FM asks banks to focus on core business, stop mis-selling

Finance Minister Nirmala Sitharaman on Monday asked commercial banks to focus on their core business of lending and deposit mobilisation and stop mis-selling of insurance products which has reached alarming proportions.

Answering a question at a press conference held after the customary post Budget meeting with the Reserve Bank of India (RBI) board of directors in New Delhi, the FM asked banks to return to traditional banking functions rather than mis-selling insurance and non-core products. She said that has inconvenienced bank customers to a large extent. 

She wondered why a person mortgaging her/his land to avail a bank loan be forced to take an insurance policy by the bank?

Lauding the RBI for initiating steps to issue directions to banks on mis-selling, she said earlier neither the RBI nor the IRDAI were able to look into the ‘grey area’. 

“I am glad that the RBI is coming up with guideline that why mis-selling is not going to be entertained. The message should go to the banks that they can not afford to mis-sell.”

In a clarification, the Finance Ministry said, “The FM had said she does not clearly know is mis-selling is an offence under Bharatiya Nyaya Sanhita (BNS). And banks should focus on their core business.”

“She did not categorically state that mis-selling is an offence.” the Ministry clarified. The 621st meeting of the Central Board of Directors of the Reserve Bank of India was held today at New Delhi under the Chairmanship of Governor Sanjay Malhotra.

“The Board assessed the global and domestic economic landscape, factoring in the challenges arising from geopolitical developments and financial market volatility,” the RBI said in a statement.

“Union Minister of Finance articulated the strategic vision of the Union Budget 2026-27, which was inspired by the three Kartavyas, and delineated expectations from the financial sector toward achieving its goal of Viksit Bharat. The Directors expressed their appreciation for the Budget and shared their perspectives,” the RBI statement added.