New Delhi:Many bank customers walk into their branch seeking simple financial services like renewing afixed deposit, only to be offered complex investment or insurance products instead. While such recommendations often appear beneficial at first, many customers later realise that these products come with long lock-in periods, complicated terms and lower-than-expected returns.
Experts say the problem is not always the bank employee sitting across the desk. Instead, the issue may stem from theintense sales pressure placed on relationship managers (RMs)by banks to meet product targets.
Complaints about mis-selling of insurance and investment products have surfaced repeatedly across India’s banking system. Interviews with bank employees and industry data suggest that internal sales targets play a major role in shaping the advice customers receive.
A survey conducted by1 Finance Magazineamong1,655 relationship managers across 20 banks in 15 statesprovides insight into the situation.
The findings reveal thatmore than 84% of relationship managers face strong pressure to meet sales targets, rating the pressure at three or higher on a scale of five.
Even more concerning,57.56% of respondents admitted they had been instructed to sell financial products “at any cost,” even if the product was not suitable for the customer.
About51.52% of employees said they had feared losing their job at some point for failing to meet sales targets.
The survey suggests that the role of relationship managers has gradually shifted from financial advisory toproduct sales.
Several employees described the pressure they face during internal performance reviews.
One relationship manager from a private sector bank said the stress of unrealistic sales targets and daily scrutiny often made employees consider quitting their jobs.
Another respondent claimed that customers applying for loans are sometimes indirectly pressured to purchase insurance policies even when they do not require them.
The study also revealed gaps in financial knowledge among many relationship managers responsible for selling complex investment products.
According to the survey:
85.29% of RMs said they did not know the difference between direct and regular mutual funds
Around75% were unaware of tax benefits of Equity-Linked Savings Schemes (ELSS)
98.04% said they could not distinguish between nominal and real returns
Industry experts say the combination ofsales pressure and limited trainingincreases the risk of customers receiving unsuitable financial advice.
Although bank employees may not always earn direct commissions, financial product distribution has become amajor revenue source for banks.
InFY24, the top15 banks by market capitalisation earned ₹21,773 crore in commissionsfrom selling insurance, mutual funds and other investment products.
In some banks, commission income accounts forover 25% of total earnings.
A key driver behind this system isbancassurance, where banks act as distribution partners for insurance companies. Through these partnerships, bank branches become one of the primary sales channels for insurance policies.
Data shows thatbanks accounted for 33.1% of insurance premiums in FY24, more than double their share from a decade ago.
The consequences of aggressive product selling often appear years later.
Industry data shows thatnearly half of life insurance policies are discontinued within five years, often because customers cannot continue paying premiums or realise the product does not meet their expectations.
In many cases, surrendering such policies early results infinancial losses for customers.
Experts say the system rewards product sales rather than suitability, blurring the line between financial advice and aggressive marketing.
For customers, the lesson is simple: even when advice comes from a trusted bank, it is important tocarefully evaluate financial products before investing.
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