Summary of this article
RBI has brought out stricter rules to curb mis-selling
Banks and financial institutions have the onus to protect customers
The Reserve Bank of India (RBI) has introduced stricter rules to protect customers from being misled into buying financial products by banks, non-banking finance companies (NBFCs), along with their marketing partners, such as social media influencers. The new framework, which will come into effect from January 1, 2027, aims to improve transparency and prevent banks and NBFCs from pushing financial products onto their customers.
Under the new rules, financial institutions will be required to obtain clear and explicit consent from customers before selling any financial product. RBI clarified that such consent cannot be assumed, pre-selected, or hidden in fine print. Institutions must also maintain records of such consent, ensuring that customers fully understand what they are signing up for.
The RBI has expanded the definition of mis-selling to include offering products that are unsuitable for a customer's needs, providing misleading information, selling products without informed consent, and forcing customers to buy bundled products. The regulator has also prohibited "dark patterns"—deceptive digital design techniques that manipulate customers into making decisions they did not intend to make. Banks and lenders will have to regularly audit their websites and apps to eliminate such practices.
The new rules place accountability on banks and lenders. If a case of mis-selling is proven, as per the new rules, the bank or the NBFC must refund the entire amount involved and inform the customer that the transaction has been cancelled. This is expected to encourage stronger compliance and improve customer trust.
The regulations also extend to influencers, affiliates, digital marketing intermediaries, and customer-acquisition agents working with financial institutions. These entities will be overseen by the RBI, and aim to make lenders more responsible for the conduct of third parties promoting their products.
The RBI has also barred incentive structures that encourage aggressive selling. While banks can continue rewarding their own employees, third-party product providers can no longer provide incentives to bank staff, as it is considered a conflict of interest.
The new rules aim to offer stronger protection to customers. Consumers should carefully read product disclosures, compare alternatives, keep records of sales interactions, and avoid making investment decisions based solely on influencer recommendations or sales pitches. The RBI's latest move is expected to bring greater transparency and accountability to the sale of financial products across India.
