Banks Focusing More on Insurance Sales Than Core Lending: FM
Union Finance Minister Nirmala Sitharaman has raised concerns that banks are increasingly spending more time selling insurance products rather than concentrating on their core banking functions, particularly lending and credit delivery.
Speaking at a public forum, the Finance Minister observed that while cross-selling financial products is permitted, banks must ensure that their primary responsibility of extending credit and supporting economic growth is not diluted. She emphasised that banking institutions were established primarily to mobilise deposits and lend to productive sectors of the economy.
The remarks come amid growing scrutiny of bancassurance practices, where banks distribute insurance products through their branch networks. Concerns have been raised in some quarters about potential mis-selling and excessive focus on fee-based income streams at the expense of traditional banking operations.
Sitharaman underscored that banks must strike a balance between diversifying revenue streams and fulfilling their fundamental role in financial intermediation. She reiterated the importance of responsible lending, credit expansion to priority sectors and efficient customer service.
The comments also align with broader regulatory efforts to strengthen governance and protect consumer interests in financial product distribution. Regulators have in recent years tightened norms around disclosure, suitability assessments and commission structures in insurance sales.
Industry observers note that while non-interest income contributes to bank profitability, sustained economic growth depends significantly on robust credit flow. The Finance Minister’s remarks signal the government’s expectation that banks remain focused on their core mandate while maintaining fair and transparent distribution practices.
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