The Department of Financial Services (DFS) has directed public sector banks (PSBs) to focus on selling insurance products along with their core banking objective, according to a CNBC TV report.
Acknowledging the importance of public sector banks to meet ‘Insurance for All by 2027’ target, the DFS has asked PSU lenders to focus on insurance distribution in Tier-2 and Tier-3 cities in the country.
This DFS directive marks a shift in the government’s earlier stance which wanted PSBs to focus on their core banking objective rather than bancassurance approach.
The new directive shows that the government is serious about utilising bancassurance channel – an arrangement between a bank and an insurance company for offering insurance products to customers – to expand insurance reach to underserved parts of the country.
Finance Minister Nirmala Sitharaman last year at a meeting with Central Board of Directors of the RBI had said that banks should focus on core banking.
“Both RBI and the government want banks to focus on core banking,” she had said, asking banks to prioritise their core business which is mobilising deposits and lending.
