The Presidents/Chief Executives

All Banks/DFIs

Dear Sir/Madam,

DEDUCTION OF INSURANCE PREMIUM AND OTHER CHARGES IN EXCESS OF ACTUAL COST OR THE AMOUNT PAID TO SERVICE PROVIDERS

1. Please refer to BPRD Circular No.11 dated August 01, 2006 and BPRD Circular No.12 dated August 01, 2007 wherein the banks/DFIs have been instructed not to charge any amount under the head of insurance premium without the consent of customer in writing. They were also advised that all charges, other than mark-up to be recoverable by them should be clearly disclosed to the customers at the time of entering into agreement.
2. It has been observed that some banks/DFIs are not properly complying with above instructions in the matter. In view of the above, the existing instructions have been revisited and following instructions will become operational with immediate effect.
   1. Banks/DFIs should not retain a part of insurance premium received from customers for payment to insurer.
   2. The banks/DFIs may not charge any amount in excess of their actual cost under various heads being paid to the service providers.
   3. The Banks/DFIs should clearly disclose all charges recoverable from the customers at the time of entering into agreement with them and the same shall also be duly incorporated in their schedule of charges.
3. All banks/DFIs are advised to ensure strict compliance of the above instructions in letter and spirit as non-compliance will attract punitive action under BCO, 1962.
4. Other instructions on the subject shall, however, remain unchanged.

Please acknowledge receipt.