The Mis-Selling Menace: ₹21,773 Crore Loot in the Name of Trust by 15 Banks

What is Mis-selling?

Let’s strip the fancy words. Mis-selling is when banks or agents push you to buy a financial product you don’t really need — or don’t fully understand — just so they can pocket fat commissions. It’s not “advice.” It’s not “help.” It’s manipulation dressed up as guidance.

Example? You walk into a bank to open a savings account. Instead, you walk out with a long-term insurance policy you never asked for. Later you realise the policy lapses, you lose your money, and the bank manager got a bonus. That’s mis-selling.

Who Started This Game?

It began quietly in the early 2000s when banks were allowed to sell insurance and mutual funds. What was supposed to “deepen financial inclusion” became a side business worth thousands of crores. Nobody outside the finance industry knew how big it was, because the banks kept calling it “fee income.” Customers saw it as “bank advice.” A deadly mix.

The Big Exposé – ₹21,773 Crore in Commissions

According to a study by 1 Finance Magazine, India’s top 15 banks raked in ₹21,773 crore in FY24 just from commissions on insurance, mutual funds, and broking fees. That’s not their interest income. Not your deposits. Just commissions from pushing products.

• Kotak Mahindra Bank: 100% of its life-insurance commissions came from Kotak Life Insurance (its own group company).
• Canara Bank: 99.1% of its mutual fund commissions came from Canara Robeco AMC (again, its own group).
• HDFC Bank: Topped the chart with ~₹6,467 crore.
• SBI: Earned ~₹3,893 crore.
• Axis Bank: Pulled in ~₹3,320 crore.

Overall, a quarter (25.4%) of their total income was just commission, exchange and broking fees. Imagine — one in four rupees they earn comes from pushing products onto customers.

The Hidden Damage

• High surrender & lapse rates: Almost half the life insurance policies sold don’t survive beyond a few years. That means lakhs of people lost money.
• Persistency ratio at 5 years: ~51%. Half the customers give up midway. Who benefits? The banks and insurers, not the common man.
• Complaints piling up: Mis-selling has become one of the fastest-growing categories of financial consumer complaints.

This isn’t just “bad advice.” It’s daylight robbery under the cover of respectability.

Why Nobody Knows

Because it happens behind glass doors and in the language of jargon. The customer is told, “Sir, this is a safe investment.” Or, “Ma’am, this will double as insurance and savings.” Most people trust their bank — after all, it holds their salary. But the reality is: the bank is no longer a service counter, it’s a sales counter.

The Unknown Truths

• Your “friendly bank manager” is under monthly sales targets.
• Products of their own group companies are pushed because it means double profits — for the bank and its parent.
• The glittering brochures hide the truth that commissions eat your returns.

When a ₹1 lakh policy earns a banker a ₹20,000 commission, who do you think the product was really designed for?

How to Avoid Falling into the Trap

1. Never buy financial products inside a bank branch.
   Walk in for deposits, transfers, loans. Not for insurance or mutual funds.
2. Ask: “How much commission do you get on this?”
   If the person hesitates or changes topic — red flag.
3. Go direct.
   Buy mutual funds through “Direct Plans” (available online on AMC websites or SEBI-registered platforms). No commission cuts your returns.
4. Check persistency ratios before buying insurance.
   If most people drop the product after a year or two, why should you be the guinea pig?
5. Separate insurance and investment.
   Insurance = protection. Investment = growth. Never mix the two, no matter what a banker tells you.
6. Don’t be pressured by “last-day offers.”
   These are usually end-of-month sales targets. Your urgency is their bonus.
7. Read the first page of any policy.
   If you can’t understand it in 5 minutes, don’t sign.

Final Wake-Up Call

Banks earned ₹21,773 crore last year in commissions alone. That money didn’t fall from the sky. It came from ordinary people like you — from policies you abandoned, from funds you didn’t need, from promises that were half-truths.

Mis-selling thrives because silence protects it. The more people talk about it, the harder it becomes for banks to keep playing this game.

The next time a banker tries to sell you a “golden opportunity,” remember this: if it sounds too good to be true, it’s probably designed for their commission — not your future.

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