Finance Minister Nirmala Sitharaman, addressing a State Bank of India (SBI) event on Monday, underscored the importance of preserving public trust in India’s banking system. She called on lenders to curb the mis-selling of insurance products, which often raises costs for customers, and to prioritize resolving distressed assets through the National Asset Reconstruction Company Limited (NARCL), commonly referred to as the “bad bank.”
Focus on Core Banking Activities
Ms. Sitharaman urged banks to refocus on their primary functions: mobilizing deposits and lending funds. Highlighting concerns around bancassurance—the practice of banks distributing insurance products—she noted that while it has increased insurance penetration in India, it has also led to instances of mis-selling and indirectly raised borrowing costs for customers.
“Banks need to reassess their focus on core banking activities and avoid burdening customers with unnecessary insurance products,” she said. “Transparency, ethical practices, and clear communication must be the pillars on which trust with customers is built.”
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Building Public Trust
Concluding her address, Ms. Sitharaman reiterated the role of banks in building public trust. She emphasized that trust is earned through transparent offerings, customer-centric services, and ethical business practices.
“Banks are pillars of the economy. Their ability to adapt, focus on their core responsibilities, and serve customers ethically will determine the strength of public confidence in the system,” she added.
The Finance Minister’s remarks serve as a reminder for the banking sector to balance business growth with customer welfare and to play a proactive role in strengthening the economy through ethical and transparent practices.
