Page 58 - Banking Finance August 2025

FEATURES

Read the Fine Print Why Banks do IT

One of the biggest blind spots in such products is the From the bank's side, the strategy is smart. Bundling insurance
insurance structure itself. Most depositors are unaware of is far cheaper than raising FD interest rates by 0.5 per cent
the exclusions, waiting periods and claim hurdles that can or more to attract large deposits. A bundled cover also gives
come with these bundled covers. the product a "premium" sheen. This enables the bank to tap
into affluent savers who want both safety and utility. And, of
In most cases, only the primary account holder in a joint FD course, insurance partners benefit from a new channel for
is covered. Some banks also cap insurance eligibility by age, group policies, often without active selling.
often limiting it to those below 60 or 65, though a few allow
it up to 75 years. The coverage is often limited to the first It also strengthens customer retention. Depositors may
deposit only, so opening multiple FDs under the same hesitate to break their FD midterm, if doing so means losing
scheme won't fetch multiple covers. their health or life cover. At a time when liquidity is tight
and deposit competition is rising, stickiness counts.
Then come the insurance design choices. A health cover that
kicks in only after you exhaust Rs. 5 lakh from your existing So while the product may seem like a sweetener, the design
policy or outofpocket isn't immediately helpful unless you is meant to serve the bank's balance sheet far more than
already have a base plan. Critical illness or hospital cash the depositor's.
benefits often come with initial waiting periods of 3090 days.
This means claims made soon after opening the FD may not Our Take
be honoured. And when the insurance itself lasts just a year, If you were anyway planning to book a large FD and have a
that's up to a quarter of the coverage window already lost. gap in your insurance, these bundled offerings may be worth
Even beyond that, preexisting conditions, lifestyle diseases considering. But treat the insurance component as a bonus,
or specific procedures may be excluded, significantly not a replacement. Don't assume it gives you fullfledged
narrowing the realworld usefulness of the cover. protection. Read the terms carefully. Check what happens
if you break the deposit. And ask yourself if you would rather
Add to this, the claims process. These are group policies issued get higher returns or an insurance cover that comes with
under the bank's master agreement with the insurer. The FD strings attached.
holder rarely receives a standalone policy document. In some
products, the only way to file a claim is to email the insurance Bundled FDs are evolving into clever marketing tools. Just
partner via a single ID listed in the FAQ. You're expected to make sure you're not buying into the optics, when all you
remember policy IDs, nominee names or fulfil conditions that really wanted was peace of mind of FD returns. (Source:
may not be easily accessible during a health crisis. BusinessLine)

Fund Managers Eye Long-Short Equity Strategy Under SIF Route
Indian and international fund houses are preparing to launch long-short equity funds for affluent investors, following
SEBI's approval of Specialized Investment Funds (SIFs) earlier this year. At least ten asset managers have signaled
interest in this strategy through public filings and internal planning.
The SIF framework, introduced to provide sophisticated investors with more flexible investment options, came into
effect on April 1. Long-short equity funds allow managers to take both bullish (long) and bearish (short) positions,
offering a differentiated return profile compared to traditional equity funds.
These funds are available only to investors willing to commit a minimum of Rs. 10 lakh (approximately USD 11,663).
Industry insiders view the new category as an important evolution in India's investment landscape, aligning domestic
offerings with global practices. The strategy aims to enhance portfolio diversification and potentially improve re-
turns, though it comes with higher risk and complexity, targeting only experienced and well-informed investors.

52 | 2025 | AUGUST | BANKING FINANCE