Does the Indian consumer buy better with full disclosure on financial products?

Niyati Agrawal, Monami Dasgupta, Anand Sinha, Ashwani Bhatia,
Krishnamurthy Subramanian and Rajesh Chakrabarti 

in conversation with 
Ananth Narayan

In recent times, financial markets have seen an increase in consumers seeking better returns through innovative investments to secure their wealth and savings. This has led to diversification of investments from old and trusted avenues to newer areas of investment.

However, many investors are generally not well-informed about the products they are about to buy. It has been observed that when given full disclosures, consumers are 80-90% less likely to buy high-risk financial products. Although financial managers are expected to act as securers of consumer interests, they are often guided more by incentive structures rather than the needs of investors. Consequently, consumers may end up buying financial products that do not meet their goals. The result is usually mis-selling, wherein consumers with little-to-no knowledge about the risks involved are left feeling short-changed.

What are the ways in knowledge-asymmetrical financial markets can shift attitudes from caveat emptor (buyer beware) to caveat venditor (seller beware)? How can regulators and banking institutions meaningfully craft sale incentive systems towards informed consumer decisions? And lastly, how can a system of informed consumer decision-making be crafted for an India flush with investors?

On Tuesday, March 23rd, NCAER hosted Monami Dasgupta and Niyati Agrawal of Dvara Research to present their research on the latest and most egregious instance of mis-selling of AT1 bonds. The presentation was based on the paper that Niyati and Monami have co-authored with Monika Halan, Misha Sharma, and Madhu Srinivas, titled Impact of Information Disclosure on Consumer Behaviour: Case of AT1 Bonds.  This was followed by a panel discussion by leading experts Krishnamurthy Subramanian, Chief Economic Advisor, Government of India, Ashwani Bhatia, Managing Director at the State Bank of India, Anand Sinha, former RBI Deputy Governor and Rajesh Chakrabarti, Dean at the Jindal Global Business School. The discussion was moderated by Ananth Narayan, Additional Director, Yes Bank. A press release for this webinar is available on this page.