Why few mis-selling complaints against banks get registered

  • Only 0.4% of the roughly 160,000 complaints made to India’s banking ombudsman in 2017-18 were about mis-selling
  • Shaikh Zoaib Saleem and Neil Borate spoke to experts in the fields of financial services distribution as well as consumer activists to get an insight

According to the recently released RBI Banking Ombudsman Report, only 0.4% of the roughly 160,000 complaints made to India’s banking ombudsman in 2017-18 were about mis-selling. There could be many reasons for this: the recent inclusion of mis-selling complaints within the purview of the banking ombudsman, lack of awareness or simply the inefficiency of the ombudsman in handling consumer grievances. Shaikh Zoaib Saleem and Neil Borate spoke to experts in the fields of financial services distribution as well as consumer activists to get an insight.

Mrin Agarwal, Founder director, Finsafe India Pvt. Ltd

Mrin Agarwal, Finsafe India Pvt. Ltd
Mrin Agarwal, Finsafe India Pvt. Ltd

Customers are not aware of how to file complaints

It is disappointing to see the low number of complaints pertaining to mis-selling of third party products by banks, especially since one hears of many such cases. This could be due to many reasons. Firstly, investors may not be aware that they can approach the banking ombudsman for such cases. Also, there are only 20 banking ombudsman offices in India and hence physical accessibility is an issue. However, complaints can be made online and one does not need to make a physical complaint.

Another issue is that there is a 30-day waiting period between making the complaint to the bank and the ombudsman. The customers are not aware of how they can make complaints. RBI needs to disseminate more information about the grievances, especially relating to mis-selling that can be handled by the banking ombudsman. Further, the facility of making online complaints and the process must be highlighted properly.

Gaurav Gupta, Co-founder and CEO, Myloancare.in

Gaurav Gupta, Myloancare.in
Gaurav Gupta, Myloancare.in

Ombudsman should create seamless redressal system

Mis-selling of financial services is difficult to prove as it is typically discovered by a customer after buying the product at a much later stage. Given that the customer has already invested significant time and money in the process, they are reluctant to take up such issues in the right forum.

In recent time, regulators have been prompt in putting together mechanisms to address the potential areas of mis-selling. While many of these measures are reactive, others have been structural such as the inclusion of mis-selling under the ombudsman scheme or making it mandatory for banks and their selling agents to follow a customer code of conduct.

The banking and insurance Ombudsmen now need to work on building a comprehensive framework, improving implementation, customer awareness, seamless redressal process and encouraging or penalizing the set of financial service providers based on their track record.

Jehangir Gai, Consumer rights activist

Jehangir Gai, Consumer rights activist
Jehangir Gai, Consumer rights activist

Ombudsmen often attempt to shield the companies

Mis-selling is not by accident; it is intentional and targets are fixed for marketing. So there is a concerted effort by the industry to dupe gullible consumers, while trying to cover up any trace of these malpractices.

The Insurance Ombudsman or the Banking Ombudsman seldom comes to the rescue of the victim. On the contrary, being industry persons, they often attempt to shield the companies. The report of the Banking Ombudsman stands testimony to its dismal functioning— 612 million was spent on running the scheme in which only 133 complaints (0.159%) covering all spheres of banking activity were adjudicated on merits.

The reason why aggrieved consumers do not lodge complaints can be solely attributed to the failure of the existing system to redress their grievances. The solution would be to frame appropriate rules and regulations for safeguarding and preventing consumer exploitation.

Arun Saxena, President, International Consumer Rights Protection Council

Arun Saxena, International Consumer Rights Protection Council
Arun Saxena, International Consumer Rights Protection Council

Can’t expect fair decision from existing setup of ombudsman

Banking ombudsman is a toothless tiger. In the ombudsman, the people who decide upon a banking complaint are the same people from various banks that caused grievance to the consumer. One cannot expect a fair decision from such a setup.

I am yet to come across a strong order by Banking Ombudsman. In fact, approaching the ombudsman is a waste of time for most of the consumers. The consumers file complaint to the Banking Ombudsman, the ombudsman then rejects most of the complaints after few months and tells the consumer that he is free to seek redressal elsewhere.

When we talk of consumers being misled and being mis-sold products, unless we have strict laws that have the capability of taking some punitive action, nothing would improve on this front. Banking Ombudsman, too, does not have any such power. I fail to understand why Ombudsman is formed. It is a waste of resources.


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