A story of misaligned incentives has also been playing out in the Indian retail financial product market for many years, and can affect intermediation and development of the financial market if it remains unchecked. Mint’s consulting editor Monika Halan and economist Renuka Sane, in a recently published working paper, showed how banks are mis-selling financial products to customers. It is highly likely that a wrong financial product can lead to real or opportunity losses for the investor and end up denting the individual’s faith in the financial market. But if households lose faith in the financial system and start shifting away from the financial market, it can affect the economy’s medium- to long-term growth prospects. How can regulators stop mis-selling of financial products?

Source: Mint August 23, 2016 22:52 UTC