FM Nirmala Sitharaman warns banks on mis-selling, says gold imports not ‘alarming’

Finance Minister Nirmala Sitharaman on Monday came down heavily on banks for mis-selling financial products and urged them to focus on their core business, even as she said the government and the Reserve Bank of India (RBI) are closely monitoring gold imports amid a recent surge.

She made the remarks after addressing the 621st meeting of the RBI’s Central Board in New Delhi.

‘Banks should concentrate on core business’

Raising concerns over aggressive cross-selling of insurance and other financial products, Sitharaman said banks must prioritise deposit mobilisation and lending.

"Banks should concentrate on their core business... My pet peeve has always been .... you're spending more time on selling insurance when it is not required, and conveniently, it fell between two stools (of RBI and IRDAI)," Sitharaman told reporters.

"I am glad that the RBI is coming up with guidance on why mis-selling is not going to be entertained. I think the message should go to the banks that you cannot afford to mis-sell. And this word mis-sell, instead of offending anybody, seems to be one more word in the lexicon," she said.

Highlighting customer grievances, the minister pointed out that borrowers are often asked to purchase insurance even when they have adequate cover.

"...The individual deposit holder, the citizen of this country who kept saying, why am I being asked to take an insurance when I'm giving my property, my piece of land and taking a home loan, he wants a loan for which the property is already there. So what is he being asked to de-risk? Why should he come up with another insurance there," she said.

She reiterated that banks should strengthen their low-cost CASA (Current Account Savings Account) deposit base rather than push non-bank products.

RBI Governor Sanjay Malhotra said deposit growth is currently at 12.5 per cent, while advances are growing at 14.5 per cent. He added that future rate decisions will depend on evolving growth and inflation dynamics, with the next bi-monthly policy scheduled for April 6.

Gold imports rise, but ‘not alarming’

"We are watching it, but I'm not sure it has reached such alarming proportions, given the tendency ... in India, for investing in and buying gold. And therefore, I think it has not gone in that sense beyond the certain limit, but of course, RBI will also be monitoring it," the minister said.

India’s gold imports rose to about USD 50 billion during April-December last year. While prices had offset lower volumes during that period, RBI flagged a sudden spike in both value and volume in January.

Malhotra said the central bank is analysing the data but is “not unduly concerned,” noting that India’s external sector remains robust and the current account deficit is projected to remain around 1 per cent of GDP.

The RBI board meeting also reviewed the global and domestic economic landscape amid geopolitical tensions and financial market volatility, alongside discussions on the government’s broader economic vision.