RBI New Rules: Banks in India have long faced accusations of selling customers financial products they don’t need or without providing them with complete information about the risks involved. To address this issue, the Reserve Bank of India has issued strict draft rules. The primary objective of these rules is to protect customers from fraud, misinformation, and forced product sales.
According to the latest proposal, if it is proven that a customer has been mis-sold a financial product, the bank or related entity will be required to refund the full amount and compensate for any financial losses incurred.
Banks will have to do this
The new draft clearly defines mis-selling. This will include cases where the product was not appropriate for the customer’s needs, income, risk appetite, or profile, or where information was concealed. Furthermore, it is proposed to ban deceptive designs, or so-called dark patterns, used on digital platforms.
Under the rules, banks must ensure that every product is sold according to the customer’s profile, regardless of the customer’s written consent.
Losses Must Be Compensated
According to the draft, if mis-selling is proven, the bank must return 100% of the amount to the customer. Furthermore, if the customer suffers losses such as lost investment opportunities or interest losses, they must also be compensated.
This rule could provide a significant safeguard for customers and increase accountability in the banking sector.
Both banks and agents will be accountable
The new rules also call for control over bank agents and third-party sales channels. If an agent sells a product using false information, the bank will be held responsible. Furthermore, the bank will be required to make its list of agents public and make them clearly identifiable.
The new proposal proposes several key changes, such as prohibiting products from being sold by forcibly combining them with other products, requiring separate consent for each product, and collecting feedback from customers after the sale.
When will the rules come into effect?
This draft has been released for public and industry feedback. It is proposed that the final rules will come into effect on July 1, 2026.