Indian Finance Ministry Raises Concerns Over Banks' Shift from Core Lending to Insurance Sales

Indian Finance Minister Cracks Down on Bank Mis-Selling

February 23, 2024

Indian Finance Minister Nirmala Sitharaman has expressed concerns over banks prioritizing non-core functions, such as insurance sales, over their primary business of lending and mobilizing deposits. At an event, she emphasized the need for banks to focus on their core business and warned against mis-selling practices.

Banks' Mis-Selling Practices Under Scrutiny

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The Finance Minister noted that customers seeking home loans with collateral should not be required to purchase additional insurance coverage. She welcomed the Reserve Bank of India's (RBI) clarification to banks that they cannot engage in mis-selling practices.

Emphasis on Core Business

The government has been urging banks to prioritize mobilizing deposits and lending, which is their core business. Sitharaman highlighted that banks had not been successful in mobilizing Current Account Savings Account (CASA) deposits, but have since taken steps to address this issue.

Impact of US Tariff Changes on Indian Economy

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In a separate development, Sitharaman stated that it is too early to assess the impact of recent tariff changes in the United States on the Indian economy. The Ministry of Commerce and Industry is closely examining the implications of the US tariff revisions on bilateral trade, investment flows, and key export sectors, in collaboration with the RBI and other stakeholders.