The Reserve Bank of India has asked banks to disclose details of the commissions and other fees received while selling mutual funds and insurance policies. The move which was announced on Monday is aimed at curbing mis-selling of financial products.
With the move customers will now be able to know how much banks are earning from every mutual fund or insurance product sold to them.
The RBI circular said, ''…it is likely that banks may be marketing/referring, several competing products of various mutual fund/insurance/financial companies to their customers. Keeping in view the need for transparency in the interest of the customers to whom the products are being marketed/referred, it has since been decided that banks should disclose to the customers, details of all the commissions/other fees (in any form) received, if any, from the various mutual fund/insurance/other financial companies for marketing/referring their products.''
Additionally, banks will also be required to disclose commission details when offering referral services for financial products, non-discretionary investment advisory services and portfolio management services through their subsidiaries. According to a senior official with a public sector bank, the move would restrain banks from recklessly pushing financial products that earn them higher commissions without bothering to consider whether the product is beneficial to the customer or not.
According to analysts the move will empower customers to know which product is fetching how much commission for the bank.
Mutual fund industry officials say around 40 per cent of total mutual fund sales come through banks.