Following fresh complaints of customers being forced to buy insurance policies when they apply for loans or seek other banking facilities, the government has started discussions with the Reserve Bank of India (RBI) to scrutinize the practice of banks selling insurance products.
The government said that this review cannot be limited to just public sector banks, but also need to be done for the entire sector including private banks.
The government also wants review of existing incentive structures at banks for selling insurance products because it is of the view that giving over importance to bancassurance could affect core banking functions.
The vigilance authority had pointed out that sale of insurance products usually form a part of the bank’s appraisal system. This impact the core functions of the banks, which is not conducive for the system.
Earlier, the RBI had also highlighted the need to revisit the marketing and sales strategies used by banks in pushing insurance products, especially since insurance is considered as a more complex financial product.
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