Is Indian Banking Still About Banking — or Has It Become an Investment and Insurance Hub?

For decades, banking in India was synonymous with savings accounts, fixed deposits, and loans. A place where you safeguarded your money and earned modest returns. But today, the word bank evokes a far broader image — one that blends financial advice, wealth management, mutual funds, and insurance. The line between banking and investment has blurred, especially in the private sector.

The Shift from Core Banking to Financial Supermarkets

Private banks in India have transformed themselves into financial supermarkets. Walk into any branch, and the focus quickly shifts from deposits and loans to investment products — mutual funds, ULIPs, or life insurance. Relationship managers are incentivised to cross-sell financial products rather than promote traditional savings or lending.

The logic is simple: non-interest income (commissions from selling investment and insurance products) offers higher profitability than conventional lending, which is regulated, risk-weighted, and slow-growing. As a result, banking has gradually evolved into a sales-driven ecosystem rather than a pure service-oriented one.

Public Sector Banks: Holding on to Traditional Banking

On the other hand, nationalised banks like SBI, Bank of Baroda, and Punjab National Bank still retain the ethos of traditional banking. Their customer base — largely middle-income, salaried, or rural — seeks security over sophistication. These banks focus more on deposits, credit, and social-sector lending under government schemes.

However, they are now under pressure to adopt private-bank-style profitability models. Even so, their pace remains more conservative, and their engagement with high-net-worth products is limited.

Customer Experience and Bias in Private Banking

Many customers argue that private banks’ customer service is tiered by wealth. High-investment clients receive dedicated relationship managers and faster responses, while average account holders often experience delays or digital-only service. This bias reflects the changing DNA of private banking — prioritising customers who contribute higher fee-based income.

The irony? While technology has made banking more inclusive, the attention of banks has become more exclusive.

The Big Picture: A Hybrid Future

Indian banking is no longer just about savings and loans — it’s an integrated financial ecosystem. Yet, this shift comes with trade-offs. The focus on selling insurance or mutual funds sometimes overshadows the foundational duty of protecting deposits and enabling credit access.

For the future, the real challenge for Indian banks — especially private ones — will be to balance profit with purpose. As fintechs and digital banks enter the scene, customers will have more choices and less tolerance for bias or over-selling.

Conclusion

Indian banking today stands at a crossroads between service and sales, purpose and profit.

Nationalised banks continue to represent the spirit of trust and stability, while private banks lead innovation and wealth creation. The ideal future may lie somewhere in between — a model where banks are both custodians of savings and facilitators of smart financial growth, without losing sight of their core mission: to serve every customer, not just the most profitable ones.