RBI to tighten noose on mis-selling of financial products; issues draft amendment directions on sales, marketing
Mumbai, February 11
The Reserve Bank of India on Wednesday issued draft amendment directions aimed at strengthening regulations governing the advertising, marketing and sale of financial products and services by regulated entities, including banks and non-banking financial companies.
The RBI said it has decided to introduce comprehensive guidelines covering advertising, marketing and sales practices for all banks and NBFCs. The proposed framework will also apply to third-party financial products and services.
The draft amendments, issued pursuant to the announcement made in the Monetary Policy Committee (MPC) meeting, seek to modify existing "Responsible Business Conduct" directions across a wide range of regulated entities. These include commercial banks, small finance banks, payments banks, local area banks, regional rural banks, urban and rural co-operative banks, All India Financial Institutions, NBFCs, and housing finance companies.
The draft amendment directions aim at strengthening customer protection norms and curbing mis-selling, compulsory bundling, and deceptive digital practices.
A key highlight of the draft directions is a clear prohibition on "compulsory bundling," defined as making the availability of one product or service conditional upon the purchase of another, whether offered by the bank itself or a third party.
The RBI has also introduced a detailed definition of "mis-selling," covering instances such as selling products unsuitable for a customer's profile, providing misleading or incomplete information, selling products without explicit consent, and forcing bundled purchases.
In cases where mis-selling is established, banks will be required to refund the entire amount paid by the customer and compensate for any loss arising from the transaction, it said.
The draft mandates that banks obtain explicit consent, defined as a specific, informed, and unambiguous indication of agreement before selling any product or service.
It mentioned that the consent for multiple products cannot be clubbed together, and user interfaces must ensure customers review applicable terms and conditions before granting consent.
Further, banks cannot fund the purchase of products from loan proceeds without explicit consent.
In a significant move targeting digital conduct, the RBI has formally defined and prohibited the use of "dark patterns", deceptive user interface designs that mislead or trick customers into unintended actions.
The RBI has also introduced detailed norms governing Direct Selling Agents (DSAs) and Direct Marketing Agents (DMAs).
Further, telemarketing calls or visits must generally be made between 9:00 a.m. and 6:00 p.m., unless specifically authorized by the customer, the RBI draft guidelines said.
The comments/feedback on the draft Amendment Directions may be submitted by the regulated entities and members of public/other stakeholders on or before March 4, 2026, RBI said in its press release.
— ANI
Reader Comments
The ban on compulsory bundling is the best part. Why should I be forced to buy a useless insurance policy just to get a car loan? Banks have been getting away with this for years. Hope the enforcement is strict.
As someone working in fintech, I appreciate RBI defining 'dark patterns'. So many apps use tricky UI to get you to sign up for things you don't want. This levels the playing field for ethical companies. The explicit consent rule is also crucial for digital India.
Good move, but implementation is key. Will small co-operative banks in rural areas have the systems to track explicit consent for every product? The guidelines seem urban-centric. RBI must ensure training and support reaches all levels.
The 9 AM to 6 PM rule for telemarketing is a blessing! No more dinner-time calls about 'pre-approved' loans. Thank you, RBI. Now if only TRAI could do something about the other spam calls...
Refund of entire amount plus compensation for loss is a strong deterrent. This will hit banks where it hurts - their profits from pushing unnecessary products. Sales targets for bank staff need to be reviewed too, that's the root cause of mis-selling.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.