Modi govt's flagship insurance schemes, or daylight robbery?

For more than a year, 26-year-old engineering graduate Kundan Kumar of Saran district in Bihar has been trying to unsubscribe from an insurance policy he did not buy in the first place. Without his consent, Kumar’s bank deducted money from his account and enrolled him in the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).

Days after his account was debited on 29 December 2022, an upset Kumar sought a copy of his insurance application form from the bank under the RTI Act. On 2 February 2023, his bank, the State Bank of India (SBI), replied, "Application form not found for the aforesaid insurance."

But the bank has not granted him a refund of payments towards this unsolicited insurance policy.

Like him, many across the country have protested unauthorised debits from their bank accounts for the Central government’s insurance schemes. Apart from life insurance, banks have also been enrolling customers without consent in the accident insurance scheme — the Pradhan Mantri Suraksha Bima Yojana (PMSBY) — without their consent. These complaints also extend to the Centre’s micro-pension scheme, called Atal Pension Yojana (APY).

While Kumar was enrolled in PMJJBY without his consent, his mother was enrolled in APY, he said. Once a customer is subscribed to these schemes, the fees are deducted automatically from his/her/their accounts annually.

While the PMJJBY premium is Rs 436 a year, PMSBY costs Rs 20 a year. PMJJBY provides a cover of Rs 2 lakh to a policyholder’s nominee in the event of death due to any reason. The PMSBY provides Rs 2 lakh in case of death in an accident, and Rs 1 lakh in case of severe injury.

The APY offers a monthly pension of up to Rs 5,000 after the age of 60. The monthly fee depends on the pension plan selected.

Often, those enrolled in insurance schemes without their consent are not aware that they are paying a premium for an insurance cover. This prevents family members from availing the schemes’ benefits, rendering their premium payments, unauthorised to begin with, futile.

Policy certificates of such customers, accessed by this reporter, showed bogus nominees. This also restricts policyholders’ families from availing the benefits of the schemes.

Prime Minister Narendra Modi launched these low-cost welfare schemes in May 2015 to provide financial security to the poor. From the beginning, banks faced allegations of often enrolling customers in these schemes through fraudulent means, apparently under pressure from the government to achieve the targets.

New evidence reveals that this malpractice has since been institutionalised, with regional, zonal and even head offices executing fraud and forcing branches to conceal them.

Huge targets, quick fixes

The quickest albeit illegal way to enrol a high number of customers appears to be what is called “bulk activation”, where banks can upload and approve many customers’ details into the insurance-activation portal all at once using a spreadsheet or another bulk upload file.

No matter how steep the targets, they can be met with just a few clicks as long as the bank does not mind enrolling customers without their knowledge.

In August 2023, an officers’ union of the government-run UCO Bank sent a letter to its managing director and CEO, alleging that account holders in Dehradun were illegally enrolled in these government schemes from the back-end by the head office. Article 14 has a copy of the letter.

It said that in July-end, the zonal office in Dehradun sent the branches a list of accounts eligible for PMJJBY and PMSBY, and asked the branches to activate the schemes in all of them. Many branch managers refused to do so without customers’ consent, only for the head office to do this from the back-end.

The union’s letter pointed out that complaints from customers began to trickle in, and branch managers requested their zonal office to issue refunds. But the zonal office instead instructed them to collect and backdate enrolment forms.

An employee of the government-owned Canara Bank told this reporter that a similar story unfolded in Rajasthan in June 2023. He said regional offices sent branches lists of customers eligible for PMJJBY.

This employee shared screenshots of the bank’s content management system, showing that PMJJBY was activated on customers’ accounts in bulk by an assistant general manager posted in a regional office.

One SBI employee from the bank’s Delhi circle shared screenshots of the bank’s de facto official WhatsApp group in October 2023. The WhatsApp screenshots sent by the SBI employee showed bank employees being given instructions on how to initiate bulk enrolment of customers in PMSBY. This employee also shared screenshots of the bulk upload files.

A Gujarat resident told this reporter that his wife’s SBI account was auto-debited for PMJJBY on 19 January 2024. He said when she went to her branch to seek an explanation, the branch told her that many accounts were debited because of a technical error and now the bank was offering a full refund. To avail her refund, the bank asked her to fill a form.

This customer’s husband told this reporter that he spoke with the branch manager, who apologetically said he had received a list of accounts from his regional office and had no option but to debit them to save his job.

Bank of Baroda, the second-largest government bank after SBI, also uses bulk activation to meet enrolment targets without customers’ consent.

One Bank of Baroda employee from Karnataka shared screenshots of emails from December 2022 and February 2023, bearing details of eligible customers and instructing branches to enrol them in the PMJJBY and PMSBY via bulk activation. This employee said he had to do bulk enrolment of customers in the PMSBY without their consent when his deputy regional manager asked him to do so and provided him with the list.

In response to Article 14’s queries about enrolling customers without their consent, UCO Bank’s assistant general manager of the financial inclusion department, Joydeep Nandy, sent the following reply: "In our communication to our zonal offices, we clearly mentioned that the customers should be contacted and persuaded to get enrolled under PMJJBY and PMSBY. We also mentioned that due procedure of PMJJBY and PMSBY enrolments like obtaining consent forms, nominee details etc. should be followed by branches before enrolment of customers."

Nandy said a bulk enrolment menu was especially devised. “In light of the above, we have not followed any unethical practice while enrolling customers under both the schemes.” The bank’s customers, however, have been stating otherwise.

A January 2024 report in MoneyControl showed that the SBI was aware of the problem and had issued a letter in this regard, instructing branches to desist from "such unethical practices".

Forensic accountant and certified fraud examiner Nikhil Parulkar said the problem of debiting customers’ accounts without permission for one or the other scheme is a common ailment, called predatory sales practices in forensic audit parlance.

He said such scenarios are prevalent in the banking sector, including private sector banks, but aren’t exposed until a whistleblower comes forth.

Canara Bank’s cover-up

Canara Bank underwent an audit in December 2023 after an article in the Economic Times highlighted online complaints about unauthorised debits for the PMJJBY and PMSBY.

The bank’s employee grapevine was abuzz with news about this audit. Purportedly, the government asked the bank’s leadership to look into the allegations. Subsequently, branches were asked to examine customers’ application forms for these schemes. Since many customers were enrolled without consent via bulk activation, their forms did not exist.

An employee said his regional manager — the very official who had enrolled customers without permission in bulk — advised branch heads during a video conference to give a fake confirmation that the forms were all in place. The employee said his branch did just that. Eventually, the claim was accepted at face value and not cross-checked.

An email sent by a regional office of the bank to employees on 29 December 2023 read: "All employees are advised to ensure that the consent forms in respect of PMJJBY and PMSBY enrolled accounts are obtained and placed on records. [The] inspection wing has given a timeline up to 30.12.2023 to ensure that the consent letter from customers has been obtained invariably and kept on record."

A former branch manager of Canara Bank posted in central India recounted that a couple of years ago, his regional office enrolled 50-odd customers of his branch into the PMJJBY from the back-end, without consent. He said that to save himself from any trouble later on, he obtained application forms from most of the customers over the next few weeks.

For the aforesaid audit that followed the ET report, Canara Bank employees were required to pull off a similar feat, in one day.

Pressure from the top

For this pressure, bank employees do not blame their management as much as they blame the department of financial services (DFS), which is in charge of key initiatives of the government concerning the banking and insurance sectors.

For the PMJJBY, PMSBY, APY and other government schemes, the DFS sets enrolment targets for banks. Bank employees said top executives are berated by the DFS and threatened with consequences for failing to meet the targets.

A recent letter issued by Punjab & Sind Bank to a zonal manager illustrates this top-down pressure. The letter cites the DFS’s order about these insurance and pension schemes, notes that the zonal manager’s area is lagging behind and ends with a warning: the targets are to be “mandatorily achieved” to avoid “any unpleasant action”.

The DFS refused to part with copies of its letters/circulars to banks regarding enrolment under the PMJJBY, PMSBY and APY when asked for the same through RTI.

As of 26 April 2023, more than 16.19 crore people stood subscribed to the PMJJBY and more than 34.18 crore stood subscribed to PMSBY.

Hemant Gairola is an independent journalist based in Dehradun. The full version of this report can be accessed here