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Sitharaman Urges Banks to Stop Mis-selling

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  Published in Business and Finance on Monday, February 23rd 2026 at 6:52 GMT by ThePrint
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New Delhi, February 23rd, 2026 - Finance Minister Nirmala Sitharaman delivered a pointed message to Indian banks today, urging them to refocus on core banking functions and immediately cease the practice of mis-selling financial products to customers. The statement, made during a press conference, comes amid growing consumer complaints and increasing scrutiny of banking practices within the country. Sitharaman emphasized that the proliferation of unnecessary product offerings is diverting resources from essential services and eroding public trust in the financial system.

Speaking on Monday, Sitharaman stated, "Banks must concentrate on the core business and stop mis-selling. That's something which is extremely important." Her remarks were prompted by a question regarding the Reserve Bank of India's (RBI) recent decision to increase the risk weight on individual loans - a measure intended to bolster financial stability. However, the Finance Minister used the opportunity to address a broader issue: the creeping expansion of banking services beyond their primary remit and the associated consumer harm.

For years, consumer advocacy groups have reported a surge in complaints regarding banks aggressively pushing products like insurance policies, investment schemes, and credit card upgrades onto customers, often without adequately explaining the terms, risks, or suitability of these offerings. These complaints range from high-pressure sales tactics to outright deception, with many customers finding themselves saddled with products they neither need nor understand. The minister's comments suggest the government is taking these concerns seriously.

Sitharaman argued that when banks venture beyond their traditional roles, it's ultimately the customer and the wider financial ecosystem that suffer. "When banks try to do something which is outside the purview of what they are supposed to do, it's the customers who suffer, and the system as a whole suffers," she explained. This sentiment reflects a growing recognition that the pursuit of short-term profits through cross-selling and upselling has come at the expense of long-term customer relationships and financial stability.

This call for a return to core banking isn't simply a plea for ethical behavior; it's a strategic imperative. By focusing on essential services - such as deposit taking, lending, and payment processing - banks can improve efficiency, reduce systemic risk, and better serve the needs of the Indian economy. The RBI's move to increase risk weights on individual loans, coupled with Sitharaman's emphasis on core functions, signals a broader effort to ensure the banking sector remains resilient and focused on its primary objectives.

Experts suggest the mis-selling problem is exacerbated by a complex regulatory landscape and insufficient oversight. While regulations exist to protect consumers, enforcement has often been lax. Stronger enforcement mechanisms and increased transparency are crucial to deterring banks from engaging in unethical practices. Furthermore, the development of clear and concise product disclosure statements could empower consumers to make informed decisions.

The Finance Minister's statement also highlights the importance of prioritizing customer interests. "Banks must listen to what the customers are saying. Their interests must be kept paramount. They must deliver on what they are supposed to deliver," she stressed. This underscores the need for banks to adopt a customer-centric approach, prioritizing needs assessment and responsible product recommendations.

Looking ahead, the government and the RBI are likely to work together to implement stricter regulations and oversight mechanisms. This could include enhanced training for bank employees, stricter penalties for mis-selling, and a greater emphasis on consumer education. The goal is to restore public trust in the banking system and ensure that banks operate in a responsible and sustainable manner. The current climate also suggests a potential review of banking licenses to ensure institutions are adhering to the fundamental principles of financial integrity. Ultimately, a healthy and stable banking sector is vital for India's continued economic growth, and prioritizing core business and ethical practices is paramount to achieving that goal.