How often have you seen your bank use the strong arm to get something done in a particular manner that does not appear all that rational and even detrimental to some of the parties involved in the transaction? At Personalfn, we have investors citing instances of such a nature at regular intervals. In the interest of the investing community we decided to bring this to the notice of the investors and regulators alike.

One incident that caught our attention and propelled us to write this article involved a Personalfn client in Bhopal. The said client, an NRI, had invested in a mutual fund IPO (initial public offering) from a leading asset management company (AMC). When the client tried to deposit the IPO form at the local bank (which was listed as a collection centre), the bank refused to accept the application form with the distributor's (i.e. Personalfn) code. Instead, it insisted on the investor filling a fresh application form of the IPO with the bank's distribution code.

The Personalfn client brought this to our notice and we in turn approached the AMC with his grievance. Incidentally, the AMC was aware of such instances/malpractices at the collection bank's end. The AMC assured us that if the client could share with it the cheque details, they would ensure that the application gets processed as it is without the need to fill in a fresh application form with the bank's distribution code. With the AMCs being aware of these lapses, it is surprising why they abstain from taking action against the banks. One reason could be that banks account for more than 60% of mutual fund sales and are the most important cog in the distribution wheel.

Another instance involving a Personalfn client (from Alleppey, Kerala), is even more damaging. This involved the same AMC and the collection bank, but a different IPO. This time around, the collection bank did not bother burdening the client with a request to fill in a fresh application form. The bank simply erased the distributor's code (again Personalfn) and inserted its own! All without the client's consent!

These are just some instances brought to our notice. We are not sure how many instances have escaped our attention because the client meekly submitted to the bank's wishes. And rightly so; because as far as he is concerned he wants to get on with it and not waste more time than necessary over such issues.

However, it is improbable that we in the industry can afford to turn a blind eye to reports of such instances. At Personalfn we believe that arm-twisting tactics by banks need to be brought under the scanner. The regulators  RBI and SEBI and even AMFI, the mutual fund industry and the distribution community need to take note of such malpractices. At the end of the day these instances give the industry a bad name and are a sharp deviation from the best practices that have met with the stamp of approval and commitment of the industry participants.

 

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