A bank needs more money to be lent onward. A life insurance company needs to sell more life policies, a mutual fund needs more assets to manage…

So what can they do? Well a bank can increase interest rates, improve the services, give you more services, give you a locker, create better products….etc. etc.

However, all this takes a lot of effort and costs. Some of those costs could be permanent too! And the effort is something which it does not know how to put.

What should a life insurance company do? Well they can drop prices of term insurance, of fund management costs, etc.

However all this is not so easy. So they can go to a smaller new location and open more branches (again easier said than done).

What is really the cheapest thing to do? Go and announce a freebie. A toaster for a savings bank account. Credit extra points on a card which is a joint card with an airline. A voucher for books for a ‘children’ account.

Giving freebies is easy to do, costs are fixed (so known) and one can easily put some conditions. For e.g. you can say the minimum balance condition in a savings bank account is Rs. 10,000. Clearly the client’s balance will earn you much more than the cost of the freebie, right?

What can a life insurance company do? Say ‘here is a scheme for children’ – allowing them to drop a free ‘Camlin painting kit’ costing Rs. 100. A few parents will buy a policy with such a high premium – that it covers the costs of the whole program!!

What can you do as a customer….?

Just ignore all the gifts that your agent or banker keeps throwing at you….just do not hear the noise….

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  1. How many of such freebies are actually given out, I wonder.

    When my wife opened her savings account, this large private sector bank was promising free wallet or something like that. Although this was not a decisive factor for us, we were wondering about the quality of such a freebie. Guess what, we are still wondering, since the freebie was never given.

  2. How many of such freebies are actually given out, I wonder.

    When my wife opened her savings account, this large private sector bank was promising free wallet or something like that. Although this was not a decisive factor for us, we were wondering about the quality of such a freebie. Guess what, we are still wondering, since the freebie was never given.

  3. Here goes: HDFC bank, RR Nagar, Bangalore. I guess this was about 3 years ago. During first couple of visits to the branch, Relationship Manager postponed the giving of this gift. Afterwards, we did not bother about followup and RM moved on to other things I suppose [we all know how quickly RM changes, 🙂 ]

    Sometime later, the same bank/branch had a drawing competition for kids. I have not seen a more disorganized event than the one I saw that day. So many kids were turned back; were not even allowed to enter.

    I must mention that, other than the above incidents, our banking requirements are quite satisfactory.

  4. i liked what you say BRS! we have reduced our expectations from the banks so much that we constantly say…’except that they s….d a few of my transactions, …..etc.’

    Today I had gone to the same bank to give a demat instruction (i have moved heaven, earth, stratosphere to get my broking ac activated – the MD also knows that, but has not happened)..and the girl at the counter did not arrive …i waited 9.35 to 10.00 then left.

    sure i can go to another branch…but I would still say..’other than this transaction….’ LOL

  5. here is how to fight back – find the cost/value of the freebie & once you get it, close the account – make sure the deal is worthwhile…

    e.g. if the freebie for an insurance plan is worth 1K and on cancelling during free-look period, the costs charges is < 1K, enough people should do this so that the insurance industry as a whole drops this idea forever!

  6. My bank (HDFC in Bangalore) is offering me a free savings accounts (me or spouse or parents) to go with my existing savings account. The relationship manager and sales folks keep calling me regularly to sell this to me.

    It was surprising because my outstanding balance (after EMI, SIP, living expenses) does not justify two accounts :). Maybe they just want to increase the number of savings account.

  7. more number of accounts makes sense for the bank! Sankar after sometime there will be a min balance charge, SI rejects charge, transactions charge, asking for Pin/Tin charge….slowly it adds up and creeps up…

  8. I am a NRI customer and as of now I got three gifts from the banks which I have never asked for it nor had opted for a freebie offer.

    Two with the HDFC bank and one with SBI. I just walked into the branch and spoken with BM (not even home branch) and I don’t know what he thought but gave me a nice 3 in 1 pen as gift. Second was bit surpise to me. The RM of the home branch chased me to collect the gift. He was relieved that the gift was finally collected after 6 months.

    The curious part is the SBI. After two years of opening the account I had visited the branch first time and they literally rolled red carpet. Even with somany people waiting, I was called inside the cabin of Gen Manager and solved all issues on the spot and given a nice leather bag as gift without me asking. He even walked out of the branch to see me off. Finally he revealed the secret of this wonderful courtesy that was extended. This attention is because I am the largest depositor with the branch.

  9. if you are playing poker & can’t figure out who is being skinned, then it is ‘YOU’ – god bless the ignorant 🙂

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