NEW DELHI, Feb 23: Finance Minister Nirmala Sitharaman on Monday came down heavily on banks resorting to mis-selling of financial products, including insurance, saying it is an offence under the Bharatiya Nyaya Sanhita (BNS).
“Banks should concentrate on their core business… My pet peeve has always been …. you’re spending more time on selling insurance when it is not required, and conveniently, it fell between two stools (of RBI and IRDAI),” Sitharaman told reporters after her customary post-Budget address to the Central Board of the RBI.
On February 11, the RBI had issued draft guidelines on mis-selling, saying banks will have to refund the entire amount paid by the customer for purchase of the product or service and also compensate the customer for any loss arising due to mis-selling as per an approved policy. The public has been given time until March 4 to give feedback.
The stricter norms on mis-selling will come into effect from July 1, the RBI had said.
“I am glad that the RBI is coming up with guidance on why mis-selling is not going to be entertained. And I think the message should go to banks that you cannot afford to mis-sell. Mis-selling is an offence… under … Bharatiya Nyaya Sanhita,” Sitharaman said.
Stating that banks were asking customers to buy insurance products even though they already had their required insurance, Sitharaman said RBI did not monitor such mis-selling thinking that it falls under the domain of insurance regulator. IRDAI, on the other hand, felt banks are not regulated by the insurance regulator and customers suffered due to regulatory gap.
“…The individual deposit holder, the citizen of this country who kept saying, why am I being asked to take an insurance when I’m giving my property, my piece of land and taking a home loan, he wants a loan for which the property is already there. So what is he being asked to de-risk? Why should he come up with another insurance there,” the minister said.
Sitharaman said banks should focus on understanding their customers, strengths, weakness, and the business cycle, and in case of personal account holders, their needs and requirements.
She reiterated that banks should concentrate on their core business which is mobilising deposits and giving loans, and instead of selling non-bank products they should focus on improving their low-cost deposit base or CASA (Current Account Savings Account) deposits.
Meanwhile, RBI Governor Sanjay Malhotra said that deposit growth in the banking system is around 12.5 per cent, while advances are growing at the rate of 14.5 per cent.
Malhotra said the monetary policy committee will take a decision on further policy rate cut depending on evolving growth, inflation dynamics.
Since February 2025, the RBI has slashed benchmark policy repo rate by 125 basis points to 5.25 per cent in a bid to bolster growth amid benign inflation. However, in the last policy earlier this month MPC decided to maintain status quo with neutral stance amid global uncertainty.
The next bi-monthly policy, which is going to be the first for 2026-27 fiscal, will be announced on April 6.
Assuring market about comfortable liquidity, Governor Malhotra said the RBI will take all measures to provide durable liquidity to all market segments. (PTI)
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