New Delhi, June 3 -- The rampant mis-selling of unnecessary insurance plans to loan and deposit customers by lenders has already evoked concerns among the two sector regulators. Now, the finance ministry has asked banks and non-banks to stop offering incentives on insurance sales to eliminate this malpractice.

As lenders link employee performance and incentives to selling insurance products, the ministry's department of financial services (DFS) hasissued specific instructions,asking lenders to immediately review their marketing practices, according to two people aware of the development, speaking on the condition of anonymity. The DFS has told financial institutions that insurance plans should only be sold as per the customer's requireme...