Government Asks Public Sector Banks to Boost Insurance Sales in Smaller Cities

The Department of Financial Services (DFS) has recently asked Public Sector Banks (PSBs) to take a more active role in selling insurance products, especially in Tier II and Tier III cities. This move is part of the Indian government’s big goal of achieving “Insurance for All by 2047.”

What’s New in This Directive?

Earlier, the Finance Ministry had told public sector banks to mainly focus on their core banking services like savings accounts, loans, and credit. But now, the focus has shifted. The new direction is clear: PSBs must now support insurance services along with regular banking.

This change highlights the growing importance of bancassurance, which is a model where banks partner with insurance companies to sell insurance products. This method helps banks use their existing branch networks to offer insurance to more people, especially in rural and semi-urban areas where insurance is still not very common.

Why This Matters for Tier II and Tier III Cities

Smaller cities and towns often have limited access to insurance agents or services. By using banks as a platform for selling insurance, the government wants to make insurance more available and affordable to people living outside big cities.

Public sector banks already have thousands of branches across the country, even in remote areas. This makes them ideal partners to spread awareness about insurance and make it easier for people to buy life, health, or general insurance products.

A Step Toward Universal Insurance Access

The push from DFS supports the larger national goal of ensuring that every Indian citizen has access to insurance by the year 2047. This is in line with other efforts by the government to promote financial inclusion and improve economic security for all, especially in rural India.

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