The Reserve Bank of India (RBI) has proposed new rules to stop banks from mis-selling financial products like insurance and mutual funds. Mis-selling means selling products that are unsuitable for customers or not explained properly. Mis-selling happens when customers are pushed into buying products that are not suitable for them or are not explained properly.
According to the proposed guidelines:
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Bank employees will not be allowed to earn incentives or commissions from insurance companies or mutual fund houses. This aims to reduce pressure on staff to sell products only to meet targets.
- Banks must make sure that their apps, websites, and systems do not use “dark patterns.” This means they should not create fake urgency, hide extra products, or make it difficult for customers to say no to an offer.
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Banks cannot force customers to buy third-party products along with loans or bank accounts. If a bank product requires another product, customers are free to buy it from any company they choose.
- Banks must ensure that any product they sell is suitable for the customer by carefully assessing key factors such as the customer’s age, income level, ability to take financial risks, and overall financial knowledge. This is to make sure that customers are not sold complex or risky products that they may not fully understand or cannot afford, and that the products match their financial needs and capacity.
- If mis-selling is proven, banks will be required to return the entire amount paid by the customer without any deductions. In addition to the refund, banks must also compensate customers for any financial losses they suffered because of the mis-sold product, in line with their internal policies and regulatory guidelines. This is meant to ensure that customers are fully protected and restored to the position they were in before the mis-selling occurred.
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Banks are warned not to run contests or targets that push employees to sell products unfairly.
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Employees selling third-party products must not receive any direct or indirect benefits from those companies. Third-party products cannot be marketed as bank products.
- Banks cannot use loan money to buy any product without clear customer consent.
- Customers will have 30 days to file a complaint if they feel a product was mis-sold. Banks must also contact customers within 30 days of making a sale to confirm that the customer understood the product and was aware of the risks involved.
- Banks must prepare reports based on customer feedback after the sale.
- For sales agents, the rules state that they can generally contact customers only between 9 am and 6 pm. Sales agents working in bank branches must also be clearly identifiable and should not appear to be regular bank staff.
Banks must create a strict code of conduct for their employees and agents, with penalties for any violations. All financial products must be sold only after taking clear and informed consent from customers. These rules are planned to come into effect from July 1, 2026, and the Reserve Bank of India has invited public feedback on the draft guidelines until March 4, 2026.
