Wednesday, June 24, 2009


The banking and finance sector is structured in such a way that most of the banks and other NBFCs depend a lot on the channel partners for sale of their products. The channel partners like DSA and DSTs, even though are a different entity separate from the bank/NBFCs, have become an integral part of their distribution network. Bulk of the sales of bank's products like salary account, current account, home loan, personal loan, car loan etc happens through these channel partners. As such, sometimes they become the face of the bank to a customer and can yield great deal of influence over them. Using this influence , the DSA /DST executives sometimes charge a commission from the customer promising them that they will somehow "arrange" the loan from the bank for them.

Customers fall for these claims because of various reasons. Firstly because they see these agents as part of the bank/NBFC and as such assume that they might be able to influence the credit approval process in their favour. Second reason is mostly the desperation of the customers to get loan. They want the loan faster and as such do not mind paying a commission , if that helps them get the loan faster. But, the truth of the matter is that agents are not supposed to charge any commission from the customer since they are adequately compensated by the bank/NBFCs for their services. They are strictly prohibited from taking any money or commission from the customers on any pretext. But, most of the customers are not aware of this and as such fall prey to these money making tactics of few agents. Here, it would be necessary to say that all agents do not indulge in these malpractices. The scope of this article is to expose only those agents who are out to make money at the expense of naive customers.

Let me state the various reasons why you should never give any commission to any agent for your loan or credit approval.

1. Banks do not allow agents to take any commission from customers- Most of the banks/NBFCs have a policy whereby their agents are strictly prohibited from taking any money in any form from the customers on any pretext. Agents are hired by banks for soliciting customers and they are paid salary and incentives by the bank against their services rendered. Banks take strong exception to any complaints from the customer against agents in this regard . Agents are generally fired immediately after a customer complains against them ,for asking money, to the bank .

2. Agents have no control on the credit underwriting and loan approval process - Another important thing for everyone to know is that in most banks and NBFCs the sales function and credit underwriting function is completely separate with sales team having no or limited influence over the process of credit underwriting . As such, one must understand that the sales agent can not help influence the outcome of the credit underwriting process , even if he is paid money to do so. The money you will pay will just be pocketed by him , in case your loan gets approved, which would happen automatically under normal process if your case has merit.

3. Banks might deny you a loan if they come to know of this - In case banks come to know about you having paid money to an agent for getting your loan approved, they may view your case with a bit of suspicion , since paying money implies that you have something to hide or have some deficiency in your documents or in merit of the case. Also, it is assumed that customers who pay money to an agent as commission are more likely to be delinquent than others. Banks , obviously, do not want to lend to customers who are likely to be delinquent as such your case becomes weak if they come to know that you have paid money to the agent.

It is important to understand, that while you may be paying your agent money as a compensation for his services, banks consider this as you having paid bribe to the agent to "push" your case. This might go against you at times.

4. Agent might forge documents or signature - When you may commission to an agent , he has a vested interest in you getting a loan. As such at times, he might resort to malpractices like forging documents like income tax returns, salary slip etc on your behalf . At times he might also forge your signature. These things he would do to get your loan approved by "hook or crook", but you must understand that these are unlawful activities being done by an agent on your behalf which might get you in trouble.

Hence, it is always better to stay away from paying any money to any agent. The best strategy is to walk in personally to a bank branch near you and speak to an officer there. They will be more than happy to help you with the process and document requirements. This way , you may never have to deal with a DSA/DST agent.

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