THe Blog

August 22, 2016

How Can Financial Regulators Combat Mis-Selling?

In this blogpost, Renuka Sane, Visiting Fellow at IDFC Institute writes with Monika Halan on five ways in which financial regulators can combat the mis-selling of financial products in India. This post follows Sane and Halan's article on how banks are unfair in their role as financial advisors/distributors (which can be found here). Using the results of their audit survey on the case at hand, they come up with solutions to ensuing problem. For example, they suggest refocusing financial literacy upon distributors and redesigning the incentives of the front-line seller. Excerpts below:


"Regulators around the world, including countries such as India, have responded to problems of mis-sales in retail finance by strengthening consumer protection regulations in the form of disclosure standards, ban on commissions and volume based payments, and suitability requirements in the sale of products...


"...The savings rates of Indian households are very high, but only with better consumer protection will we get large-scale participation by households in the formal financial system. The policy proposals of this article are aimed at building this trust, while having the dynamism of the market economy. They are part of the larger project of putting consumer protection at the heart of financial regulation."


Read the full article here.


Read Sane and Halan's original paper on which the research is based here.

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