Banks spending more time selling insurance, says Nirmala Sithraman
The Finance Minister questions the practice of combining insurance products with loan offers, especially when borrowers had already furnished adequate collateral
Concerned about banks spending “more time selling insurance” instead of their primary business of mobilising deposits and lending, Union Finance Minister Nirmala Sitharaman on Monday cautioned lenders against mis-selling practices and urged them to focus on their core business model.
While addressing the media after the Reserve Bank of India’s Central Board Meeting in New Delhi, Sitharaman, who appeared alongside RBI Governor Sanjay Malhotra, said, “We have been discussing mis-selling with banks. Banks need to focus on their core business.”
Sithraman questioned the practice of combining insurance products with loan offers, especially when borrowers had already furnished adequate collateral. “Why should a customer asking for a home loan with collateral, why should he take another insurance cover?” Finance Minister remarked, pointing to what she called mis-selling incidents.
“Glad that the RBI clarified to banks that they cannot mis-sell,” she added.
Sitharaman emphasised that banks should focus on traditional banking operations instead than depending on financial product cross-selling. “The focus has been on mobilising deposits and lending, generating money from that which is core business,” she said.
Sithraman cited past shortcomings in banks’ low-cost deposit mobilisation, including in the Current Account Savings Account (CASA) category. “Banks had not mobilised CASA enough, but reached a point where there was no comfort of CASA level,” added Sitharaman.
Meanwhile, responding to a question on whether the sharp increase in precious metal prices is worrying, Sitharaman and Malhotra said the recent rise in gold and silver prices is being closely watched, but there is no immediate cause for concern.
“India’s demand for gold is totally met by imports. All gold which comes from the market is imported. We get every ounce of gold which comes into the country,” she said.
In the meantime, adding to FM’s remarks, Malhotra said imports of gold barely increased in value terms between April and September. From roughly $49 to 50 billion, the value increased only slightly, by about $1 billion.
