Is your bank mis-selling?
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Banks continue to mis-sell financial products: Are you a victim too?
Based on text by Narendra Nathan
Bank officials still try to mislead people into buying products they don’t need. Banks also set stiff sales targets for relationship managers (RMs), forcing them to push products that fetch higher commissions, instead of investments that suit the investor’s needs. ET Wealth went undercover and found that bank executives continue to mis-sell insurance and other financial products.
Here is a look at how various financial products are mis-sold by bank executives.
Bank officials still try to mislead people into buying products they don’t need. Banks also set stiff sales targets for relationship managers (RMs), forcing them to push products that fetch higher commissions, instead of investments that suit the investor’s needs. ET Wealth went undercover and found that bank executives continue to mis-sell insurance and other financial products.
Here is a look at how various financial products are mis-sold by bank executives.
2/6
Fixed deposits
Why it is mis-selling: The returns from balanced funds may be higher, but the risk they carry is also higher and the bank does not highlight this fact. Also, monthly dividends cannot be guranteed.
Impact of mis-selling: As dividends are not guaranteed, you may be in for a rude shock if you choose balanced funds for monthly income. Also, dividends come from the fund’s NAV and if the fund continues with dividends in a falling NAV scenario, you may end up with a capital loss.
Impact of mis-selling: As dividends are not guaranteed, you may be in for a rude shock if you choose balanced funds for monthly income. Also, dividends come from the fund’s NAV and if the fund continues with dividends in a falling NAV scenario, you may end up with a capital loss.
3/6
Senior Citizens’ Savings Scheme
Why it is mis-selling: People above 55 can also invest if they are retired or have taken VRS. Private banks can also offer SCSS.
Impact of mis-selling: You will lose the interest rate differential between normal FD and SCSS. And as Ulip carry higher risk, they are not suitable for retired people.
Impact of mis-selling: You will lose the interest rate differential between normal FD and SCSS. And as Ulip carry higher risk, they are not suitable for retired people.
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4/6
Term insurance
Why it is mis-selling: Insurance is meant to cover risk, and not generate returns. This fact cannot be sidelined by banks to push Ulips or endowment plans.
Impact of mis-selling: The premium for the Ulip insurance cover will be very high compared to that of term insurance premium, and the cover offered will be inadequate— much less compared to a term plan.
Impact of mis-selling: The premium for the Ulip insurance cover will be very high compared to that of term insurance premium, and the cover offered will be inadequate— much less compared to a term plan.
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Gold bonds
Why it is mis-selling: Gold bonds do not have a lock-in. Though they are not very liquid, the bonds are listed and traded in the secondary market.
Impact of mis-selling: You will lose interest during the maturity tenure that comes from gold bonds. Also, when you sell the gold coins, jewellers are likely to pay 5-10% less compared to their market price.
Impact of mis-selling: You will lose interest during the maturity tenure that comes from gold bonds. Also, when you sell the gold coins, jewellers are likely to pay 5-10% less compared to their market price.
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Bank lockers
Why it is mis-selling: Forcing customers to buy other products to get a locker is not allowed.
Impact of mis-selling: Investors will lose out by investing the money in FD—low yield, tax-inefficient— or Ulips that deduct mortality charges— as they can invest the same amount in mutual funds. Besides likely higher returns, mutual funds also offer better liquidity.
Impact of mis-selling: Investors will lose out by investing the money in FD—low yield, tax-inefficient— or Ulips that deduct mortality charges— as they can invest the same amount in mutual funds. Besides likely higher returns, mutual funds also offer better liquidity.