The Bancassurance Pressure Cooker
The recent allegations against Canara Bank in Nagpur, concerning the sale of a life insurance policy with a ₹2 lakh annual premium to a 90-year-old customer, Venkatachalam V Iyer, underscore significant ethical concerns within bank-led insurance sales. The policy's purported maturity date of 2124 has ignited widespread shock and criticism, exposing potential lapses in customer protection for the elderly and vulnerable. According to reports, the policy was finalized in February 2025, with ₹2 lakh debited from Iyer's savings account. The situation escalated when the nonagenarian received an alert for the subsequent premium, prompting his family to investigate.
The family alleges the policy was aggressively marketed as "urgent" and "very important," creating undue pressure on the senior citizen. This aggressive approach reportedly resulted in two consecutive annual debits totaling ₹4 lakh, a considerable portion of the customer's savings. Furthermore, it is claimed that the policy was structured to circumvent age restrictions, with the branch manager allegedly advising the customer to open a joint account with his daughter, who was then listed as the 'life assured,' while the elderly father funded the premiums. Documents were allegedly filled by bank staff, with the customer's signature obtained due to his primary account holder status.
Canara Bank responded to the social media outcry by stating, "We regret the inconvenience caused to you. We will forward it to the concerned team," while also requesting the user to avoid sharing personal information publicly. However, the bank did not directly address the specific allegations of mis-selling or selling an age-inappropriate product.
Canara Bank's stock, trading around ₹147 on February 6, 2026, has shown volatility, with its 52-week range between ₹78.60 and ₹160.79. Its P/E ratio stands at approximately 6.6 to 7.98, indicating a valuation that is considered attractive relative to some peers like Indian Bank and IDBI Bank. Despite its valuation, such incidents can erode investor confidence and lead to increased regulatory scrutiny, potentially impacting future performance.
Regulatory Blind Spots and Systemic Risks
This incident emerges against a backdrop of rising complaints regarding insurance mis-selling. The Insurance Regulatory and Development Authority of India (IRDAI) reported a 14% year-on-year increase in mis-selling complaints in 2024-25, with such cases constituting 22% of all life insurance grievances. The Reserve Bank of India (RBI) has also signaled its intent to address these issues, with Governor Sanjay Malhotra announcing on February 6, 2026, that the central bank will issue comprehensive instructions for banks and non-bank lenders regarding the advertising, marketing, and sale of financial products. These forthcoming guidelines aim to curb the mis-selling of third-party products, including insurance policies, mutual funds, and PMS schemes, which are frequently pushed at bank counters without adequate suitability checks.
Typically, the maximum entry age for term life insurance policies in India is around 65 years, though some specialized plans may offer extended coverage. A policy sold to a 90-year-old, especially one with a maturity date set for 2124, raises serious questions about compliance with regulatory norms and the product's fundamental suitability. The structure of such policies, with front-loaded commissions for sellers where a significant portion of the reward is earned in the first year, incentivizes pushing products irrespective of the customer's long-term financial well-being. Bancassurance, while a significant contributor to bank profitability, is thus susceptible to practices that prioritize sales targets over customer welfare.
The Forensic Bear Case
The ethical implications of the alleged mis-selling go beyond a single incident, presenting systemic risks for financial institutions. Such practices can lead to severe reputational damage, erode customer trust, and invite substantial regulatory penalties. The RBI's proactive move to draft new guidelines, following earlier signals of concern in June 2025, indicates a strong regulatory push to clean up the bancassurance channel. Banks that rely heavily on third-party product sales, particularly those with aggressive sales targets and inadequate oversight of their distribution networks, face increased exposure to compliance risks and potential litigation. Unlike banks with robust internal controls and a strong focus on customer suitability, those driven primarily by commission-based sales models may find it challenging to adapt to stricter regulatory frameworks. The long-term financial viability of banks is intrinsically linked to maintaining customer confidence, which is jeopardized by instances of exploiting vulnerable customer segments like the elderly.
Future Outlook
The forthcoming RBI guidelines are expected to impose stricter norms on how banks market and sell financial products, emphasizing suitability and appropriateness for customer needs. This regulatory shift may force banks to re-evaluate their sales strategies and enhance internal compliance mechanisms. Financial institutions that proactively adopt customer-centric selling practices and transparent product disclosures are likely to navigate this evolving landscape more effectively, distinguishing themselves from those perceived as prioritizing sales quotas over client well-being. The sustained focus on curbing mis-selling signals a significant recalibration in how financial products are distributed through banking channels.