Are Banks Prioritizing Profits Over People?

When you walk into a bank, do you expect to get advice on loans and savings — or a sales pitch for an insurance product you never asked for?

Banks and financial institutions play a vital role in delivering access to insurance and mutual fund investments across India. No one denies that.

But when this distribution turns into coercive sales, we must ask — is this access empowering people, or exploiting them?

Table of Contents:

1. The Rise in Bancassurance Profits
2. What Exactly Is Misselling?
3. Real-Life Tactics That Misguide
4. The Human Cost Behind Commission Targets
5. The Role of RBI and IRDAI
6. Can We Really Blame the Banks Alone?
7. What Can Investors Do to Protect Themselves?
8. The Role of a Certified Financial Planner (CFP)
9. Final Thoughts: Prioritizing People Over Profits

1. The Rise in Bancassurance Profits

In the financial year 2023–24 alone, 15 leading Indian banks raked in a staggering ₹21,773 crore from selling insurance and mutual funds.

On the surface, this seems like a sign of a financially savvy nation.

But dig deeper — and it becomes clear that this wealth has come at a price paid by unsuspecting customers.

Are these earnings a result of genuine financial inclusion — or is it just a target-driven, aggressive sales culture?

2. What Exactly Is Misselling?

Misselling refers to the deliberate or negligent selling of financial products that are inappropriate for the customer.

In simple terms — it’s selling you something you don’t need, can’t afford, or don’t understand.

Why does this happen? Because the person selling it is under pressure to meet a sales target. Ex: Most Insurance Policies sold by agents for their own commission.

3. Real-Life Tactics That Misguide

Have you ever heard:

• “You must buy insurance to get this loan approved.”
• “Fixed Deposit account? You’ll need insurance for that too.”
• “Just invest for 5 years, and from year 6, monthly income will start.”

These are not uncommon phrases — they’re alarmingly frequent.

Sadly, many people, especially senior citizens and rural customers, comply simply because they trust the bank.

4. The Human Cost Behind Commission Targets

Here’s a disturbing fact: 43.3% of life insurance policies end up being surrendered, cancelled, or discontinued prematurely.

What does that tell you? That many of these products were never right for the customer to begin with.

Families are stuck with unwanted policies. Retirees lose their savings. Breadwinners struggle to keep up with premium payments.

All this because someone at the bank had to meet a monthly sales quota.

5. The Role of RBI and IRDAI

Even the Reserve Bank of India (RBI) has raised concerns.

It has criticized banks for crossing the line and forcing insurance onto unsuspecting customers.

The Insurance Regulatory and Development Authority of India (IRDAI) has also flagged similar issues.

But so far, enforcement remains weak. Regulations are only as effective as the monitoring behind them.

And here’s the irony — while the Finance Minister has stated banks should focus on core services, her ministry simultaneously urges banks to meet the ambitious goal of “Insurance for All by 2047.”

How can banks serve the public while also being expected to behave like insurance agencies?

6. Can We Really Blame the Banks Alone?

Not entirely.

The culture of targets begins at the top — senior management sets aggressive sales goals, and these cascade down to every relationship manager.

Incentives are skewed more toward sales commissions than long-term customer satisfaction.

Is it any wonder that mis-selling thrives?

7. What Can Investors Do to Protect Themselves?

Consumers must stay vigilant. Ask yourself:

• Do I really need this Insurance Policy?
• Do I understand all terms and lock-in periods?
• Is the product suited to my goals?

If the answer is unclear, don’t sign anything in haste. Take a cooling-off period. Read the fine print. Better yet — consult an unbiased expert.

8. The Role of a Certified Financial Planner (CFP)

When trust in banks and agents is at risk, who can you turn to?

A Certified Financial Planner (CFP) is bound by fiduciary duty — they are required to put your interests first.

Unlike commission-driven agents, a CFP will tailor a financial strategy that suits your goals, risk profile, and life stage.

Wouldn’t it be better to plan your future with someone who works for you, not at you?

9. Final Thoughts: Prioritizing People Over Profits

There’s nothing wrong with banks earning income through financial product distribution.

But when profits come at the cost of people’s trust — it’s time to hit pause.

It’s high time regulations were enforced strictly.

But until that happens, awareness, education, and access to unbiased financial advice remain our best defense.

And remember: A bank may sell you a policy. But only you will live with its consequences.