1) It's a bank structured product, which means its 'designed' to protect the bank first. Hence, the call back option.
2) The thing about SPs is that you have to fully understand the parameters. I do notice that coupon amount is staggered down, probably indication that banks are anticipating rate cuts going forward. Alliance bank is pushing this product currently, there are customers who would wanna bet on the SP getting called back and get that 6%pa
3) Its a 5-6 year product with your money tied in with no liquidity. Typically penalty will be incurred on premature termination of the contract.
4) So it depends on customers, take the risk on 5-6 years lock in period for 2-3% above FD returns (potentially out of range) or just put in yearly FD guaranteed returns.
5) It all depends on clients' risk appetite. These SPs are targeted for those FD centric clients. Moving up the risk reward ladder would be direct bonds and bond funds, in which provides some form of liquidity and yield higher than FDs. Buying into direct stocks is way high up in the risk reward ladder, but its very liquid.