RBI Tightens Norms to Curb Mis-selling of Financial Products

Mumbai: With an aim to curb mis-selling, the Reserve Bank of India (RBI) on Monday issued comprehensive instructions for regulated entities on advertising, marketing and sale of financial products. The final norms that are effective January 1, 2027 ban deceptive marketing tactics and tighten norms around customer consent, disclosures and sales practices.

The norms ban the use of "dark patterns" in digital interfaces, defining them as design or user-experience techniques that mislead or trick customers into taking actions they did not intend.

Lenders and their agents will now be barred from employing such practices across websites, mobile apps and other sales channels, the RBI said.

Banks and NBFCs have to ensure that their policies and practices do not create incentives for mis-selling or lead to bundling of products/services. They have to obtain explicit customer consent, which indicates agreement to a specific action by or arrangement with them.

“A bank, while obtaining consent for any product / service from a customer, shall prominently disclose the key features of the product / service, e.g., fees / charges / interest rate, etc., risks involved, financial commitment for the customer, lock in conditions, exit terms including penalties, etc. in a manner to draw the attention of the customer to such important information,” said the RBI.

If a customer is found to have been sold a product through misleading practices or without proper disclosure, the bank will have to refund the amount collected. In cases where the customer suffers a financial loss, compensation may also have to be paid.

The provisions are expected to increase scrutiny of sales practices and strengthen internal controls across the banking sector.

The RBI has also tightened rules around promotional communication.

Banks will only be allowed to send marketing calls, SMS messages or promotional content after obtaining customer consent. Customers who have not opted in cannot be targeted with promotional campaigns.

The regulated entities shall establish a mechanism to seek feedback from customers, within a period of 30 days from the sale of any financial product/service, to ensure that customers have understood the features of the financial product/service and also the risks associated with such financial product/service.

RBI, in its Responsible Business Conduct Second Amendment Directions, 2026 for REs, emphasised that lenders should eschew the practice (compulsory bundling) of making availment of one product/service by a customer conditional upon availment of another product/service, whether own or third-party, offered by them.