Concerns about insurance mis-selling through banks have resurfaced after discussions on social media questioned whether current sales practices align with earlier remarks by Nirmala Sitharaman. The Finance Minister had previously advised banks to curb the mis-selling of insurance products and focus primarily on their core banking activities—mobilising deposits and extending credit.
The issue gained traction after a social media post by user Nitin Tyagi alleged that despite public messaging against mis-selling, many bank branches continue to face internal pressure to meet insurance sales targets. According to the post, some bank managements are asking branch officials to provide written assurances that mis-selling is not taking place, even as incentive structures tied to insurance sales remain unchanged.
The post further claimed that commissions, overseas incentive trips, performance-linked rewards, and business targets related to insurance products are still being used to motivate staff. Critics argue that such incentives could indirectly encourage aggressive selling practices, potentially undermining efforts to curb mis-selling.
The discussion also prompted reactions from other commentators online. A user identified as Phoenix Financials suggested that if authorities are serious about addressing mis-selling concerns, banks should be restricted from selling insurance products entirely. The user argued that dedicated insurance companies are better positioned to handle such products directly.
Separately, a senior citizen, Debashis Roy, alleged that he was sold a long-term insurance policy with a 25-year tenure by Kotak Life Insurance through Kotak Mahindra Bank. According to Roy, he was promised a 30 percent annual bonus, which he claims has not materialised. He has sought intervention from the Reserve Bank of India and the Insurance Regulatory and Development Authority of India, alleging the case involves mis-selling.
Banks currently distribute insurance products under bancassurance arrangements, allowing them to earn additional fee-based income beyond traditional banking services. While this model has expanded insurance penetration, regulators have repeatedly issued guidelines to ensure fair sales practices and safeguard customer interests.
The renewed debate highlights ongoing concerns about balancing bancassurance revenue incentives with the need to protect consumers from unsuitable or misleading product sales.
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