Can some one force you to buy ULIPs when you take a loan from the bank? I am seeing very unethical things going on in financial world these days in India. Lot’s of people are complaining that many companies are selling junk things like Endowment plans or ULIPs (which make big commissions) along with big loans or something big where a small ULIP might look like “Ok, let’s take this small thing for that big thing”. But this is not right! This is breaking the faith and such practices are against the principal of  utmost good faith!             Let’s see some real life cases:

Force Selling along with Loan Approval

I had to take this policy without knowing any details about this, as the Barclays finance company said this is mandatory for approving any loan , not sure how far it is correct. But as I was running out of time, i opted for it.

Force Selling along with Locker Facility

I requested for a locker in ICICI Bank in Hydderabad, VIdyanagar Branch, and they said there is lot of people in queue for lockers so they cant give me. But if I invbest in ULIP or make a FD of 5-10 Lakhs he said they will consider my Locker request on priority. This is forced selling and I told them straightaway that making investments for a locker is ridiculous reason and stayed away. I wish I could complain this to somebody but there is no written proof of they asking for investing in ULIP as it was verbal conversation.

Force Selling along with Home Loan

I thought banks like SBI would be straight in their clauses. I had a difficult experience recently with my loan.

 

Pre-Processing Blues:

The loan agent who works in my office, did not have any clue on the terms and conditions on loan. He was a retired officer from SBI and used his position to leverage the file movement. One fine day, he asked for payment against the services rendered (It was a shock to me). I guess, he would be getting some service fee on my loan from Bank already. I gave some required papers for gaurantor to him which was not in my file. I think he lost them. I reduced my loan amount during processing, for which I had submitted the request letter. Upon my loan approval, I noticed that there is a 1.9 Lakh additional loan sanctioned for me and added to the loan amount. I had declined the insurnace cover for the loan as I had planned to cover it on yoy basis. I discussed this with the manager and he agreed to waive it.

Next, the gauranor must be present when you go to sign the papers. I managed to get the gaurantor to accompany me during early morning hours.

Forcibly Selling SBI-Insurance with the Loan

I saw that Insurance cover has not been removed and the SBI person would not agree to waive it even when i told that i would buy SBI insurance policy. I was told that I need to go to branch where I applied for loan and get the approval from bank manager and then it will again go for approval in the loan processing center. After a lot of persuation with the sanctioning office and Chief manager, I managed to convince for a year on year insurance cover which I had to buy for this year on the spot.

Further, I was told that my this year loan is fixed for 8% ( I was happy that I was wise in choosing SBI) then I was updated that my loan is fixed at 9.75% for next 4 years. No one had told us this clause until we went for signing. We had asked this question from clerk to Manager level. No one had a clarity on it but the clause was there in the documents and I had no option but to sign it. In the recessionary situations, I understand that the rates will look further south but I will be stuck at 9.75 for next 4 years.

Otherwise, I am kind of satisfied with the pace and professionalism of officers but I feel that more transparency in the terms and condition is must.

Moral of the story: Read all the clauses before you go to sign and do not be satisfied if you do not get an answer. Private or Public banks – every one has clauses in fine prints that suits the bank and there is no one to tell you about them.

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Force selling along with Opening NRE Account

About a year ago, a 70-year-old non-resident Indian (NRI) woman went to one of the largest private sector banks in the country to open a non-resident external (NRE) account. While opening the account, an executive from the bank lured the lady into buying a co-branded insurance product under the pretext of ‘mandatory’ rules. He also told her that she will have to pay the amount of Rs10 lakh only once. With no option left for opening the account, the lady obliged and left for her overseas home.

“When that lady returned after 12 months, she was asked to pay one more premium for the insurance plan. Since the bank would not return the money which she had paid for the first premium, she was again forced to pay the second instalment for the insurance policy that was forced upon her,” revealed an independent financial advisor (IFA). Read full article

Another Case of force selling along with transfer of loan

I also also seen a case where one guy wanted to transfer his Home loan (ICICI Bank)  from Pune to Delhi and just for this , he was being forced to buy an ULIP from the officials who would be helping him in the paper work , other wise his work was stuck . At last when he approched Delhi branch , his work was done smoothly . So in this case the officials were forcing the unsuitable product.

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How to Complain for the Force Selling

To tackle such increasing fraudulent cases, the Reserve Bank of India (RBI) introduced a banking ombudsman scheme under Section 35 (A) of the Banking Regulation Act, 1949. The Act is in effect from 1995. A customer can register a complaint with an ombudsman if no reply is received from the bank within one month or if the bank rejects the complaint, or if the customer is not satisfied with the reply given by the bank. If a complaint is not settled within one month, the banking ombudsman may pass an award up to Rs10 lakh or to the extent of the losses suffered by the customer up to Rs10 lakh, whichever amount is lower. Between the years 2002-06, the banking ombudsman has settled around 36,000 complaints.

Conclusion

This is nothing but a form of corruption happening in Financial world these days. Sellers are thinking that loans are critical things for everyone and in order to let them happen smooth they can force people by miss-selling them, they feel like people in India are anyways frustrated with other things, what will they do? They will enquire a bit and then finally they will lose the patience and just buy the products and that happens. But please don’t let this happen. Raise your voice, ask explanation, demand proof and evidence, threaten them to complain and take matter higher to banking ombusdsman and consumer court etc. I am sure they will budge after some time.

Even on this blog which discussing PPF account opening at SBI we came to know that SBI bank officials sometimes force PPF account openers to start a Saving Bank account at SBI, which is a form of force selling.

Comments, please share some live examples you know of? Has this happened to you? What can be done to solve? Come unite and share ideas, you can leave a mark!!