TNN | Nov 22, 2013, 03.12AM IST | Times of India
MUMBAI: With cases of mis-selling by banks continuing to come into light Reserve Bank of India plans to introduce the concept of ‘treat customers fairly’ (TCF) for sale of third-party products. Under the TCF norms, introduced first by UK’s Financial services authority, it is not enough for banks to merely stick to rules, they must prove that they have acted in the best interest of the customer.
“The intent and basic structure for TCF is in place in India for banking products of scheduled banks. However, it is now being considered to extend the TCF structure to third party products, viz., mutual funds, capital market and insurance products sold by banks and also extending the Ombudsman scheme to non-scheduled banks,” RBI said in a report released on Thursday.
The issue of mis-selling by banks had come to the fore with Sebi’s recent show-cause against HSBC for needlessly churning her mutual fund portfolio. Sebi found out that the unnecessary churn could only have been done to earn more commission. Under TCF guidelines it is not enough for a bank to obtain the signature of a customer on the application form, the onus is on the bank to make sure to that it is providing correct advice.
According to RBI TCF is a consumer protection policy designed to address the problem where banks know something about the product that the customer does not. “It is a regulatory initiative by which firms are required to consider their treatment of customers at all the stages of the product life-cycle, including the design, marketing, advice, point-of-sale and after-sale stages. By encouraging firms to re-evaluate their company culture and to inculcate the attitude of treating customers fairly, the outcome is likely to result in a more optimal one from the perspective of regulators, consumers and ultimately, firms,” RBI said.
The report said that the desired outcome of the TCF programme is to ensure that consumers are provided are provided products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect; and consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.
Source : http://goo.gl/Iha8A9