Banks told to focus on core lending, stop mis-selling: FM

Metro India News | NEW DELHI

Finance Minister Nirmala Sitharaman on Monday pulled up banks for mis-selling financial products such as insurance to customers and asked them to concentrate on their core banking functions of mobilising deposits and extending loans.

Speaking after her post-Budget interaction with the Central Board of the Reserve Bank of India, Sitharaman said banks were spending excessive time selling insurance policies that were often unnecessary for customers. She welcomed the RBI’s recent draft guidelines on mis-selling, which mandate full refunds and compensation for losses suffered by customers. The draft norms, issued on February 11, will come into effect from July 1 after public feedback closes on March 4.

The minister pointed out that regulatory gaps between the RBI and the Insurance Regulatory and Development Authority of India had allowed such practices to continue, leaving customers confused and burdened. She questioned the logic of compelling home loan borrowers—who already provide property as collateral—to purchase additional insurance products.

Sitharaman stressed that banks must return to the basics of understanding customers’ needs, assessing business cycles, and building strong relationships. She said lenders should focus on strengthening their low-cost CASA (Current Account Savings Account) deposit base instead of pushing third-party products, adding that the drift from core principles had led to growing customer dissatisfaction.

RBI Governor Sanjay Malhotra said deposit growth currently stands at 12.5 per cent, while advances are expanding at 14.5 per cent. He indicated that future rate decisions would depend on inflation and growth trends. Since February 2025, the RBI has reduced the repo rate by 125 basis points to 5.25 per cent, though the Monetary Policy Committee recently maintained status quo amid global uncertainty.

On liquidity, Malhotra assured markets of adequate support and clarified that recent government bond switch operations were part of debt management strategy. He also said the Central Bank Digital Currency, launched in 2022, is intended to complement existing payment systems and will be expanded only after further evaluation.

‘Gold imports under watch, not alarming’

Finance Minister Nirmala Sitharaman on Monday said the government and the Reserve Bank of India are closely monitoring gold imports amid rising global prices, but stressed that the trend is not yet “alarming”.

Speaking after the 621st meeting of the RBI Central Board chaired by Governor Sanjay Malhotra, Sitharaman attributed the surge in gold prices to large-scale purchases by central banks worldwide. She noted that gold remains a favoured investment for Indian households, both as jewellery and as a financial asset, making India a net importer.

Between April and December 2025, gold imports in value terms rose by about USD 1 billion annually to touch USD 50 billion. However, January recorded a sudden spike in both value and volume of imports. The RBI is analysing the data to assess the reasons behind the increase.

Malhotra said that during most of the April–December period, higher prices were broadly offset by lower import volumes. The sharp rise was visible only in January, possibly influenced by seasonal and festival-related demand. He added that the central bank is not “unduly concerned”, as India’s external sector remains strong. The current account deficit is projected to stay around 1 per cent of GDP, keeping macroeconomic risks under control.