RBI to Banks & NBFCs: Ensure policies and practices do not create incentives for mis-selling

The RBI has directed banks and NBFCs to formulate a comprehensive policy for advertising, marketing and the sale of their own as well as third‑party financial products and services
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FRANCIS MASCARENHAS

The Reserve Bank of India announced on Monday detailed guidelines concerning the advertising, marketing, and sale of financial products and services by banks and NBFCs, requiring that their policies and practices avoid encouraging mis‑selling or prompting product bundling.

Moreover, regulated entities—banks and NBFCs—must refrain from using “dark patterns” that deceive or coax users into actions they did not originally intend. They are required to secure explicit customer consent, reflecting a clear agreement to a particular action or arrangement.

Effective January 1, 2027, these directives define what qualifies as mis‑selling and oblige the entities to assess whether a financial product or service is suitable and appropriate for each individual customer.

Feedback mechanism

Regulated entities must set up a feedback system that solicits customer input within 30 days of any financial product or service sale, confirming that customers comprehend the product’s features and associated risks.

In its Responsible Business Conduct Second Amendment Directions, 2026 for regulated entities, the RBI stressed that compulsory bundling—conditioning the provision of one product or service on the uptake of another, whether proprietary or third‑party—should be avoided.

Regulated entities are prohibited from employing “dark patterns,” which are deceptive UI/UX tactics on any platform intended to mislead or coax users into actions they did not originally intend.

Such tactics undermine consumer autonomy, impair decision‑making, and constitute misleading advertising, unfair trade practices, or violations of consumer rights.

Customer consent

Regulated entities must secure explicit customer consent—a specific, informed, and unambiguous indication of an individual’s choice, conveyed via a recorded statement or clear affirmative action. This signifies agreement to a particular action or arrangement.

Mis‑selling of a financial product or service—whether proprietary or third‑party—occurs when a product is sold that is unsuitable or inappropriate for the customer’s profile at the time of sale, even if explicit consent was given; or when the sale lacks correct, complete information or relies on misleading details.

Additionally, mis‑selling encompasses selling a product without explicit customer consent, imposing compulsory bundling of another product with the requested offering, or any other element deemed mis‑selling by the relevant financial sector regulator.

The RBI has directed banks and NBFCs to devise a comprehensive policy governing the advertising, marketing, and sale of their own and third‑party financial products and services. This policy should address suitability and appropriateness criteria, feedback mechanisms, and customer compensation in instances of mis‑selling, among other considerations.

Published on June 15, 2026