FM Asks Banks To Focus On Core Biz, Cautions Against Mis-Selling Fin Products

(MENAFN- KNN India) New Delhi, Feb 24 (KNN) Union Finance Minister Nirmala Sitharaman on Monday advised banks to focus on their core business while cautioning against mis-selling of financial products.

Addressing a press conference after the customary post-Budget meeting with the Central Board of Directors of the Reserve Bank of India (RBI), the Finance Minister said,“You cannot afford to mis-sell,” welcoming the RBI's move to issue guidance aimed at curbing such practices.

Concerns Over Insurance Bundling

Highlighting customer grievances, Sitharaman pointed to instances where borrowers were allegedly compelled to purchase insurance products while availing home loans.

She observed that regulatory oversight had gaps, with the insurance regulator treating bank-led sales as outside its ambit and the RBI categorising insurance as a non-banking activity.“In between was caught up their customer, the individual deposit holder, the citizen of this country,” she said.

RBI's Draft Amendments to Curb Mis-Selling

A few weeks ago, the RBI issued draft amendment directions aimed at strengthening norms governing advertising, marketing and sale of financial products and services by regulated entities, including banks and non-banking financial companies (NBFCs).

The proposed framework, announced following the Monetary Policy Committee (MPC) meeting, seeks to amend existing 'Responsible Business Conduct' directions across a broad set of regulated entities, including commercial banks, small finance banks, payments banks, regional rural banks, urban and rural co-operative banks, all India financial institutions and NBFCs and housing finance companies.

The new guidelines will also cover third-party financial products sold by banks and NBFCs.

Ban on Compulsory Bundling

A key provision in the draft directions is the explicit prohibition of 'compulsory bundling', making one product or service conditional upon the purchase of another, whether offered by the bank or a third party.

The RBI has also introduced a detailed definition of 'mis-selling,' covering selling products unsuitable for a customer's profile, providing misleading or incomplete information, selling without explicit customer consent and forcing bundled purchases.

In cases where mis-selling is established, banks will be required to refund the entire amount paid by the customer and compensate for any losses arising from the transaction.

The Finance Minister's remarks, coupled with the RBI's draft regulatory overhaul, signal a tightening of customer protection norms aimed at ensuring transparency and fairness in the sale of financial products.

(KNN Bureau)

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