Stronger Safeguards against Mis-selling
At the heart of the new framework is a detailed definition of 'mis-selling', a problem that has long been a source of customer complaints in the banking and financial services sector.
RBI has clarified that mis-selling includes selling products that are unsuitable for a customer's profile, selling products without complete or accurate information, obtaining consent improperly, forcing customers to buy additional products, or engaging in any practice recognised by regulators as mis-selling.
Importantly, the central bank has directed banks to ensure that their policies and compensation structures do not create incentives for mis-selling. Banks have also been prohibited from allowing employees to receive direct or indirect incentives from third-party product providers for selling such products.
The move is expected to address long-standing concerns about customers being persuaded to buy insurance policies, investment products or other financial services that may not suit their needs or risk profile.
Explicit Consent Mandatory
One of the most significant customer-friendly measures is the requirement that banks obtain explicit consent before selling any financial product or service, whether offered by the bank itself or by a third party. Consent can be obtained only through clearly documented mechanisms such as signed declarations, one-time password (OTP)-based approvals, digital confirmations or clearly demarcated consent sections in agreements.
RBI has also directed that when multiple products are offered through a single form, customers must be allowed to choose individual products rather than being compelled to accept bundled offerings. Further, banks must preserve records of customer consent for future verification.
In another important safeguard, the regulator has mandated that digital interfaces should be designed so that customers cannot provide consent without reviewing the applicable terms and conditions. The default option for consent must be set to 'No' or 'I do not agree', preventing customers from being automatically enrolled into products or services.
Ban on Forced Bundling of Products
RBI has specifically targeted a common borrower grievance — being compelled to purchase additional products, such as insurance or investment products, while taking loans.
The new framework defines 'compulsory bundling' as making the availability of one product conditional on the purchase of another product or service. Banks have been prohibited from forcing customers to buy third-party products along with their own banking products.
Even when a third-party product is required as a risk mitigant, customers must be free to purchase it from any provider of their choice, rather than from a specific bank partner.
Action Against Dark Patterns
Reflecting growing concerns about digital manipulation, RBI has introduced detailed restrictions on 'dark patterns' in banking applications, websites, and digital sales channels.
Dark patterns are deceptive user interface designs intended to trick or mislead consumers into taking actions they did not originally intend to take.
The directions require banks and their marketing agents to ensure that their digital platforms do not deploy such practices and are subject to regular testing and audits.
RBI has provided illustrative examples of prohibited practices, including:
1. Creating false urgency through countdown timers and limited-time offers.
2. Automatically adding products such as insurance or fraud protection during checkout.
3. Using guilt-inducing messages to discourage customers from opting out.
4. Forcing customers to share personal data or sign up for unrelated services.
5. Making cancellation of subscriptions difficult.
6. Hiding important information while highlighting options beneficial to the bank.
7. Advertising products on misleading terms.
8. Concealing charges until the final stage of a transaction.
9. Greater transparency in marketing and advertising
Banks have also been directed to ensure that all promotional materials, whether physical or digital, are clear, factual and transparent.
Interest rates, fees, charges and key terms must be prominently disclosed in advertisements and at all points of sale, including websites and mobile applications. Banks will not be allowed to market third-party products as their own offerings and must clearly explain their role when distributing such products.
Promotional messages can be sent only to customers who have expressly consented to receive them, and banks must provide simple and effective mechanisms for unsubscribing from marketing communications.
Tougher Rules for Agents and Intermediaries
The framework also extends to direct selling agents (DSAs), direct marketing agents (DMAs), business correspondents, loan service providers and other sales intermediaries engaged by banks. RBI has adopted a channel-agnostic approach, ensuring that the same standards apply regardless of the sales channel.
Banks will be required to maintain and publicly disclose updated lists of authorised agents, conduct due diligence, establish codes of conduct, provide training and impose penalties for violations.
Representatives marketing products within bank premises must be clearly distinguishable from bank employees to avoid customer confusion.
Suitability Assessment before Selling Products
Under the new norms, banks must assess whether a financial product is suitable and appropriate for an individual customer before making a sale.
The assessment must take into account factors such as age, income, financial literacy, risk tolerance, product complexity, fees and risk-return characteristics.
This requirement is expected to provide greater protection to senior citizens, first-time investors and financially less sophisticated customers who may be vulnerable to unsuitable product recommendations.
Compensation and Refunds for Customers
Perhaps the most consequential provision for consumers is the requirement that banks compensate customers when mis-selling is established.
Customers will be able to lodge complaints regarding mis-selling. If a complaint is upheld, the bank must refund the entire amount paid by the customer for the product and cancel the transaction wherever applicable. In addition, customers must be compensated for losses arising from the mis-selling in accordance with the bank's approved policy.
RBI has also directed banks to seek customer feedback within 30 days of a sale to assess whether customers understood the product's features and risks. The findings must be used to review sales practices and product design.
Focus on Responsible Conduct
The central bank said the final directions incorporate feedback received on draft proposals released in February 2026 and are intended to strengthen responsible business conduct across the banking sector.
With increasing digitisation of financial services and growing concerns over misleading sales practices, the framework represents one of the most comprehensive consumer protection measures introduced by RBI in recent years. It seeks to ensure that financial products are sold transparently, responsibly and in a manner that places customer interests ahead of sales targets and commissions.
Mis-selling has remained a persistent issue in India’s financial landscape, particularly as banks and non-banking finance companies (NBFCs) increasingly act as intermediaries for third-party products. In many cases, customers, especially senior citizens or rural borrowers, have been pressured into signing up for services that are unsuitable or carry hidden charges. RBI's move aims to enforce greater transparency and accountability in such transactions.
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