RBI Overhauls Framework To Curb Mis-Selling & Boost Customer Protection

New Delhi, Jun 17 (KNN) The Reserve Bank of India (RBI) has issued amendments to its framework governing the advertising, marketing and sale of financial products and services by banks, with the new directions set to come into force on January 1, 2027.

The amendments follow a draft framework released on February 11, 2026, on which stakeholder feedback was sought. The final directions aim to strengthen customer protection, curb mis-selling and enhance accountability across banks, direct selling agents (DSAs), direct marketing agents (DMAs) and third-party product providers.

Mis-Selling and Bundling

The directions lay out a formal definition of mis-selling, covering scenarios where a product is unsuitable for the customer, sold without accurate information, sold without explicit consent or bundled compulsorily with another product. 

The RBI has clarified that even where customer consent exists, sale of an unsuitable product may still be treated as mis-selling.

On bundling, banks have been prohibited from making the availability of one product conditional on the purchase of another. Where a third-party product such as insurance is required as a risk mitigant, customers must be free to purchase it from any provider of their choice. Voluntary packages and complimentary offerings at no additional cost are exempt from this restriction.

Consent, Suitability and Disclosure

As per the amended framework, banks will be required to obtain explicit consent before selling any financial product, whether their own or through a third party. Consent mechanisms may include physical or digital signatures, OTP-based approvals or digitally recorded confirmations. 

The default consent option on digital interfaces must be set to "No" or "I do not agree," and customers must not be able to provide consent without first being exposed to the applicable terms and conditions. Consent records must be preserved for at least one year after the customer relationship for that product ends.

Before a sale, banks must assess the suitability of a product for the individual customer, taking into account product complexity, risk-return profile, fees, investment horizon, and customer characteristics such as age, income, financial literacy and risk tolerance. 

Key features including interest rates, charges, lock-in periods and exit penalties must be prominently disclosed prior to obtaining consent.

Regulating Sales Agents and Marketing

The RBI directions bring DSAs, DMAs and other outsourced sales channels under a formal regulatory framework. Banks will be required to conduct due diligence, establish training programmes, monitor compliance and publish updated lists of empanelled agents on their websites. 

Sales agents operating within bank premises must be clearly distinguishable from bank employees through visible identification.

Promotional communications may only be sent to customers who have explicitly consented to receive them. Sales calls and visits are generally restricted to between 9 a.m. and 7 p.m., and sales personnel are prohibited from making false commitments or misleading customers.

Dark Patterns Prohibited

The RBI has prohibited banks and their agents from deploying dark patterns — deceptive design practices that manipulate customer choices on digital platforms. 

Prohibited practices include false urgency through countdown timers, pre-selected product baskets, confirm shaming, forced actions, subscription traps, drip pricing and disguised advertisements. Banks will be required to conduct regular testing and audits of digital interfaces to identify and eliminate such practices.

Redress for Mis-Selling

Banks must establish mechanisms to collect customer feedback within 30 days of a product sale, with findings reviewed on a half-yearly basis. Where mis-selling is established following a complaint, banks will be required to refund the full amount paid by the customer, cancel the sale where applicable and compensate the customer for any resulting losses.

(KNN Bureau)