Home/ Opinion / A hunt for PPF that leads to toxic sales pitches

I’ve known anecdotally that banks push customers towards products. That they hardsell products which fetch them the highest commissions. That they tie bank facilities such as lockers to fixed deposit balances and buying insurance policies. But to experience it myself was an entirely different thing. It was a simple visit to my bank branches to open a Public Provident Fund (PPF) account, which once again put into focus the way financial products are being sold by banks. Here’s how the conversations went with relationship managers (RMs) at the two banks I visited.

Bank 1

Me: Hi, I have an account with your bank and want to open a PPF account.

RM: PPF? It’s a dead investment. Why would you want to do that?

Me: I like PPF.

RM: You don’t get much in it. We have other products, very good returns have come.

Me: What is the paperwork needed for PPF? I have an additional request of reducing my home loan interest rate. You guys gave me a loan from a home finance company while I thought it was the bank lending! Anyway, what do I need to do to reduce the rate?

RM: There is a processing fee and some paper work. But we can waive the processing fee if you invest with us. I will have to talk to my senior.

Me: But I already have investments with you. I invest using the online service of your sister firm. And I have a life insurance policy from your insurance company.

RM: Oh! You have a policy. We can redeem it. Returns are already 18-19%. We will redeem.

Me: How can you redeem a policy?

RM: Yes, we can.

Me: But it is a term policy.

RM: Oh, term.... Okay, okay.

Me: Since I have bought investments from your sister company and have an insurance policy too, surely you can waive the charges?

RM: No. You have to invest with us for that.

Me: But aren’t you all under the same brand?

The RM looks at me with great pity and gets busy on the computer.

Me: Okay, about that PPF...

RM: Why do you want to invest in a 15-year product? Why lock up money? We can give you something else for tax saving.

Me: No, no, I want only PPF.

I finally get the form to open a PPF account and walk out of the bank branch. Next stop is another private sector bank branch for the same exercise.

Bank 2

Me: I want to start a PPF account.

RM: For investment or tax saving?

Me: Both.

RM: Why PPF? Why lock in money? There’s hardly any return.

Me: I like PPF.

RM: We have an equity fund that will give at least 14% returns. It has given 22% returns in the past three years. You can withdraw after three years.

Me: But I like PPF.

I get my form and leave.

A few months back, a colleague who tried to open a PPF account in Bank 1 had a similar experience of being deflected from PPF and towards insurance. Several things stand out from these interactions.

One, it seems that bank officers are reading from a script, all parts of which lead to selling the product that is on the sell list that month. Notice the traps laid in the exchange at Bank 1: anything that the customer is saying is being used to push a particular product. You may want a new product but we will sell you what we like right now. If you already have a product, we’ll redeem it and then sell you what we like.

The Reserve Bank of India (RBI) says that customers should complain to the ombudsman if they have an issue. But how do you complain about this sales pitch that may lead to a product sale? And when you find out that you have a toxic product, the rebuttal is: but you signed the form. RBI is not willing to look at what happens between a bank officer and a bank customer verbally.

Two, there is a casualness in recommending complicated financial products over the counter to a customer who walks in with a specific product request. Is the bank officer acting as an agent or an adviser? If she is an agent, then why is she advising the customer to buy something else. If the bank officer is acting as an adviser, surely there is a list of due diligences that she needs to follow– like suitability of a product, to start with. How does the bank officer know that the only gap in my portfolio is that of PPF? That I already have all the other products that make up a robust retail money box? Clearly, there is no desire to find out what I need.

Regulators should worry about the manner in which such conversations are held and the casual manner of suggesting long-term financial products without having a clue of my needs as an investor. I’ve been hearing about the ‘seller beware’ regulation coming out of RBI for months now. What happened, Dr Rajan? Cold feet? Or is it that customers and their rights are not that important?

Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor, Mint Money, Yale World Fellow 2011 and on the board of FPSB India. She can be reached at expenseaccount@livemint.com

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Updated: 12 Aug 2014, 07:22 PM IST
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