The Reserve Bank of India (RBI) has issued new draft rules to curb mis-selling by banks and protect customer interests. The draft, “RBI (Commercial Banks – Responsible Business Conduct) Amendment Directions 2026,” released on Wednesday, will come into effect from July 1, 2026. Under this draft, if a bank is found to be mis-selling a product or service, it will have to refund the entire amount to the customer and compensate for any loss incurred.
What is the new rule?
According to the new rules, banks and other financial institutions will maintain transparency and accountability while advertising, marketing or selling any financial product or service. Clear consent is required before contacting the customer, and contact can only be made during office hours. RBI also said that banks’ internal policy should not encourage employees or Direct Selling Agents (DSAs) to indulge in mis-selling in any way. This means that the incentive structure should not focus solely on increasing sales, even if this is not in the best interest of the customer.
The Central Bank has also taken a particularly strict stance regarding the sale of third-party products and services. The draft states that employees involved in marketing or selling of such products should not receive any incentive directly or indirectly from the concerned third party. Additionally, no bank will be allowed to forcefully integrate third-party products with its products (tie-in sales). Customers will be given the right to choose from the options of different companies as per their choice.
Why did RBI issue the draft?
RBI has also proposed that banks’ digital platforms and apps should not use any “dark patterns”. Dark patterns are designs or techniques that can mislead customers and make them unknowingly agree to a product or service. About a dozen such examples have been given in the draft, which have been advised to be avoided.
In recent years, complaints of mis-selling of insurance, investment plans and other products by banks and financial institutions have increased. In response, RBI Governor Sanjay Malhotra announced new regulations to prevent mis-selling. As part of this effort, this draft has been issued. RBI has sought suggestions and objections from the public and stakeholders till March 4.
