What changed
Previously, RRBs were allowed to market mutual funds and insurance products on a referral or corporate agency basis without explicit disclosure requirements. Now, RBI has decided that RRBs must disclose to customers all commissions or other fees received from these companies for marketing or referring their products.
What it means for you
This move enhances transparency and customer protection, ensuring customers are aware of potential conflicts of interest when RRBs recommend competing financial products. Banks must update their disclosure practices and train staff to communicate these details clearly to customers.
What you must do
- Implement a process to disclose all commissions and fees received from mutual fund and insurance companies to customers at the point of marketing or referral.
- Update internal policies and customer-facing documents to include mandatory disclosure of compensation details.
- Train branch staff and agents on the new disclosure requirements and ensure compliance across all RRB branches.
- Coordinate with mutual fund and insurance partners to obtain accurate commission/fee data for disclosure.
Who it affects
All Regional Rural Banks (RRBs), RRB branch staff involved in marketing or referral of financial products, Customers of RRBs who are offered mutual fund or insurance products
Does this circular apply to all types of insurance and mutual fund products marketed by RRBs?
Yes, the disclosure requirement applies to all competing products of various mutual fund and insurance companies that RRBs market or refer to customers.
When does this disclosure requirement come into effect?
The instructions are effective immediately from the date of the circular, December 9, 2009.
What should RRBs do if they receive commissions in forms other than cash?
The circular requires disclosure of all commissions or other fees 'in any form', so RRBs must disclose any non-cash compensation as well.