If your bank has mis-sold a financial product that you don’t need or does not suit your financial goals, you can now lodge a complaint against the bank with the banking ombudsman and seek redressal of your grievance. If the banking ombudsman finds that your complaint is justified, he may levy a penalty of up to Rs 10 lakh on the bank and award a compensation of up to Rs 1 lakh to you for causing loss of time and mental stress, along with costs incurred by you for filing the complaint.
Many of the banks resort to mis-selling financial products such as mutual funds, insurance policies, pension schemes, etc. to augment their ‘fee-based income’. These products are usually third party products and these banks earn lucrative commissions (fees) on sale of these products.
The provision for penalty and compensation in case of mis-selling of products by banks will come as a big relief to customers who are victims of mis-selling. To make the banks accountable for their acts of omissions and commissions, the Reserve Bank of India (RBI) amended the Banking Ombudsman Scheme 2006 wherein the grounds for lodging complaints against banks with the banking ombudsman have been modified. The grounds now include non-adherence to the RBI guidelines on para-banking activities such as the sale of insurance, mutual funds, and other third party investment products by banks.
As per the amended rules, the aggrieved party can file complaints against:
· Improper, unsuitable sale of third party financial products
· Non-transparency or lack of adequate transparency in sale
· Non-disclosure of grievance redressal mechanism available
· Delay or refusal to facilitate after-sales service by banks
The amended rules would end the free run of the banks, who would now think twice before resorting to mis-selling financial products to gullible customers.