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WHILE emphasising the importance of financial inclusion for sustained and long-term equitable development, Union Finance Minister Pranab Mukherjee, in his Budget speech last month, promised banking services in each of the "unbanked" blocks in the country. This is certainly a welcome step, but the government needs to do much more to ensure that citizens truly enjoy the benefits of the expansion in the banking network. First and foremost, it has to ensure that banks develop a healthy respect for the rights of consumers, and second, they follow stringently and without fail, all the laws and regulations meant for their protection. I would like to recall in this context a recent order of the apex court, wherein it has passed strictures against a bank for acting against the interests of its depositor. In fact in this case, the bank, which advanced a loan to a small-scale unit, took an insurance policy covering burglary and material damage on its behalf, but committed several blunders, adversely affecting the interest of the customer. So much so that eventually he had to seek the help of the court for full indemnification of loss. First of all, it gave a wrong description of the nature of the work being carried out at the unit. Second, it did not even mention the name of the unit, but just gave its address. Third, it failed to furnish the client with a copy of the policy. Fourth, it accepted, on behalf of the consumer and without even informing him, the calculation of loss suffered by the insured on account of a fire in the unit. The bank even signed a "full and final" voucher of the insurance company, thereby accepting that amount without protest. Observed the national consumer disputes commission in this case: " The State Bank of India, Govindpura branch, has showed itself up in poor light as a lender to a small- scale industrial unit. It failed to take necessary care in protecting the interests of the complainant, who was a loanee of the bank. It was very much the duty of the bank to safeguard the complainant’s interests while obtaining the insurance policy so that the bank’s own interests did not suffer. We hope that these observations would be brought to the notice of the senior management of the bank for necessary action." To start from the very beginning, Sushil Sharma, the proprietor of Ajay Industries in Ratnagiri, Bhopal, had a unit dealing in auto parts, besides repairs to automobiles. He took a term loan and cash credit facility from the SBI, and also obtained a miscellaneous accident insurance policy. The policy was in the name of the bank, and the consumer’s unit was entered as part of the address. In the year 2001, the unit was completely damaged due to a fire caused by an electrical short circuit. The insurance company, when a claim was made, not only paid much less than the actual quantum of loss, but also deducted Rs 32,000 from the assessed value on the ground that it was an "automobile workshop," for which the premium was higher than an "engineering workshop" as mentioned in the policy document. The bank accepted the cheque from the insurer and even signed the papers. The state consumer disputes redressal commission, Bhopal, after a detailed analysis of the case, concluded that the complainant could not be faulted for wrong classification of the unit. The fault lay with the SBI, which got the policy under written, without caring to ensure correct classification of the unit. Similarly, one of the officials of the bank had signed the discharge voucher without protest and without consulting the complainant. The insurance company, on the basis of it, cannot contend that the complainant had forfeited his right to seek further indemnification of the loss, the state commission held. It, therefore, made a correct assessment of the loss on the basis of the valuation duly certified by the chartered accountants appointed by the bank itself, and directed the insurer to pay. Unhappy, the insurance company filed an appeal before the national commission, only to be rejected (New India Assurance Company vs Sushil Sharma, and State Bank of India, First appeal no 216 of 2005, decided on Feb 2, 2010). The observations of the
apex court in this case on how banks ought to respect and protect the
rights of its depositors needs to be taken note of by the banking
industry.
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