Finance Minister Nirmala Sitharaman recently asked the banks once again to focus on core business while saying that they are spending more time on selling insurance than core business
This data is critical as Finance Minister Nirmala Sitharaman recently asked the banks once again to focus on core business while saying that they are spending more time on selling insurance than core business. This trend is also referred to as mis-selling.
In a written reply, Minister of State in Finance Ministry Pankaj Chaudhary said that as per the Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Directions, 2025, commercial banks, including public sector banks (PSBs) are permitted to act as an agent of a third-party product or service provider, to facilitate the sale of the latter’s financial products or services (e.g., insurance, mutual fund, pension fund, etc.) to its own customers.
The Minister presented public bank-wise data, which showed SBI was top earner followed by Punjab National Bank, Canara Bank, Bank of Baroda and Union Bank of India during last five years.
Furthermore, Chaudhary said the RBI has recently issued draft directions under Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Amendment Directions, 2026. These contain comprehensive instructions to all commercial banks, including, inter-alia, to ensure that their policies and practices neither create incentives for mis-selling nor encourage employees to ‘push’ the sale of products, along with to ensure that no incentive is directly/indirectly received by the employees engaged in marketing/sales of third-party products from the third-party.
“The Draft Directions also seeks commercial banks to put in place a comprehensive policy for marketing and sales of their own/ third-party financial products, while covering aspects related to criteria for determination of suitability and appropriateness of products offered to customers, and having a robust feedback mechanism,” he said. After consultation with stakeholders, the final directions will be issued.
Last month, complaints about more focus on selling other products drew ire from Sitharaman. “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),” she said while addressing a press conference after customary post-Budget address to the central board of the RBI.
She expressed satisfaction over RBI’s draft proposal on checking the mis-selling. “The message should go to the banks that you cannot afford to mis-sell. Mis-selling is an offence,” she said. “Why should a customer asking for home loan with collateral, why should he take another insurance cover? Glad that RBI clarified to banks that they cannot mis-sell,” she added.
Published on March 10, 2026