A Retiree, a BBB– NCD and a 'Guaranteed' ULIP

The arithmetic first. Expenses of ₹70,000 against a pension of ₹42,000 leave a gap of ₹28,000 a month, or ₹3.36 lakh a year - 2.9 per cent of the ₹1.15 crore corpus. This is a low withdrawal rate; a portfolio earning about 7 per cent can fund it, grow with inflation and still leave a cushion. The client's problem is not yield, it is preservation of capital and liquidity over a 20-year horizon with a dependent spouse.

Test the proposal against that.

• ₹40 lakh NCD, BBB–, 10 years, 11.5 per cent. BBB– is the lowest investment-grade rating and the issuer is a small NBFC. This is 35 per cent of the corpus in a single unsecured 10-year bullet with no put option - credit risk and interest-rate risk concentrated in one name. One default would destroy roughly eight years of the client's income gap. The extra 4 per cent over a fixed deposit is not a risk premium he can afford to earn.
• ₹20 lakh ULIP. A five-year lock-in with front-loaded charges gives no income and locks up capital that may be needed for his wife's care. There is no 'guaranteed 8 per cent' on a unit-linked plan beyond the limited guarantees actually stated in the policy; the benefit illustration must be shown at 4 and 8 per cent, and the 12 per cent first-year commission is a conflict of interest, not advice.
• Liquidity. Moving ₹60 lakh into a 10-year paper and a locked ULIP leaves ₹55 lakh to fund 20 years of withdrawals plus a dementia-related medical contingency.

A suitable structure. Senior Citizens' Savings Scheme up to its limit, a ladder of fixed deposits and short-duration debt covering the next 5–7 years of withdrawals, a small immediate annuity for a predictable floor, ₹5–10 lakh in a liquid emergency fund, and equity only to the extent the documented risk profile supports it.

Suitability. The bank must obtain, record and act on a risk profile covering capacity for loss, horizon, liquidity needs and knowledge. The proposal fails all four: BBB– credit risk against a stated 'cannot lose capital', a ten-year lock-in against medical contingency needs, single-issuer concentration, and a product producing no income for a client who needs income.

Mis-selling and disclosure.

• Describing a ULIP as offering a 'guaranteed 8 per cent' is a misrepresentation; the insurer's benefit illustration, risk factors, charges and free-look period must be given, and the client's understanding of the non-guaranteed element should be documented.
• The commission differential must be disclosed and managed. A bank distributing third-party products acts as a distributor, not an adviser; if it advises for a fee, SEBI's investment adviser regulations apply and a separate registration is needed.
• Every product must clear the bank's empanelment and due-diligence process, with issuer and rating caps set in the board-approved product policy.

Process controls. A signed suitability form and key facts statement; a cooling-off call-back by someone independent of the RM for sales to senior citizens; a documented client-decision record where the client goes against advice; segregation of advisory and sales incentives; and a board-level mis-selling compensation policy. The RM's incentive structure - 1.75 per cent on the NCD and 12 per cent on the ULIP - is itself a conduct risk that the remuneration policy should neutralise.

Capacity and vulnerability. Early-stage dementia does not automatically remove contractual capacity, but it obliges the bank to be careful. A customer who cannot understand the product must not be sold a ten-year illiquid instrument. The branch should document the interaction, avoid high-value product sales on a day when capacity is doubtful, and seek a medical opinion if the position is genuinely unclear. The account should be flagged in the senior-citizen/vulnerable-customer register, with a trusted contact and dual authorisation for large transactions.

Power of attorney. The son holds a general POA. The bank must read the deed to see whether it covers investment and disinvestment decisions, not merely deposit operations; a general POA may not authorise risky deployment or gifting. Register the POA, verify the donor's signature, and note that it lapses on death, or on the donor becoming incapable if the deed so provides. A POA holder cannot substitute his own judgement where the client can still decide, and the bank should watch for a conflict of interest if the son is also a beneficiary.

The joint holder. The wife is joint holder on the deposits, but she has dementia too and the son's POA does not cover her. The bank needs a separate mandate, POA or guardianship order for her before acting on her behalf.

Elder-abuse safeguards. No staff member as witness or beneficiary; alerts to a second family member; a hold on unusual transfers; and a clear escalation path to compliance. Record all of it - in a conduct dispute, the file is the defence.