Lure of incentives leads to mis-selling to consumers

CI Member Consumer Unity and Trust Society (CUTS) in India has released new survey results finding that 67% of financial services consumers feel the provision of sales incentives and targets, leads to bank staff providing wrong information or mis-selling products. The survey also showed that 56% of consumers were unaware of the existence of redress systems which could help them when victims of mis-selling. 

The research also found 76.3% of bank workers feel that there is pressure on them to achieve sales targets set by the bank. 81% of respondents reported that product sales are the basis of incentive schemes, and 42% of bank staff surveyed reported putting more efforts into selling products that offer more incentives. 

The research findings were launched on 20 February 2015 at an advocacy event in Jaipur. 

George Cheriyan, Director of CUTS International said "Under the Right to Suitability establised under the Reserve Bank of India's (RBI) Charter on Consumer Rights, the onus of providing suitable products for the consumer is on the provider of financial services." 

"Proper enforcement of the Right to Suitability is needed to tackle mis-selling of financial products and to ensure that consumers get the products that meet their needs".

Speaking at the event, Dharmendra Azad from the Department of Banking Supervision at the RBI said that banks need to be transparent in their operations and ensure suitability of product sold to consumers.

The research was conducted across five cities – Delhi, Kolkata, Mumbai, Chennai and Jaipur – with the aim to collect the experiences of financial consumers and bank officials, and look at the impacts of sales incentives and targets provided by banking staff.

Research was part of CUTS International’s project, with support from CI and funding by UK consumer organisation Which? to achieve better environments for consumers to make improved choices in their financial planning.