Monday, April 29

Banks Take Money Illegally From Customers, Forge Consent For Centre’s Insurance Schemes: Report

Edited by Aishwarya Krishnan
Banks Take Money Illegally From Customers, Forge Consent For Centre's Insurance Schemes

In a recent report by Article 14, several leading banks in India have come under scrutiny for enrolling customers without their consent and knowledge in the central government’s life insurance schemes, leading to unauthorised debits from their accounts.

The Article 14 report provides a deep dive into the scores of customers—often students, unemployed youth, and the poor—who have been enrolled in the life insurance scheme called Pradhan Mantri Jeevan Jyoti Bima Yojna (PMJJBY), the accident insurance scheme called Pradhan Mantri Suraksha Bima Yojna (PMSBY), and even the micro-pension scheme called Atal Pension Yojna (APY). The premium for the PMJJBY is Rs 436 annually, while for the PMSBY, the amount is Rs 20 every year. The amount is deducted automatically from the customer’s account once they are enrolled in these schemes. Rs 200,000 is provided as a cover under PMJJBY, while PMSBY provides Rs 200,000 in case of accidental death and Rs 100,000 if it’s a severe accident-related injury. The APY gives a monthly pension of Rs 5,000 after the age of 60. The monthly fee may vary depending on the pension plan selected.

However, several customers are simply not aware of being enrolled in these schemes, much less about paying a premium for an insurance scheme. This means that even if something happens, they would not be able to avail the benefits of a scheme that they are paying for but never subscribed to in the first place. Many of the schemes also have bogus nominees, restricting the policyholders’ families from availing the benefits.

Launched in 2015 by PM Modi, these schemes serve to provide financial aid to the poor. However, since the beginning, accusations of banks enrolling customers through fraudulent practices have been raised.

The News Minute and Malayala Manorama reported that the State Bank of India (SBI) in Kerala was enrolling customers without their consent. The malpractices have been institutionalised, with regional, zonal, and head offices executing frauds and forcing branches to cover up. But the question that comes up is: how do the banks do it?

Bulk Activation: Quick, Easy, and Illegal

Banks can upload and approve customer details into the insurance portal all at once or through another bulk upload file, enrolling customers without their knowledge.

Several instances of the same have been recorded. The government-owned Canara Bank in Darjeeling and Rajasthan has had branches send lists of customers eligible for the insurance schemes. When asked to activate the schemes in all of them, some branch managers refused to do so without the customer’s consent. The head office then did it from the back-end. In Delhi’s SBI, bank employees received messages with instructions on how to initiate bulk enrolment of customers in PMSBY.

When a Gujarat resident filled a form to refund the money after finding out that she had been subscribed to the PMJJBY scheme without her knowledge by SBI, the bank employee confessed that he had no option but to save his job and debit after receiving a list of accounts from the regional office.

The largest public sector bank, SBI, is not the only one. Bank of Baroda, the second largest public sector bank, uses the same bulk activation method to enrol customers without their consent. Union Bank of India and Canara Bank have also come under scrutiny.

In December 2023, following a report in The Economic Times that brought light to scores of complaints on X (formerly known as Twitter) regarding unauthorised debits for both PMJJBY and PMSBY, branches were asked by the government to examine the application forms of customers for the above schemes. According to an employee, the regional officer advised branch heads to give a fake confirmation that consent forms were in place. These consent forms, of course, did not exist. Without cross-checking, the claim was accepted.

Department of Financial Services (DFS)

The organisation is in charge of important government initiatives related to the banking and insurance sectors. DFS sets the enrollment targets for the banks to hit for PMJJBY, PMSBY, APY, and other government schemes. Using pressure tactics to avoid “any unpleasant action,” the DFS sends warnings to zonal managers to ensure that they meet the targets. This pressure from the top trickles down to the management and to the ground-level staff. Those who failed to meet the targets for enrolling customers had their salaries docked for months.

What Do The Customers Have To Say?

Customers affected by these unauthorised debits have not remained silent. Many have taken legal action against banks, demanding refunds. One customer, Kiran M. Goli, of Karnataka’s Canara Bank, is suing the bank for debiting his account without his consent for PMJJBY and PMSBY and asking for Rs 5 lakh in damages.

Like Mr. Goli, many others have received the same standard reply: “Due to some technical error, your account was debited for some amount instead of the other account. The deduction was totally a technical error.”

Certified fraud examiner Nikhil Parulkar stated that a cover-up can be successfully pulled off by using the shield of “technical” error. He also stated that while the benefit of doubt should be given to everyone, banks tend to use this tenet as a way to hide their malpractices.

According to Article 14, over 16 crore people have been subscribed to PMJJBY and 34 crore to PMSBY. Based on the opinions of the bank officials, most of these registrations will end up being forged.