I wrote last week about the results of the research that household finance economist Renuka Sane and I did, which showed how banks mis-sell third-party financial products in India. You can read the column here and hear a podcast in which Mint editor R. Sukumar talks about the research here. I received a lot of emails from people who wrote in with their individual stories on bank mis-selling. Many of them have stories that follow our findings to the letter. The story is this: your bank knows how much money sits in your account and will contact you when you go to make a fixed deposit (or a public provident fund or a locker or a loan) to hard-sell a life insurance policy.
The story of octogenarian C. Selvakumar is a textbook case of mis-selling. He writes that he is a ‘super senior citizen’ and his income is only from fixed deposits. In December 2014, he approached the customer relationship manager (CRM) of his bank with the intention of depositing Rs.5 lakh in the Senior Citizens Savings Scheme (SCSS). “...the CRM invited two other officers for a discussion. The three of them convinced me (rather brainwashed me) with various printed material and convinced me to invest the money in...a unit-linked insurance plan (Ulip).” He was assured a return of 14%. “Being an 80-year-old man, dealing with officers in the 30s, I asked them whether they would recommend the Ulip instead of the SCSS if I was their father. They categorically mentioned that they would.”
In December 2015, when the next premium was due, he found that the fund value had dwindled to Rs.4.11 lakh from the Rs.5 lakh invested. “None of them could be contacted and I realised how heartless they could be to miss-sell a product to an old man who took their word for gospel truth. With no other option left, I paid the premium for the second year. In January 2016, I went through a learning process from various websites and realised that the Ulip was one of the worst investments.” It is a perfect crime. When you complain you are told: “But you signed.” But the verbal hard-sell and the assurances are so strong that most people capitulate.
