Can a bank sell insurance in India?
What the 2025 Directions allow on insurance agency and referral business.
Short answer. Yes, as an agent or by referral, for a fee and without carrying the risk. The customer must join by choice, cannot be pushed towards one insurer, and there must be no link between the banking service and the insurance.
The rule, lender by lender
| Kind of lender | What the rule says |
|---|---|
| Commercial bank | The service is given for a fee. The lender carries none of the risk. Read the rule |
| Small finance bank | The service is given for a fee. The lender carries none of the risk. Read the rule |
| Regional rural bank | Prior approval is not needed to take up insurance agency work without risk. Read the rule |
| Rural co-operative bank | Insurance business cannot be started without the Reserve Bank's prior permission. Read the rule |
| Finance company | A finance company cannot carry on insurance business departmentally. Read the rule |
| Urban co-operative bank | Prior approval is not needed to take up referral business. Read the rule |
What else the rule says
- A customer takes an insurance product only by choice, never by requirement. · source
- The lender cannot compel a customer towards one insurance company. · source
- There must be no link, direct or indirect, between banking service and insurance. · source
- The premium is paid by the insured straight to the insurer, not through the lender. · source
- Risk in the insurance agency work must not pass to the lending business. · source
- The first referral agreement cannot run beyond three years. · source
- Where insurance is sold, the Board must see that a strong complaints system exists. · source
- Permission for insurance agency work is valid for two years and is then reviewed. · source
Where this comes from
- Reserve Bank of India (Commercial Banks - Undertaking of Financial Services) Directions, 2025
- Reserve Bank of India (Small Finance Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
- Reserve Bank of India (Regional Rural Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
- Reserve Bank of India (Rural Co-operative Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
- Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Directions, 2025 (Updated as on July 01, 2026)
- Reserve Bank of India (Urban Co-operative Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on April 27, 2026)
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Plain-language summary, not the official text. Not legal advice. Every line above is a point published on the rule page it links to. · Report a mistake