In a sudden move, HSBC Bank has passed an order to stop selling Insurance and Mutual Fund products in India basis a report submitted by the London Headquarters on mis-selling. Due to rising allegations and complaints, the London Headquarters had carried out a Culture Audit of the Indian Retail Banking and Wealth Management practices and has come out with an order of suspension of sale till the issues are sorted.
HSBC Bank, being the world’s third largest bank and the largest Mutual Fund distributor in India, has reported a sudden unusual hike of 30% of the previous years’ commissions even though that year had been reported as one of the toughest in the country for Mutual Fund Distributors, Life Insurers and other Wealth Management Services. This, along with rising complaints and allegations led to the surprise audit.
HSBC Bank had given its Indian counterpart a two-month notice in order to reduce the customer complaints and ease out issues. This is the second time of suspension of sale in the last 5 years, the previous one being in the year 2007-08 when HSBC’s regional headquarters had inspected the suspicions books about retail assets and credit card portfolios. The major complaints against HSBC Bank, India were also related to Frequent Fund Churching of Mutual Funds in order to collect upfront Commissions of large investors other than mis-selling of insurance policies. Therefore, HSBC India Bank has been forced to stop sale till the issue is taken care of.
