Home / Business and Economy / FM Calls Bank Mis-selling a 'Pet Peeve,' RBI Acts
FM Calls Bank Mis-selling a 'Pet Peeve,' RBI Acts
23 Feb
Summary
- Finance Minister Nirmala Sitharaman identified mis-selling as a major concern.
- Banks are urged to prioritize their core lending business.
- New RBI rules will take effect from July 1, 2026.
Finance Minister Nirmala Sitharaman has declared bank mis-selling of financial products a significant issue, urging financial institutions to refocus on their primary lending activities. She described the practice, which includes selling unsuitable insurance and mutual funds to customers, as her personal "pet peeve."
Sitharaman highlighted that banks have drifted from their core function of mobilizing savings and understanding customer creditworthiness. She emphasized that mis-selling creates difficult situations for borrowers, who may question the necessity of additional insurance tied to loans, and noted that such practices are considered an offense.
The Reserve Bank of India (RBI) has responded to these concerns by tightening rules around mis-selling. Draft regulations, known as the Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Amendment Directions, 2026, have been issued to safeguard customers from coercion.
These new directions, scheduled to come into effect on July 1, 2026, will require banks to refund customers in proven mis-selling instances. Furthermore, banks will be obligated to compensate customers for any losses incurred due to these unethical sales practices related to their approved policies.
