Chirag Madaan, a 24-year-old graduate from Indian Institute of Information Technology (IIIT), recently left his Rs 17 lakh per year banking job, citing pressure to mis-sell as a major factor in his decision. His statement on this matter has garnered significant attention online.
Madaan’s viral Instagram post resonated with many individuals and shed light on a broader issue within the banking sector. Aggressive sales targets and internal incentives often influence the products offered to customers, sometimes leading to the promotion of insurance and investment products that may not be suitable for them.
A report by IndiaToday.in revealed that frontline banking positions increasingly resemble sales roles rather than advisory positions. A survey showed that more than 84% of relationship managers feel intense pressure to meet sales targets, with over 57% admitting they have been pushed to sell products regardless of suitability.
Employees face repercussions for failing to meet targets, including the fear of job loss, daily performance reviews, public criticism, and halted career progression. This high-pressure environment, as highlighted by Madaan, blurs the line between financial advice and product sales, sometimes resulting in mis-selling incidents.
The most commonly promoted products include insurance policies, mutual funds, and bundled financial products, which generate substantial fee income for banks. Bancassurance agreements, where banks distribute insurance products, account for a significant portion of this revenue.
Despite the push for sales, there are significant gaps in product knowledge among relationship managers. Many lack understanding of basic financial concepts, yet are required to sell complex products to customers. This lack of comprehension, coupled with pressure to meet targets, often leads to the recommendation of unsuitable products.
The aftermath of mis-selling is felt by customers, with nearly half of life insurance policies being discontinued within five years due to various reasons such as unsustainable premiums or inadequate returns, resulting in potential losses for investors.
Madaan’s departure has reignited discussions on the prevalence of mis-selling in banks. The systemic issues of sales targets, incentives, and mis-selling risks have persisted for years, raising concerns within the industry.
IndiaToday.in attempted to reach out to Madaan for comment but had not received a response at the time of publication. The story will be updated if he responds.