RBI's Directions Revive Focus On Mis-Selling Financial Products: What You Can Do

The Reserve Bank of India (RBI) has recently issued draft amendment directions aimed at curbing mis-selling and false advertisements of financial products, and strengthening customer protection, including mandatory refunds where mis-selling is established. While the regulatory frame changes, it is important for customers to move in a structured and timely way, if they believe that they have been mis-sold any financial product.

Mis-selling typically means when a financial product is sold on the basis of misleading claims and incomplete disclosures, use of pressure tactics, and without determining whether the product is appropriate for the customer's financial needs and risk profile. It may include promises of excessive returns, hidden charges, unsaid lock-in periods or bundling of products without consent.

Recognise the Warning Signs

The first step is to identify whether the mis-selling has taken place. Warning signs include being promised guaranteed or unusually high returns without written confirmation, being rushed into signing documents, or finding costs and conditions that were not explained when you bought the item.

A product may also not be suitable for your circumstances. For example, a long lock-in investment sold to someone in need of liquidity, or a high-risk market-linked plan marketed as a safe savings plan. If the features of the product are materially different from what was communicated verbally, then that is a red flag.

Analyse Documents Carefully

Collect all related documents in case of application, paperwork filed, policy bonds, account statements, emails, SMS alerts, and brochures provided during the sale of the policy. If the sale was done digitally, print screenshots of the process, if possible.

Compare the written words to what you were told. Look very carefully at the risk disclosures, surrender charges, tenure, commissions, and exit conditions. Keep track of specific differences. Clear, factual documentation is a lot more powerful than general dissatisfaction.

File a Formal Written Complaint

Raise a written complaint with the bank or financial institution that sold the product. Use the official grievance redress channel or registered email so that there is a proper trail.

State clearly why you think that the product was mis-sold to you. Refer to specific statements made during the sale, and contrast them with the written terms. Attach copies of supporting documents and suggest the remedy you are seeking. You may also suggest what remedy you are seeking. This could include cancellation of the product, refunding of premiums or the amount invested, reversal of charges, or compensation for losses incurred.

Institutions are mandated to recognise complaints and respond within prescribed time scales. Keep the complaint reference number and copies of all correspondence.

Escalate to the Responsible Regulator

If the response is unsatisfactory or no response is received within the given time frame (15-30 days, depending on the regulator), escalate the complaint to the concerned regulator.

For banking products, the customers can move to the RBI's Integrated Ombudsman Scheme. For insurance-related instances, you can flag a complaint with the help of the Insurance Regulatory and Development Authority of India (Irdai). For mutual funds and securities products, investors can approach the Securities and Exchange Board of India (Sebi) through their grievance system.

When escalating, send copies of your original complaint, response received and all supporting documents. Regulators can seek clarification prior to issuing a decision.

Act Within Timelines

Timeliness is critical. Many financial products, especially insurance policies, have a free-look period in which the policy can be cancelled with minimal deduction. If you suspect mis-selling, don't delay in the time available in this window.

Maintain a Structured Approach

Do not engage in verbal negotiations or informal assurances. Insist on written communication at all stages. Keep records in order and respond promptly to any inquiries raised by the concerned institution or regulator.

Mis-selling may be hard to prove, but a systematic approach does improve the odds of resolution. With the focus of the regulator on curbing false advertisement and mis-selling gaining force, those who document discrepancies clearly and follow due process, are more likely to be on stronger grounds when seeking refunds or compensation.