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…