What changed
Previously, UCBs were allowed to market mutual fund and insurance products as agents or on a referral basis without risk participation. Now, RBI has added a transparency requirement: banks must disclose to customers the full details of any commissions or other fees received from product providers.
What it means for you
UCBs can no longer keep commission structures hidden from customers. This levels the playing field and ensures customers can make informed choices. Banks will need to update their disclosure processes and train staff to communicate these details clearly during product sales.
What you must do
- Immediately update customer-facing documentation and sales scripts to include mandatory disclosure of all commissions and fees received from mutual fund/insurance companies.
- Train frontline staff and relationship managers on the new disclosure requirement and ensure they can explain commission details to customers.
- Review existing agency and referral agreements with mutual fund and insurance partners to capture commission/fee data for disclosure.
- Set up internal audit checks to verify compliance with the disclosure mandate during product marketing activities.
Who it affects
All Primary (Urban) Cooperative Banks, UCB customers purchasing mutual fund or insurance products through their bank, Mutual fund and insurance companies partnering with UCBs for distribution
Does this circular apply to all types of insurance and mutual fund products marketed by UCBs?
Yes, the disclosure requirement covers all insurance and mutual fund products that UCBs market or refer to customers, as per the earlier permissions granted in 2003, 2006, and 2007 circulars.
What exactly must be disclosed to the customer?
Banks must disclose details of all commissions and other fees (in any form) received from the mutual fund or insurance company for marketing or referring their products. The disclosure should be made to the customer at the time of sale.
When does this requirement come into effect?
The instructions are effective immediately from the date of the circular, December 3, 2009. No transition period was provided.