In a significant move aimed at cleaning up the way banks market and sell financial products, Reserve Bank of India (RBI) has proposed a sweeping overhaul of rules governing advertising, telemarketing and third-party product sales. If mis-selling is established, RBI says banks must refund the entire amount paid by the customer and cancel the sale where applicable.
At the heart of the draft amendment directions is a clear message: banks must stop incentivising behaviour that leads to mis-selling.
The proposed framework, which will come into effect from 1 July 2026, once finalised, lays down granular standards on everything from explicit customer consent and tele-calling hours to digital interface design and post-sale feedback.
Clear Definition of Mis-selling
In a notable step, the RBI has, for the first time, provided a detailed definition of 'mis-selling' within the responsible business conduct framework.
It says mis-selling will include selling a product that is unsuitable for a customer’s profile, even if the customer has given explicit consent, selling without complete or correct information, bundling products compulsorily, or selling without clear consent. It will also cover any conduct identified as mis-selling by other financial sector regulators.
This closes a long-standing grey area in which banks have argued that customer signatures or digital clicks constitute adequate protection against allegations of mis-selling.
Under the draft, RBI says explicit consent must be 'specific, informed and unambiguous', obtained through a clear affirmative action and properly recorded. Importantly, banks will not be allowed to club consents for multiple products or purposes together. Each product must carry its own separate approval.
No Forced Bundling, No Hidden Add-ons
The draft directions also take aim at 'compulsory bundling', which is defined as making the purchase of one product conditional on the purchase of another, whether it is the bank’s own offering or a third-party product.
While voluntary packages offered without additional cost will be permitted, banks will not be allowed to force customers to buy insurance, investment products or other services as a condition for sanctioning loans or extending other facilities, RBI says.
Further, banks cannot fund the purchase of a product, whether their own or a third party’s, out of a loan sanctioned to the customer without explicit consent.
In cases where a bank’s own product is linked to a third-party product, customers must be given the option to purchase that third-party product from any other provider, RBI says. "They cannot be compelled to buy it from the bank’s partner."
Sales Incentives Under Scrutiny
Perhaps the most consequential proposal from the draft rules relates to internal sales practices. RBI has cautioned banks against organising competitions among business units, earmarking specific days for targeted selling, or adopting similar strategies if these create incentives for mis-selling.
Crucially, employees engaged in marketing or selling third-party products must not receive any direct or indirect incentive from the third-party provider, the central bank says.
This is a direct response to persistent concerns that aggressive cross-selling targets, particularly in areas such as insurance and mutual funds, have led to inappropriate product placements, especially among elderly or financially less literate customers.
Tele-calling Restricted to Office Hours
The draft also tightens norms around telemarketing and field visits.
RBI says that bank employees and DSAs or direct marketing agents (DMAs) will be permitted to contact customers only between 9am and 6pm. Calls or visits outside these hours will be allowed only if the customer has expressly requested or authorised such contact.
Agents will be required to clearly identify themselves and must not misrepresent themselves as bank employees. They must disclose differences in fees, charges or interest rates if a product is purchased through them rather than directly from the bank.
Customers flagged as 'do not disturb' or DND must not be contacted, and banks must respect customer privacy by sharing information only with explicit consent, the draft rules say.
In addition, RBI says banks may send promotional communications only if the customer has given explicit consent to receive them. Unsubscribing must be as easy as subscribing and customers should be able to view all subscribed commercial communications through a dedicated link on their digital banking interface.
Crackdown on ‘Dark Patterns’
In a forward-looking move, the RBI has also addressed manipulative digital design practices, which are commonly known as dark patterns.
The draft defines dark patterns as deceptive user interface or user experience designs that mislead or trick users into actions they did not intend, thereby impairing consumer choice.
An illustrative annex lists practices such as false urgency (limited time only), basket sneaking (adding products by default), confirm shaming, forced pop-ups, subscription traps, drip pricing, disguised advertisements and trick wording.
Banks will be required to ensure that their digital interfaces do not deploy such practices. User interfaces must undergo user testing and periodic internal audits to detect unfair features. They must also comply with the Central Consumer Protection Authority’s Guidelines for Prevention and Regulation of Dark Patterns, 2023.
Suitability, Disclosures and Documentation
Before marketing or selling a product, RBI says banks must assess its suitability and appropriateness by analysing product features, risk-return attributes, fee structure and complexity against the customer’s age, income, financial literacy and risk tolerance.
"Advertising material must be clear and factual. Interest rates, fees and charges must be disclosed, and third-party products cannot be marketed as if they are the bank’s own. The bank must clarify its role when offering such products," it says.
According to RBI, separate application forms will be required for each product category, prominently stating the nature of the product like insurance, mutual fund, pension, hybrid and so on. Importantly it says, these documents must be made available in the regional language or in a language understood by the customer.
"After receiving an application for a third-party product, banks must confirm with the customer via SMS, email or other secure medium that the application has indeed been made. On completion of the sale, a copy of the signed agreement must be provided to the customer, either physically or electronically," the draft rules say.
Post-sale Feedback and Compensation
RBI has also proposed a mandatory feedback mechanism. Within 30 days of a sale, it says banks must seek feedback, potentially through call-backs or surveys conducted by a unit not involved in the sale, to ensure customers have understood the product and its associated risks. A half-yearly report on these findings must be prepared and used to review policies and product features.
Customers will be allowed to lodge complaints regarding mis-selling within the timelines specified by the relevant sectoral regulator. Where no such timeline exists, complaints may be filed within 30 days of receiving the signed agreement.
"If mis-selling is established, banks must refund the entire amount paid by the customer and cancel the sale where applicable. They must also compensate the customer for any loss arising from the mis-sale, in line with an approved policy," RBI says.
Broader Compliance Mandate
The draft directions make it clear that banks must comply not only with RBI norms but also with guidelines issued by other regulators such as Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA), as well as telecom rules governing commercial communications.
Taken together, the proposals represent one of the most comprehensive attempts in recent years to align bank sales practices with consumer protection principles.
For customers long frustrated by unwanted calls, hidden charges and opaque cross-selling, the draft signals a regulatory pivot: growth in fee income cannot come at the cost of informed consent and fair conduct.
The onus, once these rules are finalised, will firmly rest on banks to prove that every product sold is suitable, transparent and genuinely chosen — not pushed.
RBI has invited comments and feedback on the draft amendment directions from all stakeholders till 4 March 2026. Responses may be submitted through the ‘
Connect 2 Regulate’ section on the RBI’s website. Alternatively, stakeholders may send their representations 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 (
[email protected])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”.’
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