“Financial consumer is struggling to cope up with unfair consumer service practices being followed by financial institutions such as lack of transparency and disclosure, hidden charges, penalties, misselling of products, sale of unsolicited products-often by bundling them with other products, improper recovery practices and others,” said D.S. Rawat, secretary general of Assocham while releasing the study.
“Regulators have an increased responsibility to safeguard the interest of the consumer as well as the service provider and inculcate global best practices in our financial system,” said Rawat. “The regulators need to play a dynamic role in strengthening financial regulation while also empowering consumer through consumer awareness initiatives.”
“Considering that objective of financial inclusion would be lost in the absence of strong financial consumer protection, it is extremely important to establish efficient grievance redressal systems, greater transparency, enhancement in the minimum standards of banking practices relating to customer service, incentivizing and leveraging technology for product innovation to achieve financial inclusion,” added the top Assocham official.
There is also the need for adequate consumer protection and financial literacy for long-term stability of the financial sector, more so, as protecting illiterate poor people from the traps of misselling is as important for wealth generation as access to financial services, noted the Assocham-Brickwork Ratings study.
Besides, financial markets players and regulators have to build confidence amid consumers as they do not often understand the complexity of the products they buy and are never sure if the products are suitable for them considering their situation in investment life cycle, risk aversion, capital and liquidity needs, it added.
The Assocham-Brickwork Ratings study has further stressed upon the need to develop regulations having consumer protection as the core theme and build confidence amid consumers to foster growth of robust, safe and sound financial markets/institutions operating under rules and regulations which are fair, transparent, free from conflicts of interest and other agency problems.
The microfinance institutions (MFIs) should responsibly lend to the poor people as indiscriminate lending and irresponsible borrowing had lead to India’s sub-prime crisis, it added.
The study has also batted for providing regulatory protection for consumers to get confidence about technology based products and services as there is a lot of scope to reduce the intermediation cost from the current level by leveraging technology.