Finance Minister asks banks to refocus on core business

New Delhi: Articulating the strategic vision of the Union Budget while sharply calling out mis-selling by banks, Finance Minister Nirmala Sitharaman on Monday urged lenders to refocus on their core business and place customers at the centre of financial intermediation.

Addressing the 621st meeting of the Central Board of Directors of the Reserve Bank of India (RBI), Sitharaman outlined the roadmap of the Union Budget 2026–27, saying it was inspired by the three Kartavyas and aimed at advancing the goal of Viksit Bharat. She underlined the role of the financial sector in supporting sustainable growth amid global uncertainty and domestic challenges.

Speaking to reporters after the meeting, Sitharaman came down heavily on banks for mis-selling financial products, particularly insurance, to customers who often do not need them. “Banks should concentrate on their core business… you’re spending more time selling insurance when it is not required,” she said, describing mis-selling as a long-standing concern.

She pointed to a regulatory grey area where mis-selling fell “between two stools”, with the RBI earlier assuming such practices were overseen by the Insurance Regulatory and Development Authority of India (IRDAI), while the insurance regulator viewed banks as outside its direct ambit. This gap, she said, left customers exposed.

Her remarks come close on the heels of the RBI’s draft guidelines issued on February 11 to curb mis-selling. Under the proposed framework, banks would be required to refund the full amount paid for a mis-sold product and compensate customers for losses suffered. Public feedback has been invited until March 4, with the norms slated to take effect from July 1. “The message should go to banks that you cannot afford to mis-sell,” Sitharaman said.

She cited instances of loan-seeking customers being compelled to purchase insurance despite already having adequate cover, stressing that banks must assess actual customer needs rather than push unnecessary products.