Banks Have Been Charging Customers for Government Insurance They Never Wanted

Dehradun: Banks across the country have been charging customers for the Union government’s multiple insurance and pension schemes they didn’t need or hadn’t requested, and are still paying for them, reveals our investigation.

State-run as well as private banks impose the Pradhan Mantri Jeevan Jyoti Bima Yojana for life insurance, Pradhan Mantri Suraksha Bima Yojana for accident insurance and Atal Pension Yojana for micro-pension on their customers. Even though rules say these schemes are voluntary and require explicit permission to charge customers, banks have been either enrolling customers directly from the backend or by obtaining consent signatures through lies, deceit or coercion, shows evidence in the form of audio and video clips of bank employees confessing to malpractices to achieve industrial-level enrolment, RTI responses and internal letters setting targets for bank employees.

Prime Minister Narendra Modi launched these schemes in May 2015 to provide financial security to the poor. Life insurance provides a cover of Rs 2 lakh for death due to any reason while accident insurance assures the same amount in case of death or disability due to an accident. The micro-pension scheme guarantees a monthly pension up to Rs 5,000 after the age of 60. Life insurance and accident insurance policies get renewed annually and cost Rs 436 and Rs 20 a year respectively. The fee for the pension scheme depends on the plan and is charged monthly.

Banks operate as agents in enrolling customers in the schemes for a commission (Rs 41 for PMJJBY, Rs 2 for PMSBY) while the business goes to the insurance companies they have tied up with. According to the Insurance Regulatory and Development Authority of India (IRDAI) and Department of Financial Services (DFS), there are 6.58 crore active life insurance policies of the 12.89 crore people enrolled as on May 31, 2022. IRDAI said it does not have the number of active accident insurance policy holders of the 28.63 crore enrolled so far.

Bank employees and customers revealed to The Reporters’ Collective (TRC) the unscrupulous ways by which banks enrol and retain people in these schemes.

Twenty-two-year-old Rahul Chauhan is one among the many customers on whom the banks forced unwanted insurance schemes. He had opened a bank account with the State Bank of India (SBI) when he was in school to receive a government scholarship. Since 2019, his account would get debited every year for the government’s insurance policies he did not buy. Every year, he would request his home branch to stop these debits. They would either make him run around or tell him he would be unsubscribed from the schemes, only to charge him again. 

Ashish Mishra, the general secretary of WeBankers Association, a fledgling union of bank employees, told TRC that unethical enrolments in these schemes are widely in practice. He said senior managers who chase promotions abuse branch heads and threaten them with suspension, transfer, loss of pay etc. if they do not deliver a high number of enrolments. This pressure compels branches to enrol customers by hook or by crook.

Bank employees have long been complaining on social media that the target-obsessed managements have driven them to duping customers.

Also, hundreds of customers thus duped have posted their complaints on Twitter, complaint forums, YouTube and nondescript websites. In fact, complaints about direct enrolment had started appearing on social media (here, here) and in the news within a few weeks of the schemes’ launch. A brief news report in The Tribune newspaper’s Jammu edition revealed this malpractice a year later.

Twenty employees and kiosk operators of nine government banks gave TRC insights into how this con is pulled off. About half of them admitted to having had to do it themselves; some said scamming customers is a part of their routine work.

Banks activate the schemes en masse on customer accounts with the click of a button from the back office. This takes place at customers’ home branches after branch managers receive a list of eligible accounts and an enrolment target from the higher offices, such as zonal office and regional office.

Two Canara Bank officers told The Collective that they have activated the insurance schemes on customer accounts in bulk during such special campaigns. 

Another government bank employee shared with the reporter four emails, and bulk upload files attached with two of them, sent to him by his branch’s Regional Office earlier this year. Bulk upload is a technology banks use for bulk operations, such as remitting salary in corporate clients’ salary accounts. The employee claims these files were meant to activate life insurance and accident insurance on customers’ accounts without consent.

While the emails merely say, “Please find attached file for your perusal,” the employee alleges that the instruction to enrol customers without their knowledge came on a phone call from the regional office. Employees of various banks told The Collective that this is the standard method of direct enrolment in their branch too.

A retired, senior bank official who is an expert in banks’ technological operations examined the bulk upload files and found these to be authentic. A former whistleblower himself, he requested anonymity.

The employee who shared the bulk upload files says he refused to process them and hence was deputed to a faraway branch shortly after. This has reportedly happened more than once. TRC has copies of the bank’s emails in this regard. The employee also sent TRC a call recording in which a senior officer is heard warning him to mend his ways. 

Forensic accountant and Certified Fraud Examiner Nikhil Parulkar said that while the mere existence of bulk upload files does not prove wrongdoing, the allegation of bulk upload without customers’ consent merits an in-depth forensic audit to establish the truth. He said that if the allegations are true, this could be a case of mis-selling with the fraudulent intent to raise the numbers for business development. 

Parulkar has been in the banking and consulting sector for 20 years and held senior positions. Currently he is the Principal Consultant, Corporate Investigations, at Ocurisc Consulting, a firm he has co-founded to provide forensic advisory services. 

Another method bankers use to get customers to sign up for the schemes is to quietly slip in these schemes’ forms along with the account-opening forms, getting the unsuspecting customers to sign on every form without scrutiny. Whereas those who do spot these forms are told these are a must to open an account. Also, many branches activate policies on new accounts from the back-end.

In bank employees’ certain Facebook groups – one has 1.74 lakh followers – one will find memes and comment threads aplenty about these tactics. The memes and the discussion that follows echo the allegations of the bank employees and the customers TRC has spoken with. 

Banks also freeze customers’ accounts on the pretext that they have not submitted all the documents required under Know Your Customer (KYC) norms. At their branch, these customers are told that life and accident insurances and pension forms are mandatory under KYC rules.

@TheOfficialSBI
Hello Sir I have an account on SBI branch Code 12441, My account is not fully working due to KYC and here I came to do so and the service manager forcefully want me to open a PMJJBY scheme for successful functioning of my account. I am really shocked.Need help 🙏

— Rajesh Singh (@SPEEDSTERV4) June 10, 2022

Customers availing of a loan from the bank are told buying the insurance is compulsory for them. The same lie is told to beneficiaries of other government schemes, such as ones meant for street vendors, Self-Help Groups, micro-entrepreneurs, etc. Some branch managers trick customers into sending a scheme-activation SMS to the bank.

In remote or rural areas, banks provide services to customers through Customer Service Points kiosks. Under pressure from their supervisors, kiosk operators slyly get their gullible customers to verify their fingerprints on the Aadhaar-linked biometric device and saddle them with insurance without their knowledge.

If they face questions, many branch managers, bank employees and kiosk operators deny service to the customer until he/she signs up for these schemes.

Went to open a new account but the branch head told that atal pension, Pmjjby and pmsby schemes are mandatory to get a new account in the bank

— NAVEENKUMAR BANDI (@nvnkumarbandi) July 27, 2022

Following up on the complaint by a customer, this reporter called a branch of Bank of Baroda (BoB) in Madhya Pradesh posing as a customer and asked how money got debited from his account for life insurance.

“This is happening from the back-end. The government is like, this has to be done for everybody, whoever has an SB [Savings Bank] account,” the bank employee said on the phone. The reporter asked if the scheme is compulsory, to which the response was that the instruction is to enable these schemes on all the new accounts.

Likewise, this reporter called these welfare schemes’ government helpline four times and asked if banks indeed enrol customers from the back-end. Two customer care associates candidly said banks do, one cautiously; only one insisted that banks do not.

Many people with accounts in more than one bank get charged multiple times when all of their accounts get enrolled in the schemes without their consent. Often, the families of those insured without consent are not aware of the policy in the first place.

A Canara Bank employee who herself has enrolled customers directly shared that when the bank staff is asked to do so, many leave nominee details blank or enter “nominee”, “n/a” (not applicable) or put in similar filler text.

Bank of India (BoI) said in an RTI reply that about 2.73 lakh life and accident insurance policies do not have nominees. The bank also said that in 9,871 accident insurance policies, the nominee’s name is N/A. Further, the RTI reply disclosed that 54.4 lakh life insurance policies and 1.4 crore accident insurance policies do not mention nominee’s age. Other banks refused to provide the information.

IRDAI (Protection of Policyholders’ Interests) Regulations, 2017, says “a life insurance policy shall clearly state” the name and age of the nominee and their relation with the policyholder.

If an insurance policy does not have a nominee, the policyholder’s family will have to go through a cumbersome, costly and lengthy procedure to obtain a legal heir certificate to be able to claim the payout. However, these insurance schemes’ claim forms say the family of the deceased should preferably submit the insurance claim within 30 days of the policyholder’s death. 

Then there are policies with fictional nominees. SBI customer Swapnil Meshram from Maharashtra found himself directly enrolled in the life insurance scheme on August 24. His policy certificate says his nominee’s name is Shalikram Shalikram and that the policyholder is the husband of the nominee. Meshram is unmarried, and Shalikram is his father’s first name.

Chauhan’s life insurance renewal acknowledgment says his nominee is Kusum Devi but he has nobody by that name in his family. He filed an RTI request, asking how, according to the information available with the bank, the nominee is related to him. SBI’s regional office in Ballia replied that the bank cannot locate his application and would provide the information when it finds the document. Also, an employee from his branch called him and offered a full refund from his own pocket. Chauhan insisted on the bank refunding him, not the employee. TRC has their call recordings. A few weeks later, the bank gave him a full refund of the insurance fees deducted over the past three years.

He had filed another RTI application, seeking his life insurance enrolment form. Instead, the bank sent him a copy of ‘his’ accident insurance form, which he insists he did not sign. He was scandalised upon seeing this form with ‘his’ signature. Despite the presence of this form, the bank did not dispute his claim of wrongful enrolment and refunded him accident insurance premium too.

Twenty account holders from 11 states shared their stories with The Reporters’ Collective and all of them had a common refrain: they got enrolled without consent or through coercion.

Getting the insurance removed is another hassle altogether, The Collective learnt from interviews with the customers. At many branches, customers who ask to be unsubscribed from these policies are told one cannot exit these since these are mandatory as per the orders of the Centre/Reserve Bank of India/Modi. Many banks assure customers the schemes have been or will be deactivated, only to debit their accounts in the next payment cycle.

A Maharashtra resident’s SBI branch enrolled him without his consent in the life insurance scheme. His branch manager curtly told him he would have to close his account to avoid future deductions. He closed the SBI account in a huff and opened one in Maharashtra Gramin Bank (MGB), which too charged him for the insurance scheme shortly after.

The customer filed RTI requests with both the banks, but neither could produce his enrolment form. Though MGB promptly refunded him Rs 436, the now-apologetic SBI branch manager invited him to a restaurant, came with an account-opening form and gave him a full refund a few days later. He also coaxed the customer into signing a life insurance form (to take care of his RTI request) and writing a letter stating that his complaint stands addressed. TRC has the audio recording of the manager’s and the customer’s conversation at the restaurant.

 The RTI reply Anil Dash, an SBI customer and a small trader from Odisha, received stood out for brazenness. It simply says: “…customer account was registered for PMSBY [accident insurance] erroneously.” Dash did get a refund for the two years his account was wrongly debited for accident insurance but only after facing many hassles. He said his account got frozen this May 17 citing KYC regulations. He alleged that the branch manager said he would not reactivate the account until Dash paid Rs 12, Rs 330 and Rs 1,000 towards PMSBY, PMJJBY and SBI’s Personal Accident Insurance respectively.

Dash went back to his home and called up SBI’s customer care, which told him insurance is voluntary. He went to his branch armed with this knowledge but the branch manager allegedly brushed him off saying the customer care department does not know anything. Then Dash filed a complaint with SBI’s online grievance cell. Someone from his branch called him and updated his KYC details, finally letting him use his account a week after it was frozen.

Dash’s relief was short-lived. Barely three days later he received an SMS from the bank, reminding him to maintain sufficient balance in his account for renewal of his accident policy. This was how he learnt he had been enrolled in the scheme two years ago. It set him off on another round of back-and-forth with the branch manager and the grievance cell.

Many complain that their bank’s customer care department disposes of their complaints without resolving the issue. Others complain that they are merely advised to submit a written request at their branch to opt out of the schemes. Those who live away from their home branch are rendered helpless and many who visit their branch run into lies, hostility and indifference.

Besides causing harassment and indignation, an unwanted policy can burn a hole in the pockets of the poor. Kiosk operators told TRC the customer segment they serve, and are forced to cheat, largely consists of the working class, whose meagre savings will face a dent.

A day labourer from Karnal in Haryana said he and his family were distressed when the new Jan Dhan accounts were charged for the two insurance schemes this year. His family had opened accounts with Rs 500 each.

“I’m a daily wage labourer, earn about Rs 8,000 a month. With this, I have to run the household. My father has been undergoing dialysis, his kidneys haven’t been working. I have to bear his expenses too,” he said. He requested anonymity, fearing backlash from his kiosk operator.

While the majority of complaints on the internet are against government banks, names of private institutions also come up.

The reporter filed RTI requests with banks and asked for the number of complaints they have received of unauthorised enrolment and the number of customers who have been granted a refund. SBI and BoB said they do not maintain this data whereas Canara Bank said sharing this data would invade customers’ privacy. BoI and Punjab & Sind Bank said they have not received even a single complaint whereas PNB said it has received a lone grievance since the schemes were launched.

TRC sought data about complaints, refunds, policy cancellations from government authorities too, but they said they do not maintain this information. The Department of Financial Services (DFS), which oversees government initiatives pertaining to banking and insurance, further noted that it is not required to “furnish replies to hypothetical questions” under RTI. Also, DFS ignored TRC’s RTI request for copies of letters/orders sent to banks regarding increasing enrolment under PMJJBY and PMSBY.

IRDAI, whose mandate is to protect the interests of policyholders, also said in RTI replies it did not have any data about the complaints. IRDAI also disclosed it has not audited the insurance schemes.

The Institute of Chartered Accountants of India, the government body whose objective is to regulate auditing practices and which regularly brings out Guidance Note on Audit of Banks, refused to examine TRC’s evidence. The chairperson of its Public Relations Committee, Sanjay Kumar Agarwal, asked: “How can we help you until the ministry tells us to!” He said only a small-time chartered accountant might be able to help out with this, that too anonymously. “Doing anything against the government, I deem it difficult,” he said.

Emails to IRDAI, DFS, Union finance ministry and the RBI went unanswered. SBI said it does not promote any unfair practice. Binay Pathak, Chief Manager (Operations) of the bank’s Financial Inclusion department, stated in an email that since the bank has the highest number of branches, “a few such instances as cited by you cannot be ruled out, but this may be an aberration rather than the rule.”

In response to TRC’s 25 questions, he wrote that the details have been sent to the respective departments and that the bank would get back to the reporter upon receiving detailed feedback.

The Deputy General Manager of BoB’s Financial Inclusion department, K. Surya Prasad, sought evidence from TRC. However, he did not comment on the description of the evidence and the list of the allegations that TRC sent him; instead, he again requested for the evidence.

The email from Canara Bank’s head office merely stated that the organisation strictly follows its policies and guidelines. The bank did not address any of the specific questions sent by TRC. Other organisations named in this article did not respond to the emails.