Finance ministry wants meet bank CEOs on January 28 on insurance broking

MUMBAI: Finance ministry is looking at ways of sorting out difference that has cropped between them and banks on selling insurance products. While finance ministry wants banks to sell covers of multiple insurance companies, banks are resisting it citing the agreements they have their existing foreign partners that permits them to exclusively selling their products.

CEOs of large commercial banks will meet secretary, finance services, Rajiv Takru to on January 28 to find a solution to this stalemate.

Last month, finance ministry wrote to all government to dispense with the corporate agency model – where they can sell cover of only one life and one non life company – and switch to insurance broking model- which enables them to sell products of all insurance companies.

"The government is not saying banks to stop doing what they are doing immediately..We are saying phase it out…I am meeting the IBA on this on January 28 to work out the nitty-gritties on what to do, how much to do and how to do," said Takru.

He categorically said that the finance ministry has not imposed upon any bank to take up insurance broking. However he added that going forward banks will have to move towards selling products of multiple companies to avoid mis-selling of products.

"You have to move away from this model that encourages mis-selling, creates a problem for the consumer very often and the RBI, Irda and the government are absolutely one on this. I dont also think that any bank management will like any type of mis-selling," he said.

Several large banks such as State Bank of India, Punjab National Bank, Canara Bank and Bank of Baroda have entered into equity tie-up with insurance companies with an agreement to exclusively sell products of their partners.

Although none of officials from these banks have openly opposed the finance ministry, speaking on condition of anonymity have questioned the rationale behind the finance ministry’s move. Bankers feel that PSU banks are not geared to sell insurance products of all companies as it is not their core business.