 crore in incentives paid to executives between 2005–2012. The Bank’s board passed Resolution No. 21294 (dated 12.08.2014) initiating recovery.
Yet the Court did not record whether recovery actually occurred—leaving a gap in accountability. No public dashboard tracked compliance.
No institutional apology was issued. The silence persisted.
“This wasn’t just a petition—it was a mirror held up to the entire banking system.”
The officers who filed the writ didn’t act for personal gain. They acted to restore the dignity of their bank, their profession and the rights of their customers. Their stand was rare. Their evidence was irrefutable. And their courage forced the judiciary to confront not just procedural violations, but the deeper erosion of fiduciary trust in India’s banking system.
Regulatory Awakening – From Silence to Structural Reform
For nearly a decade, the regulatory guardians of India’s financial system—RBI, IRDAI and the ministry of finance—stood at the periphery of a growing ethical breach. The bundling of insurance with loans was no secret. Customer complaints had reached ombudsmen. Officers had raised alarms. Yet institutional response remained muted.
WP(C) 1639/2013 – the ethics petition , changed that.
The writ, filed by the All India Punjab & Sind Bank Officers Union, didn’t just document mis-selling. It named the regulators. It cited violations of:
- The Banking Regulation Act, which prohibits banks from engaging in non-banking activities without safeguards
- IRDAI guidelines, which require informed consent and prohibit coercion
- RBI circulars, which mandate fair practices in loan disbursal
RBI, in its submission to the Delhi High Court, confirmed:
“Bank employees were offered commissions and foreign trips in violation of regulatory norms.”
This admission was pivotal. It validated the union’s claims and placed the burden of reform squarely on the shoulders of the regulators.
Yet even after the Court acknowledged the breach and the Bank’s Board passed Resolution No. 21294 (dated 12.08.2014) to initiate recovery of 25 crore in incentives, the follow-through remained opaque. The Court did not record whether recovery actually occurred. No public dashboard tracked compliance. No institutional apology was issued.
For years, the silence persisted.
It wasn’t until 2024—more than a decade after the writ—that IRDAI chairman Debasish Panda publicly declared:
“You don’t need to chase customers. No mis-selling, no force-selling.”
This statement marked a shift. It acknowledged that bundling had become normalised—and that it needed to stop.
The ministry of finance followed. finance minister Nirmala Sitharaman expressed concern that insurance bundling was inflating borrowing costs and distracting banks from their core function: credit delivery. Her remarks signaled that the issue had moved from courtroom to Cabinet.
RBI, which had already prohibited direct incentives during the writ proceedings, began issuing internal circulars reinforcing ethical boundaries. Banks were instructed to:
- Separate loan processing from insurance sales
- Ensure voluntary opt-ins
- Avoid performance-linked insurance targets
Then came the numbers:
Rs21,773 crore in commissions earned by banks through insurance sales—proof that the pressure wasn’t anecdotal. It was institutional.
In May 2025, IRDAI proposed a structural reform: replacing commission-based incentives with a transaction fee model. The goal was to reduce the temptation to oversell and restore ethical boundaries.
“These reforms didn’t emerge from foresight. They emerged from resistance.”
The Union’s filing was the trailblazer. It forced regulators to confront not just policy violations, but the moral cost of their silence. And while the reforms are welcome, they remain incomplete—unless they are monitored, enforced and shaped by those who first raised the alarm.
The Incentive Trap – When Institutions Reward Selling over Serving
The bancassurance model was introduced in India with noble intent: to expand access to insurance by allowing banks to act as corporate agents. Under IRDAI’s guidelines, banks were permitted to distribute insurance products, provided they maintained transparency, ensured informed consent and avoided coercion.
But over time, that model was weaponised—not to protect customers, but to pressure staff and inflate revenue.
Officers were no longer evaluated on service quality or customer care. They were measured by:
- Conversion rates
- Policy counts
- Commission earnings
The institutional message was clear:
Sell more. Serve less.
The judicial turning point of WP(C) 1639/2013 had already warned of this drift. The petition revealed how Punjab & Sind Bank’s officers were incentivised through a “Business Promotion Scheme” that offered foreign tours and cash rewards. But similar schemes existed across banks—public and private alike.
The writ documented how:
- Insurance sales targets were embedded into officer appraisals
- Loan disbursal was conditioned on policy bundling
- Customer consent was bypassed through pre-filled forms and verbal pressure
- Incentives were paid directly by insurers to bank staff, violating RBI norms
RBI’s submission confirmed that these incentives breached the Banking Regulation Act. The Court acknowledged board resolution No. 21294 (dated 12.08.2014), which initiated recovery of Rs25 crore in payouts. But it failed to confirm whether recovery actually occurred—leaving a gap in accountability.
This wasn’t just a failure of ethics. It was a failure of systems.
The incentive structures themselves were designed to prioritise sales over stewardship. And when institutions normalise that distortion, individual conscience becomes the exception—not the rule.
The writ also highlighted how officers who resisted were penalized. Transfers, poor appraisals and isolation became tools of enforcement. The pressure wasn’t just financial—it was psychological. Officers were caught between duty and demand, ethics and evaluation.
“The system didn’t just reward mis-selling—it punished integrity.”
The conscience-led intervention — WP(C) 1639/2013, didn’t just expose a policy—it exposed a culture. A culture where trust was monetised service was sidelined, and officers were trapped in an incentive loop they didn’t design—and couldn’t escape.
The Human Cost – When Targets Turn Fatal
Behind every policy sold under pressure is a person—an officer weighed down by unrealistic targets, weekend workloads and relocation threats. What began as a sales strategy became a psychological burden. And in some cases, a fatal one.
Recent data underscores the scale of this ethical erosion:
- A 45% increase in complaints related to mis-selling between Q1 and Q2 of 2025
- Endowment policies remain the most mis-sold products—often bundled with loans, despite being unsuitable for short-term borrowers.
These policies frequently result in penalties, surrender losses and capital erosion for unsuspecting loanees who were neither informed nor financially prepared for such commitments
These aren’t just financial missteps—they are ethical failures. Customers were misled into believing insurance was mandatory. Officers were instructed to 'convince' borrowers. Consent was bypassed. And when officers resisted, they faced transfers, poor appraisals, and isolation.
Across banks, suicide notes tell a hauntingly similar story:
“I just want my life back.”
“I couldn’t meet the targets.”
“I was transferred for not selling enough policies.”
These aren’t isolated tragedies. They are ethical indictments.
Officers from Bank of Baroda, Union Bank and State Bank of India have taken their own lives—leaving behind families, colleagues, and unanswered questions:
- Shivshankar Mitra, Bank of Baroda
- Siyaram Prasad, Union Bank
- Sandesh Malpani, SBI
- Kuldeep Dasgupta, SBI
Each name is a reminder that institutional pressure has consequences beyond balance sheets. When banks reward selling over serving, they don’t just compromise ethics—they compromise lives.
The Officers’ stand —WP(C) 1639/2013 gave voice to this silent suffering. It wasn’t just about mis-selling—it was about the system that made mis-selling inevitable. The writ forced regulators to confront not just policy violations, but the emotional toll of their silence.
“These deaths are not anomalies. They are the cost of institutional indifference.”
The human cost must now be central to reform. Because no officer should have to choose between dignity and survival. And no customer should be pressured into a product that profits from their vulnerability.
Reform Blueprint – Ethics Must Be Operational
The 2013 challenge was not just a legal intervention—it was a moral reckoning. It forced regulators, banks, and policymakers to confront a hard truth: ethics cannot remain aspirational. They must be built into systems, incentives, and daily operations.
The Delhi High Court affirmed the union’s stand and directed future compliance. But compliance alone is not reform. Reform must be proactive, transparent, and citizen-centric. It must protect both the depositor and the officer. It must ensure that trust is not sold—but safeguarded.
Here’s what meaningful reform must include:
Structural Safeguards
- Transparent reporting of insurance-linked revenue across banks
- Public dashboards for mis-selling complaints and resolution status
- Audit trails for bundled transactions, with customer consent records
Regulatory Enforcement
- Clear penalties for violations of IRDAI and RBI norms
- Independent grievance redressal for mis-selling victims
- Periodic compliance reviews by third-party ethics panels
HR Protections for Officers
- No performance linkage between insurance sales and career progression
- Whistleblower safeguards for officers resisting unethical pressure
- Transparent transfer policies to prevent punitive postings
Stakeholder Engagement
- Consultation with unions and citizen advocates during policy design
- Inclusion of judicial precedents like WP(C) 1639/2013 in training modules
- Public awareness campaigns to educate customers on their rights
“Reform must include the voices of insiders—not just institutional optics.”
RBI’s prohibition on direct incentives was a start. IRDAI’s proposal to replace commissions with transaction fees was a step forward. But unless these reforms are monitored, enforced and refined through lived experience, they risk becoming symbolic.
The union’s filing showed that change begins with courage. Now, that courage must be institutionalised. Because ethics are not just values—they are systems. And systems must be designed to protect the vulnerable, not exploit them.
Trust Must Not Be Bundled – A Closing Reflection
The trailblazing writ—WP(C) 1639/2013 was more than a legal filing. It was a signal flare—launched by officers who refused to compromise ethics for incentives. The judiciary stood with them. The regulators followed—late, but not too late. And now, the echoes of that writ reverberate through every reform, every directive, every policy shift.
But the image remains:
- A loanee hesitating.
- An officer pressured.
- Three regulators watching silently—Ministry of Finance, RBI, IRDAI—not intervening.
That image must not remain symbolic. It must become a call to action.
Because trust is not a product. It is a promise.
It must not be bundled.
It must be earned, protected, and honoured.
“The dignity of the borrower and depositor must always outweigh the pressure of the sale.”
The 2013 legal challenge blazed the trail. It showed that ethical resistance is possible—even within systems designed to suppress it. It reminded us that reform doesn’t begin with institutions—it begins with conscience.
Now, it’s up to every stakeholder—regulators, banks, unions and citizens—to walk that trail forward.
To build systems that reward service, not sales.
To protect officers who choose ethics over incentives.
And to ensure that no customer is ever again told:
“No policy, no loan.”
Wholesome - because the author has shown the path that having grouses and only keep whining about them is not suffecient. One needs to take action with indisputable facts and with proper intention so that corrective recourse can be defined. And then the author goes on to offer long term solutions too.
Actually this article qualifies to be a case study - which Motivational and Legal fraternity Trainers can use it for their training modules, and law students for insight of a case.
* A case - "that restores Ethical Services over Sales targets"
* A case - "how deligently the facts and data are assimilated and are presented in Court , that the court agrees with the intention and passes the order in favour of petitioners"
* A case - where author not only highlights the grouses but also offer long term solutions
Author's remarks in ending paragraphs are real eye operners:
* “The system didn’t just reward mis-selling—it punished integrity.”
* “Reform must include the voices of insiders—not just institutional optics.”
* “The dignity of the borrower and depositor must always outweigh the pressure of the sale.”
My COMPLIMENTS to Author KULVINDER SINGH SETHI, for writing such and elaborate article/case study.
I only wish he had written this article 25 years earlier, that even I could have been saved from spending on unnecessary Insurance.
You’ve articulated what many within and outside the banking world have been feeling but haven’t been able to express. Borrowers deserve transparency, and bankers deserve a system that empowers them to serve customers fairly!
Hopefully, this kind of writing sparks the reflection and reform our financial institutions truly need. A very compelling and necessary read — thank you for starting an important conversation that we can no longer afford to ignore!!
The writer has presented the topic with great clarity and depth. This piece effectively raises awareness about the hidden charges in banking that customers are often not informed about. The banking system is indeed becoming increasingly expensive for consumers, and such well-researched, fact-based articles are essential to keep the public informed.
Kudos to the writer for shedding light on this important issue and delivering such a powerful message!!!!