Banks Vs. Insurer

NEW DELHI: Commercial banks are planning to aggressively market their tax-saving products such as fixed deposits and equity-linked saving schemes (ELSS), as they look to counter the insurance sector, which is increasingly positioning its products as investment tools rather than risk covers. 

Tax-saving products have for long been the preserve of the insurance sector and the banks’ increasing interest in the segment is set to increase competition for consumers’ savings. 

“Earlier, we were not very aggressive in marketing our tax-saving products as major investment tools. But now we have to devise new strategies as insurance companies have modified their marketing techniques,” said a senior official with the State Bank of India (SBI), who didn’t wish to be named. 

At present, tax-saving fixed deposits constitute a very small portion of a banks’ total deposits, accounting for 1-3% of total deposits. Not all banks currently sell ELSS products, which are yet to gain popularity among investors. 

At least three other state-owned large banks — two based in Mumbai and one based in Delhi — are also planning to adopt new marketing strategies to promote their tax-saving instruments as better investment options. 




Banks will look to highlight differences between their tax-savings products and those offered by the insurance sector to push their products. Returns from fixed deposits and ELSS products are not linked to customers’ ages unlike the life insurance products, where they are linked to an individual’s age and insurance companies typically charge older people higher premiums. 

“We would like to bring this and many other factors to the prospective investor’s notice while marketing our product,” said an official at a Mumbai-based bank. 

A senior official of the other Mumbai-based state-run bank said his bank was hiring specialised staff for advising prospective investors on the various tax-saving products it had to offer. 

Meanwhile, Life Insurance companies, including market leader Life Insurance Corp, ICICI Prudential, Max New York Life and MetLife, are promoting their products as major investment tools rather than mere insurance schemes, with some of them offering up to 10% annual return on investment. 

“Traditionally, life insurance has been viewed as an instrument for both stable returns and risk cover. The recent market volatility has brought the stable ‘investment’ aspect of insurance to fore once again,” said MetLife managing director Rajesh Relan.