How good is it? How bad is it?

When I began this column in March 2009, I remember writing my first piece on the macro mess India was in and how a spendthrift government, which took an 8% growth rate and a 26% rise in tax revenues in the previous years as the new normal, messed up big time. You can read that column here: http://bit.ly/2bynE0d . With elections around the corner, money was splurged on massive loan waivers and many other let’s-give-them-money-and get-their-votes schemes. It worked and the government came back to power. The next five years got the country closer to disaster, with bank books getting stuffed with questionable loans, policy paralysis and big corruption in the central government and bureaucracy.

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Finding evidence of banks mis-selling

Mystery shopping working paper

Misled and Mis-sold: Financial misbehaviour in retail banks?

http://ifrogs.org/PDF/Misled-and-Mis-sold-Financial-misbehaviour-in-retail-banks.pdf

My Mint column: Here is proof that banks mis-sell

Anybody who has walked into a bank branch in a metropolitan city would have been pushed towards a financial product that he or she didn’t want. Worse, they may have been forced, cheated into or otherwise pushed towards buying life insurance policies. I documented my own search for a Public Provident Fund account two years ago: http://bit.ly/1sye5F8 . A question asked very often by readers of this column is this: why don’t the regulators or government stop this coercion? The banking regulator, for a long time, took the view that mis-selling of third-party products was not their problem, but rested with the product regulators. The capital market regulator said that it could not tread on the Reserve Bank of India’s (RBI’s) toes. The insurance regulator put down these instances to the overactive imagination of some illiterate journalists.

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My Mint policy column: Yes, banks mis-sell. Now what?

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.

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A Mint edit: The cost of mis-selling financial products. Mint edit, August 24, 2016.

Most of economics can be summarized in four words. ‘People respond to incentives.’ The rest is commentary,” claimed economist Steven E. Landsburg in his best-selling book The Armchair Economist: Economics and Everyday Life. The problem in real life arises when incentives are not properly structured.

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A Blog: Banks are unfair in their role as financial advisors / distributors

A major weak link in financial regulation in India is the lack of emphasis on consumer protection. An academic literature on this subject has been building up. The policy discourse has also shifted considerably, and the contours of the policy research and action program are now visible.

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A policy blog: How can financial regulators combat mis-selling? Five solutions

In a previous article (Banks are unfair in their role as financial advisors / distributors), we described our audit study on the sale of financial products across 400 bank branches in Delhi, India (Halan and Sane, 2016). In this paper, we found three things:

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A podcast: Mint editor R Sukumar on the bank mis-selling paper.

Hear it here

 

 

Yes, banks mis-sell. Now what?

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 researchhere. 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.

Read more

 

Here is proof that banks mis-sell

Anybody who has walked into a bank branch in a metropolitan city would have been pushed towards a financial product that he or she didn’t want. Worse, they may have been forced, cheated into or otherwise pushed towards buying life insurance policies. I documented my own search for a Public Provident Fund account two years ago: http://bit.ly/1sye5F8 . A question asked very often by readers of this column is this: why don’t the regulators or government stop this coercion? The banking regulator, for a long time, took the view that mis-selling of third-party products was not their problem, but rested with the product regulators. The capital market regulator said that it could not tread on the Reserve Bank of India’s (RBI’s) toes. The insurance regulator put down these instances to the overactive imagination of some illiterate journalists.

Read more

 

This week in personal finance

Buying G-secs through your demat account: Next week, you should be able to directly buy a dated government security or a treasury bill using your demat account. The Reserve Bank of India (RBI), in a 28 July 2016 notification (http://bit.ly/2b2LAfZ ), allowed account holders with National Securities Depository Ltd (NSDL) or Central Depository Services (India) Ltd (CDSL), to buy and sell government bonds through their banks. Let’s de-jargon this before we decide whether to buy these or not. Governments spend more than they gather—from taxes and other revenue streams—by borrowing. The government’s borrowing is facilitated by its banker, the RBI. The central bank sells short-term papers called treasury bills (tenures of 91 days, 182 days and 364 days) and long-term government securities (G-Secs), with tenures of up to 30 years.

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Buying mediclaim is hard but harder is to know if it is any good

Quick, do the math. If it takes you two hours to read one policy brochure and there are 65 brochures, how much time will you spend reading? 130 hours, or a 16 eight-hour days. What, you have a day job and need to work? Skip your TV and workout and spend two hours a day reading them and you need 65 days. By which time there will be another few products in the market and your attempt to be a literate consumer who looks at disclosure statements and reads the policy documents before buying a medical insurance plan will remain undone. If you had other products to buy, such as life insurance, investment plans, home loans, you should pretty much leave everything else and just reach for the brochures.

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