In Financial Year 2023-24, India’s top 15 banks by market capitalisation earned a massive ₹21,773 crores just from commissions. This income came through the sale and marketing of insurance products, mutual fund regular plans, and other financial products.
What’s alarming is that this commission income formed 25.2% of their total earnings from commissions, exchange, and brokerage activities. But here’s the catch — a large portion of this money is earned by pushing products that benefit the bank, not the customer.
Mis-selling: A Systemic Problem
Bank branches have become sales outlets. When your bank manager pitches a product saying it’s “good for your child’s future” or “a must for your security,” be cautious. Many such pitches are designed not for your benefit, but to generate revenue for the bank through high commissions.
Banks are heavily incentivised to sell financial products of their own group companies – often prioritising profits over customers’ best interests.
Insurance Commissions – A Family Affair
For life insurance policies sold by banks, up to 100% of the commission income comes from selling policies of related-party life insurance subsidiaries.
HDFC Bank sells policies of HDFC Life Insurance
Kotak Bank sells Kotak Life Insurance
This structure creates a strong conflict of interest. The bank doesn’t compare products across insurers — it simply sells its own group company’s policies, regardless of whether they are the best fit for the customer.
Mutual Fund Commissions – Even Worse
The trend is even more skewed when it comes to mutual fund distribution. In FY24, up to 99.1% of mutual fund commissions earned by banks came from their own related-party asset management companies (AMCs).
SBI Bank sells mostly SBI Mutual Fund schemes
Canara Bank earned 99.1% of its MF commissions by selling Canara Robeco MF
These are regular plans — loaded with commissions and higher costs — even when direct plans with zero commission are readily available online.
What Can You Do?
Don’t blindly trust product suggestions from your bank RM or branch manager.
Always ask whether there are direct alternatives to the investment or insurance product.
Consult a SEBI-registered Investment Advisor, who works in your interest without earning commissions.
Educate yourself before signing any policy or investment document.
⚠️ Already Invested in Such Products?
If you have already invested in these kinds of products and are struggling to deal with them, PVR Advisory is always happy to assist you. We help investors review, resolve, and recover from such financial decisions with unbiased advice and tailored strategies.
Final Thoughts
Banks and insurers are growing richer through a well-oiled model of internal cross-selling — while customers bear the brunt of expensive, misaligned products. What appears as “financial guidance” is often just a disguised sales pitch. Stay alert, ask questions, and never hesitate to say no.
