- In a bold step towards improving how banks promote and sell their financial products, the Reserve Bank of India (RBI) has put forward a comprehensive set of changes to the rules surrounding advertising, telemarketing, and the sale of third-party products.
- If any mis-selling is found, the RBI mandates that banks must refund the full amount paid by the customer and, where applicable, cancel the sale.
- In its draft titled Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Amendment Directions, 2026, the central bank emphasizes, “A bank shall ensure that its policies and practices neither create incentives for mis-selling nor encourage employees or direct selling agents (DSAs) to ‘push’ the sale of products and services.” The core message of these draft amendment directions is clear: banks need to stop promoting behaviors that lead to mis-selling.
- Once finalized, the proposed framework, set to take effect on July 1, 2026, will establish detailed standards covering everything from obtaining explicit customer consent and regulating tele-calling hours to designing digital interfaces and gathering post-sale feedback.
- For the last 16 years, Moneylife Foundation has been sounding the alarm about mis-selling practices by banks, often carried out by employees, relationship managers (RMs), and DSAs, whose jobs and bonuses hinge on securing high-commission sales.
In a bold step towards improving how banks promote and sell their financial products, the Reserve Bank of India (RBI) has put forward a comprehensive set of changes to the rules surrounding advertising, telemarketing, and the sale of third-party products. If any mis-selling is found, the RBI mandates that banks must refund the full amount paid by the customer and, where applicable, cancel the sale.
In its draft titled Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Amendment Directions, 2026, the central bank emphasizes, “A bank shall ensure that its policies and practices neither create incentives for mis-selling nor encourage employees or direct selling agents (DSAs) to ‘push’ the sale of products and services.”
The core message of these draft amendment directions is clear: banks need to stop promoting behaviors that lead to mis-selling.
Once finalized, the proposed framework, set to take effect on July 1, 2026, will establish detailed standards covering everything from obtaining explicit customer consent and regulating tele-calling hours to designing digital interfaces and gathering post-sale feedback.
For the last 16 years, Moneylife Foundation has been sounding the alarm about mis-selling practices by banks, often carried out by employees, relationship managers (RMs), and DSAs, whose jobs and bonuses hinge on securing high-commission sales. As a result, they often pressure customers, including vulnerable elderly individuals, without a second thought. Unfortunately, many people remain unaware of financial products until it’s too late, reaching out to us only after they’ve suffered significant losses.
Clear Definition of Mis-selling
In a significant move, the RBI has taken the important step of defining ‘mis-selling’ for the first time within the framework of responsible business conduct.
According to the new definition, mis-selling includes situations where a product is sold that doesn’t fit a customer’s profile, even if the customer has given their explicit consent. It also covers selling without providing complete or accurate information, forcing customers to bundle products, or selling without clear consent. Additionally, any actions deemed as mis-selling by other financial regulators will also fall under this definition.
This new clarity addresses a long-standing grey area where banks have claimed that customer signatures or digital clicks were enough to protect them from mis-selling allegations.
Under the draft guidelines, the RBI states that explicit consent must be ‘specific, informed, and unambiguous,’ obtained through a clear affirmative action and properly documented. Importantly, banks won’t be able to combine consents for multiple products or purposes; each product will need its own separate approval.
No Forced Bundling, No Hidden Add-ons
The draft guidelines are also targeting what’s known as ‘compulsory bundling.’ This means that a customer can’t be forced to buy one product just to get another, whether it’s something the bank offers or a product from a third party.
While banks can offer voluntary packages at no extra cost, they can’t make customers buy insurance, investment products, or any other services just to get a loan or other financial help, according to the RBI.
Additionally, banks aren’t allowed to use a loan approved for a customer to fund the purchase of either their own products or those from third parties without getting clear consent first.
If a bank’s product is tied to a third-party product, customers must have the choice to buy that third-party product from any provider they want. The RBI emphasizes that “they cannot be forced to purchase it from the bank’s partner.”
One of the most significant proposals in the draft rules focuses on how internal sales practices are handled. The RBI has warned banks against holding competitions between business units, designating specific days for targeted selling, or using similar tactics that might encourage mis-selling.
Importantly, employees who are involved in marketing or selling third-party products should not receive any direct or indirect incentives from the third-party provider, according to the central bank.
This move comes in response to ongoing worries that aggressive cross-selling targets, especially in sectors like insurance and mutual funds, have resulted in unsuitable product placements, particularly affecting elderly or less financially savvy customers.
Tele-calling Restricted to Office Hours
The draft also tightens the rules around telemarketing and field visits.
According to the RBI, bank employees and direct selling agents (DSAs) or direct marketing agents (DMAs) can only reach out to customers between 9 AM and 6 PM. Any calls or visits outside of these hours are only permitted if the customer has specifically requested or authorized such contact.
Agents must clearly identify themselves and cannot pretend to be bank employees. They are also required to inform customers about any differences in fees, charges, or interest rates if a product is bought through them instead of directly from the bank.
Customers who are marked as ‘do not disturb’ or DND should not be contacted, and banks must honor customer privacy by sharing information only with explicit consent, as stated in the draft rules.
Additionally, the RBI mentions that banks can only send promotional messages if the customer has given clear consent to receive them. Unsubscribing should be just as easy as subscribing, and customers should have the ability to view all their subscribed commercial communications through a dedicated link on their digital banking interface.
Crackdown on ‘Dark Patterns’
In a proactive step, the RBI has taken on the issue of manipulative digital design practices, often referred to as dark patterns.
The draft outlines dark patterns as misleading user interface or experience designs that trick users into actions they never intended, ultimately limiting their choices as consumers.
An accompanying annex highlights practices like false urgency (limited time offers), basket sneaking (where products are added by default), confirm shaming, forced pop-ups, subscription traps, drip pricing, disguised ads, and tricky wording.
Banks will need to ensure their digital platforms steer clear of these practices. User interfaces must go through user testing and regular internal audits to spot any unfair features. They also have to adhere to the Central Consumer Protection Authority’s Guidelines for Prevention and Regulation of Dark Patterns, 2023.
Suitability, Disclosures and Documentation
Before a bank can market or sell a product, the RBI emphasizes the need for a thorough assessment of its suitability and appropriateness. This involves looking at product features, risk-return characteristics, fee structures, and complexity, all while considering the customer’s age, income, financial literacy, and risk tolerance.
The RBI states, “Advertising material must be clear and factual. Interest rates, fees, and charges need to be disclosed, and third-party products should not be presented as if they are the bank’s own. The bank must clearly define its role when offering these products.”
Additionally, the RBI requires that separate application forms be used for each product category, clearly indicating the type of product, such as insurance, mutual funds, pensions, hybrids, and so forth. Importantly, these documents should be available in the regional language or a language that the customer understands.
According to the draft rules, “After a bank receives an application for a third-party product, it must confirm with the customer through SMS, email, or another secure method that the application has been submitted. Once the sale is completed, a copy of the signed agreement must be provided to the customer, either in person or electronically.”
Post-sale Feedback and Compensation
The RBI has put forward a new requirement for a feedback system. They’re saying that within 30 days of a sale, banks need to reach out for feedback—this could be through call-backs or surveys done by a separate team that wasn’t involved in the sale. The goal is to make sure customers really understand the product and the risks that come with it. Additionally, banks will need to prepare a report every six months based on this feedback to help review their policies and product features.
Customers will have the right to file complaints about mis-selling within the timeframes set by the relevant regulatory body. If there’s no specific timeline, they can submit complaints within 30 days of getting the signed agreement.
“If it turns out that mis-selling has occurred, banks are required to refund the full amount paid by the customer and cancel the sale if necessary. They also need to compensate the customer for any losses resulting from the mis-sale, following an approved policy,” the RBI states.
Broader Compliance Mandate
The draft guidelines clearly state that banks need to follow not just the RBI norms but also the rules set by other regulators like the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI), and the Pension Fund Regulatory and Development Authority (PFRDA). They also have to adhere to telecom regulations related to commercial communications.
When you look at the proposals as a whole, they represent one of the most thorough efforts in recent years to align banking sales practices with consumer protection principles.
For customers who have been frustrated for a long time by unwanted calls, hidden fees, and unclear cross-selling, this draft marks a significant shift in regulation: banks can’t prioritize growth in fee income at the expense of informed consent and fair practices.
Once these rules are finalized, the responsibility will be on banks to demonstrate that every product they sell is suitable, transparent, and genuinely chosen by the customer—not just pushed onto them.
The RBI is inviting comments and feedback on the draft amendment directions from all stakeholders until March 4, 2026. You can submit your responses through the ‘Connect 2 Regulate’ section on the RBI’s website. Alternatively, you can send your feedback to The Chief General Manager-in-Charge, Department of Regulation (SIG-NBFCs), Reserve Bank of India, 12th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001, or by email at feedbackfortypeInbfc@rbi.org.in with the subject line: ‘Feedback on the draft “Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Amendment Directions, 2026.”