Misled and mis-sold: financial misbehaviour in retail banks? |
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| Institution: | 1. National Institute of Public Finance and Policy, New Delhi, India;2. Consulting Editor at Mint, HT Media, New Delhi, India;1. Department of Clinical Epidemiology and Biostatistics, McMaster University, Hamilton, ON, Canada;2. Department of Internal Medicine, School of Medicine, Pontificia Universidad Católica de Chile, Santiago, Chile;3. Department of Internal Medicine, American University of Beirut, Beirut, Lebanon;4. Department of Medicine, University at Buffalo, The State University of New York, Buffalo, NY;5. Department of Orthopaedic, School Medicine, Pontificia Universidad Católica de Chile, Santiago, Chile;6. Comisión de Medicina Preventiva e Invalidez, Ministerio de Salud, Santiago, Chile;7. School of Nursing, Universidad del Desarrollo, Santiago, Chile |
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| Abstract: | We use an audit methodology where auditors ask for tax saving instruments from banks and document the disclosures made on product features at the time of sale. In private sector banks with high sales incentives, the high commission product is recommended. In public sector banks, where there are deposit mobilisation targets, fixed deposits are recommended. Banks rarely make voluntary disclosures on product features. When specifically requested, information provided is inaccurate or incomplete. Our results demonstrate the challenges of mandating disclosures when buyers have little understanding of the relevance of product characteristics, and distributors are themselves ignorant or influenced by incentives. They also raise concerns regarding private sector banking without regulatory capacity. |
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