Incentive Scheme For Sale Of Third-party Non-banking Products Under RBI Lens

The reward & recognition (R&R) incentives that bankers receive from the sale of third-party non-banking products seem to have come under the Reserve Bank of India’s scanner on concerns of mis-selling and loss of focus on core banking activities.

The banking regulator’s concern can possibly be gauged from the fact that State Bank of India has decided to put on hold any R&R incentives related to activities/ performance in respect of cross-selling of third-party non-banking products. Other banks too are believed to have put a stop to such R&R incentives.

India’s largest bank, however, has decided to continue R&R schemes for other than the cross-sell business of third-party non-banking products, as per its recent circular.

According to Soumya Datta, General Secretary, All India Bank Officers’ Confederation, in their bid to meet the steep targets for cross-selling third-party non-banking products and earning incentives, bankers could end up mis-selling them. Hence, there is a need to curb this perverse incentive and bring back focus on core banking activities.

Referring to “RBI instructions”, SBI had issued instructions to all verticals on September 21, 2019, to hold release of any R&R/ incentives (even in respect of previous periods under approved schemes, irrespective of the activity/ campaign and Business Unit (BU)/ Department) till further instructions.

As per SBI’s latest circular, R&R incentive related to activities/ performance in respect of cross-selling of third-party non-banking products such as cross sell business of Customer Value Enhancement (CVE) Business Unit (BU) and other third-party non-banking products (Atal Pension Yojana, Public Provident Fund, Sukanya Samriddhi Account opening, etc.) should not be paid and will continue to be on hold.

SBI’s CVE-BU oversees sale of insurance policies of SBI Life Insurance and SBI General Insurance, distribution of schemes of SBI Mutual Fund, distribution of products of SBI Cards & Payment Services, and SBI Cap Securities.

As per its latest annual report, the bank also distributes mutual fund products of UTI Mutual Fund, Tata Mutual Fund, Franklin Templeton Mutual Fund, L&T Mutual Fund, ICICI Mutual Fund, and HDFC Mutual Fund. In addition, all branches are authorised for opening pension accounts under National Pension System (NPS).

SBI reported 18 per cent increase in commission on cross-selling in FY2019 at ₹1,927 crore against ₹1,631 crore in FY18.