The Reserve Bank of India (RBI) has proposed new draft rules to stop banks from mis-selling financial products to customers. The central bank wants to end incentive structures that push employees and agents to aggressively sell insurance, mutual funds and other third-party products.
Under the proposed guidelines, banks will not be allowed to design reward systems, sales competitions or performance targets that encourage staff to prioritise sales over customer needs. The RBI has made it clear that employees and direct sales agents must not receive direct or indirect incentives from third-party companies for promoting their products.
The move comes after concerns that customers are often pressured into buying products that may not suit their financial goals, income level or risk capacity. In some cases, products are bundled with loans or other banking services without giving customers a clear choice.
The draft rules define mis-selling as selling products that are unsuitable, failing to disclose important details, or using misleading tactics to influence customer decisions. If mis-selling is proven, banks will be required to fully refund customers and compensate them for any financial loss.
The RBI has also targeted unfair digital practices. The draft prohibits the use of “dark patterns”, design features in apps or websites that mislead or pressure customers into making purchases. Banks will need to review their systems and remove such tactics.
Another important proposal is that banks can contact customers for marketing only with explicit consent and during specified hours. This is aimed at reducing harassment through repeated calls and messages.
The central bank has invited public comments on the draft guidelines until early March 2026. If finalised, the new rules are expected to come into effect from July 1, 2026.
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