In a move aimed at strengthening customer protection, the banking regulator has proposed tighter norms to stop mis-selling of financial products and prevent customers from being pushed into unwanted purchases.
Reserve Bank of India has released draft rules titled Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Amendment Directions, 2026. The proposed norms are set to come into effect from July 1, 2026, with feedback invited until March 4, 2026.
Under the draft, banks will be required to issue a full refund if mis-selling is established. They must also compensate customers for any losses arising from such practices, in line with their approved policies. The proposal focuses on improving how banks advertise, market, and sell financial products and services.
Concerns around mis-selling have grown in recent years, with customers often being pushed to buy insurance, mutual funds, or other third-party products without proper understanding. In November last year, Union Finance Minister Nirmala Sitharaman had urged banks to curb mis-selling and safeguard public trust. The RBI has also repeatedly asked banks to focus on core banking activities.
A key proposal is a ban on incentives paid by third parties such as insurance companies and mutual fund houses to bank employees. “It shall be ensured specifically that no incentive is directly/indirectly received by the employees engaged in marketing/sales of third-party products/services from the third party,” the draft norms said. This could impact banks and financial firms that rely heavily on bank-led distribution.
The draft also bans forced bundling of products. Banks cannot link the sale of their own products to the purchase of third-party products. If such linkage exists, customers must be free to choose any third-party provider. Banks are also barred from marketing third-party products as their own.
Customers can file mis-selling complaints within 30 days of receiving signed terms and conditions, if no other timeline is specified by the sector regulator. Banks must seek customer feedback within 30 days of selling any product or service to confirm understanding of features and risks. A half-yearly report based on this feedback will be mandatory.
The RBI has asked banks to review sales targets and internal competitions to ensure they do not encourage unfair selling. It has also directed banks to avoid “dark patterns” such as false urgency, basket sneaking, confirm shaming, and subscription traps on digital platforms.
The draft sets clear rules for direct selling agents, including contact hours between 9 am and 6 pm unless consent is given. Agents must be clearly identifiable and follow a formal code of conduct with penalties for violations.
If implemented, the draft could significantly change how banks sell insurance and mutual fund products at the point of sale.
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