Banking · Bancassurance Regulations
Zenith Bank operates as a Corporate Agent for an insurance company. To mitigate home loan defaults, the bank decided to make it mandatory for every new home loan applicant to buy a 'Home Loan Protection Plan' from this insurer. The bank also offered a 'Premium Holiday' to customers moving their entire savings balance to the bank. An inspection found bank staff were paid cash incentives directly by the insurer. What are the specific regulatory violations committed by Zenith Bank?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank must partner with at least three insurers, and by offering only one insurer, it violates diversity norms.
- 2The bank is allowed to take incentives from the insurer if disclosed, and the only violation is the lack of a 'No Objection Certificate'.
- 3Mandatory insurance is allowed for home loans, but the 'Premium Holiday' is an unauthorized banking product requiring RBI's prior approval.
- 4Making insurance mandatory violates the tie-in prohibition, and cash incentives for bank staff from the insurer violate the prohibited corporate agent incentive structure.✓
Correct answer
Making insurance mandatory violates the tie-in prohibition, and cash incentives for bank staff from the insurer violate the prohibited corporate agent incentive structure.
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