Ethics in Credit, Marketing and Business Practices
What this domain tests
Ethics in Credit, Marketing and Business Practices examines lending integrity, truthful selling, third-party accountability and recovery conduct. The focus is on whether targets, commissions or business pressure produced a decision that harms the customer or the bank.
Core rules and concepts
- Credit integrity: appraise objectively, verify income and financials, document deviations, give reasons for rejection and classify NPAs correctly. Do not lend on collateral alone or discriminate unlawfully.
- Evergreening-rolling over or capitalising unpaid interest to keep a stressed account 'standard'-conceals risk and breaches prudential norms. Restructuring must follow RBI norms, not branch convenience.
- Fair lending: transparent pricing, no hidden charges, accurate reporting to credit information companies and correction of genuine reporting errors.
- Marketing ethics: advertisements must be truthful and not misleading; disclose the APR, fees and conditions; no 'free' claim with hidden conditions; no bait-and-switch. Suitability and consent matter more than conversion targets.
- Third parties: DSAs and recovery agents act for the bank; the bank remains accountable for their conduct. Pay commissions that do not reward mis-selling.
- Recovery ethics: no harassment, no disclosure to neighbours or employers, no calls at unreasonable hours; follow SARFAESI and RBI fair-recovery requirements.
Worked example
A relationship manager renews a stressed cash-credit limit by capitalising six months' unpaid interest and marks the account standard to meet the branch target. Reasoning: the borrower's repayment capacity has not improved; the overdue interest is evidence of stress. The renewal masks an NPA, misstates the bank's asset quality and misleads the regulator and depositors. The ethical and regulatory answer is correct classification and a properly approved restructuring, if eligible.
Traps
Believing sales targets justify mis-selling; hiding charges in fine print; assuming outsourced recovery removes bank responsibility; calling evergreening 'customer-friendly'; treating credit scoring as automatically fair.