Need for a General Grievances Forum

Need for a General Grievances Forum

Of late, the markets are flooded with several financial institutions / companies and products and it is impossible even for educated people to verify the genuineness of the finance companies and the products they market.

There are some finance companies offering mutual fund products, insurance products, running chit funds and offering varieties of brokerage and other services in and around all cities.
Even many of the new generation banks offer varieties of insurance and mutual fund products in their premises. It is practically difficult to come out of a new generation bank without being trapped for some investments in their insurance/mutual fund products.
They have many subsidiaries operating from the bank premises and it is embarrassing to ask whether the subsidiaries are licensed or authorised to do business from bank branch premises.
As scams and frauds occur every now and then even in well regulated institutions / Companies, it is high time vigilance is kept on all types of finance companies and public are suitably warned from being duped. In the case of banks offering insurance products, it should be widely publicised by IRDA that what are the types of products they have authorised the banks’ subsidiaries to deal with and what type of charges they can levy from customers. It should also be made clear to the public that whether banks are offering the products or their subsidiaries are offering the products.
The extent of the liability that the bank bears on behalf of their subsidiaries also should be made clear to public before they are made to invest.

The canvassing of business keeping the image of the bank and that too in banks premises by banks own subsidiaries without making the charges transparent to the investors is nothing but trapping the gullible customers.

The finance companies / institutions should indicate their regulator and their full address in all their forms prominently for investors benefit when they canvass business.

The Reserve Bank and SEBI should also have the moral responsibility to bring to public knowledge in these days of liberalisation as to what type of products and what sort of control they have on various institutions they regulate and to what extent public are safe in investing their hard earned savings.

Similarly, IRDA has to periodically come out with the information relating to institutions dealing with insurance products, their collaborations, and the type of products and the general nature of risks customers have to understand, the charges to be borne by the customers and the lock in period of investments etc.

Several insurance products are in the market and they are all mostly marketed as investment products and customers are at a loss to understand fully what is in store for them till they get the policy and in case they take the pains to read the fine print.

Marketing has been aggressive these days by private institutions in particular and contacting persons in these institutions has been virtually difficult as the business is practically carried out virtually through computerised system and information technology.

The State Governments also should publicise once in a while the list of companies they have authorised to function and offer financial services. There should be a reference point for public to verify the genuineness of the institution and the products they offer.

A general grievances forum to refer cases of doubtful nature should be thought of jointly by all regulators for the benefit of public, regulators and institutions / companies as well.

The caution that Customers have to be cautious and the products they buy are subjected to market risks will not alone be sufficient to keep the institutions/ companies away from indulging in all sorts of marketing gimmicks and canvassing business.

The image of the economy, the regulator and the institution and ultimately the customer has to be well taken care of by proper rules, regulations and control.

The presence of Ombudsman who takes care of basically grievances arising from deficiency of service to customers may not be of much use in respect of issues referred to above.

Dr.T.V.Gopalakrishnan

( This Write-up appeared in Business Line dt 10/05/10)