Summary of this article
RBI bars incentive structures that encourage financial mis-selling.
Influencers, affiliates and agents brought under regulatory oversight.
Banks and NBFCs accountable for all sales activities.
The Reserve Bank of India (RBI), on Monday, June 15, issued revised guidelines targeted at reducing mis-selling of financial products and services and has enforced stricter rules for banks and other regulated entities (REs) on how they advertise, market and sell financial offerings.
The amended directions, titled the Advertising, Marketing and Sale of Financial Products and Services by Regulated Entities, are set to come into effect from January 1, 2027. This framework, upon enforcement, will follow a principle-based and channel-agnostic approach, covering both traditional and digital modes of customer acquisition and promotion.
Incentive Structures Under Scrutiny
A key feature of the revised directions is the restriction on incentive arrangements that may encourage aggressive sales practices. The RBI clarified that third parties will not be allowed to pay incentives directly to employees of regulated entities.
At the same time, the central bank said the rules do not prevent banks, non-banking financial companies (NBFCs) and other regulated entities from offering incentives to their own employees. However, such incentive structures should not result in pressure selling or mis-selling of products and services to customers.
The clarification comes amid growing concerns over instances where customers have been sold financial products that were unsuitable for their needs or without adequate disclosure of risks and terms.
Coverage For Digital Marketing Channels
The revised framework expands the scope of oversight to include digital marketing intermediaries engaged by regulated entities. These include social media influencers, affiliates, Loan Service Providers (LSPs), Direct Selling Agents (DSAs), Direct Marketing Agents (DMAs) and similar entities involved in customer acquisition and promotion.
According to RBI, some stakeholders had sought clarity on whether influencers and LSPs would be covered under the proposed rules. In response, the central bank has modified the relevant definitions to explicitly bring such entities within the regulatory framework.
Responsibility Remains With Regulated Entities
The RBI has stated that the directions place overall responsibility on regulated entities for all advertising, marketing and sales activities, regardless of whether these activities are carried out directly or through outsourced arrangements and agents.
The final norms follow a draft framework issued by RBI in February this year. The draft had proposed comprehensive instructions covering the sale and promotion of both in-house and third-party financial products and services by banks and NBFCs.
After reviewing feedback received from stakeholders, the central bank issued the final directions, seeking to strengthen customer protection and improve accountability in the distribution of financial products across physical and digital channels.
