Dealing with corporate "dalals"
Shamsul Huq Zahid | Wednesday, 16 March 2011
Shamsul Huq Zahid
The central bank, reportedly, issued last Monday a circular asking the banks not to force their borrowers to take policies from insurance companies of their (banks") choice. Such a circular, in fact, has been overdue for long. The wing concerned of the Bangladesh Bank has issued the circular on the basis of allegations that some scheduled banks have prepared a list of general insurers and the borrowers are, in most cases, pressed for taking policies from one of those companies. And, in exchange for extending favour, the banks ask the insurance companies concerned to maintain fixed deposits with them. Then again, if the chairman or any other sponsor director of bank owns a general insurance company, the borrowers and other clients, particularly who are involved in export and import trade or own industrial units, motor vehicles and vessels, are "requested" to take policies from that company. In a number of cases, sponsor directors of commercial banks do simultaneously own insurance companies. Besides, some bank officials do earn handsome amounts as "commission" from the general insurers against policies that they manage from the clients. The practice of pressurizing the borrowers overtly or covertly to take insurance policies from companies of the bankers" choice has been going on for long, openly. But none has ever bothered to do anything about it. In fact, there is no harm if a bank official does give a borrower or any other client a piece of advice to take policy from an insurance company having good performance rating and it should be left to the borrower/ client concerned to accept or reject the advice given with good intention. However, it is always risky to suggest the name of an insurance company if the bank official concerned does not have in his/her possession the full information about its performance. A client may face serious troubles in settling claims, if there is any, with second or third grade insurance companies. But why blame banks or insurance companies? The act of forcing or motivating (?) the clients or patients or borrowers to accept "imposed" decisions has been rampant in this country. The sole objective behind such an improper act is the earning of some extra amounts in the name of "commission". There are both "ordinary" and "high profile" commission agents the main job of whom is to secure business for others, individuals and organizations. Some business ventures and professionals are largely dependent on commission agents or "dalals". For instance, the presence of "dalals" in the real estate and property sector is very old. In recent years, the number of "dalals" has been on the rise in the cases of sale of used vehicles and the business of private health clinics. Some legal professionals are often found to engage "dalals" to get clients. Nobody minds the presence of petty "dalals" or commission agents as their services, at times, prove useful. However, one has to remain extra careful about the possible acts of cheating while taking services of the "dalals". But the people do get upset if they find some professionals of repute, including doctors and bankers, acting as commission agents. Allegations are galore against doctors that they earn hefty commission by sending patients to diagnostic centres and private clinics and hospitals. However, none, including the Bangladesh Medical and Dental Council (BMDC), has never ever has made any attempt to look into the allegation. But unlike BMDC, the Bangladesh Bank is an effective regulatory body as it enjoys adequate power and authority to deal with the issues of the banking sector. Though belated, it deserves kudos for asking the banks not to force anything on their clients on insurance policy matters. However, the central bank would have to ensure that the banks are complying with its latest directives. Otherwise, the practice of commission taking or forcing, unofficially, the clients to take polices from insurers of banks" choice would continue. The BB had issued earlier a number of directives on commissions, fees and charges realized by the banks from their clients. But some banks are found to be non-compliant in many cases. Clients expect the banks and other financial institutions, private or public, to run efficiently and render quality service. Delivering anything short of that expectation does not fit in with the image the banking industry has now globally. The industry is now exceptionally fast, transparent and highly efficient through the use of the information and communication technology and talented people. The banks concerned do need to give up the habit of employing its officials to work as commission agents or petty "dalals". It would also be important for the government to ensure that the newly-formed insurance regulatory authority takes effective measures against the insurance companies engaged in unethical practice of giving hefty commissions to bank officials and others to secure business. The unregulated use of the commission system has become a sore pint of the country"s insurance sector. [email protected]
The central bank, reportedly, issued last Monday a circular asking the banks not to force their borrowers to take policies from insurance companies of their (banks") choice. Such a circular, in fact, has been overdue for long. The wing concerned of the Bangladesh Bank has issued the circular on the basis of allegations that some scheduled banks have prepared a list of general insurers and the borrowers are, in most cases, pressed for taking policies from one of those companies. And, in exchange for extending favour, the banks ask the insurance companies concerned to maintain fixed deposits with them. Then again, if the chairman or any other sponsor director of bank owns a general insurance company, the borrowers and other clients, particularly who are involved in export and import trade or own industrial units, motor vehicles and vessels, are "requested" to take policies from that company. In a number of cases, sponsor directors of commercial banks do simultaneously own insurance companies. Besides, some bank officials do earn handsome amounts as "commission" from the general insurers against policies that they manage from the clients. The practice of pressurizing the borrowers overtly or covertly to take insurance policies from companies of the bankers" choice has been going on for long, openly. But none has ever bothered to do anything about it. In fact, there is no harm if a bank official does give a borrower or any other client a piece of advice to take policy from an insurance company having good performance rating and it should be left to the borrower/ client concerned to accept or reject the advice given with good intention. However, it is always risky to suggest the name of an insurance company if the bank official concerned does not have in his/her possession the full information about its performance. A client may face serious troubles in settling claims, if there is any, with second or third grade insurance companies. But why blame banks or insurance companies? The act of forcing or motivating (?) the clients or patients or borrowers to accept "imposed" decisions has been rampant in this country. The sole objective behind such an improper act is the earning of some extra amounts in the name of "commission". There are both "ordinary" and "high profile" commission agents the main job of whom is to secure business for others, individuals and organizations. Some business ventures and professionals are largely dependent on commission agents or "dalals". For instance, the presence of "dalals" in the real estate and property sector is very old. In recent years, the number of "dalals" has been on the rise in the cases of sale of used vehicles and the business of private health clinics. Some legal professionals are often found to engage "dalals" to get clients. Nobody minds the presence of petty "dalals" or commission agents as their services, at times, prove useful. However, one has to remain extra careful about the possible acts of cheating while taking services of the "dalals". But the people do get upset if they find some professionals of repute, including doctors and bankers, acting as commission agents. Allegations are galore against doctors that they earn hefty commission by sending patients to diagnostic centres and private clinics and hospitals. However, none, including the Bangladesh Medical and Dental Council (BMDC), has never ever has made any attempt to look into the allegation. But unlike BMDC, the Bangladesh Bank is an effective regulatory body as it enjoys adequate power and authority to deal with the issues of the banking sector. Though belated, it deserves kudos for asking the banks not to force anything on their clients on insurance policy matters. However, the central bank would have to ensure that the banks are complying with its latest directives. Otherwise, the practice of commission taking or forcing, unofficially, the clients to take polices from insurers of banks" choice would continue. The BB had issued earlier a number of directives on commissions, fees and charges realized by the banks from their clients. But some banks are found to be non-compliant in many cases. Clients expect the banks and other financial institutions, private or public, to run efficiently and render quality service. Delivering anything short of that expectation does not fit in with the image the banking industry has now globally. The industry is now exceptionally fast, transparent and highly efficient through the use of the information and communication technology and talented people. The banks concerned do need to give up the habit of employing its officials to work as commission agents or petty "dalals". It would also be important for the government to ensure that the newly-formed insurance regulatory authority takes effective measures against the insurance companies engaged in unethical practice of giving hefty commissions to bank officials and others to secure business. The unregulated use of the commission system has become a sore pint of the country"s insurance sector. [email protected]