Finance Minister Urges Banks to Tackle Mis-Selling

In a strong message to banks, Finance Minister Nirmala Sitharaman warned against the practice of mis-selling, labeling it as an offence. Following a post-Budget meeting with the RBI, she highlighted the need for clear guidelines and customer protection against bundled and unsuitable financial products.

Finance Minister Nirmala Sitharaman delivered a stern warning to banks, stating that mis-selling is not just unacceptable but constitutes an offence. Her remarks came during a press conference following the traditional post-Budget meeting with the Reserve Bank of India's Central Board of Directors.

She acknowledged the Reserve Bank of India's forthcoming guidance on eliminating mis-selling, emphasizing the regulator's role in protecting depositors. Notably, she discussed the disparity in how insurance sales by banks fall outside the purview of the insurance regulator and how this gap impacts customers.

Highlighting borrower concerns, Sitharaman questioned why customers, already securing loans with property, were pressured into purchasing additional insurance. The Reserve Bank's draft amendment directions aim to enhance customer protection through refined advertising, sales, and marketing practices.

These proposed guidelines, set to govern not just banks but also non-banking financial companies, aim to eradicate compulsory product bundling and define mis-selling comprehensively. Mis-selling, now clearly delineated, includes the sale of unsuitable financial products, coercive bundling, and misleading customer information.

Should mis-selling occur, affected customers will be entitled to full refunds and compensation. This move underscores the central bank's commitment to uphold ethical standards across various financial institutions.

(With inputs from agencies.)