India’s banking services are rapidly going digital, and with this shift, the number of financial products available to customers has also increased. However, alongside this transformation, complaints related to mis-selling, forced product sales, and misleading digital practices have also risen.
To address these challenges, the Reserve Bank of India (RBI) has introduced new guidelines aimed at better protecting customer interests and strengthening trust in the banking system. These rules are not limited to customer protection alone; they also aim to promote a more responsible and transparent business culture within the banking sector.
What’s Happening?
RBI released the Commercial Banks, Responsible Business Conduct (Second Amendment) Guidelines, 2026 on June 15, 2026, which will come into effect from January 1, 2027. The primary objective of these rules is to curb practices such as mis-selling, forced bundling, and digital dark patterns.
For the first time, RBI has provided a clear definition of mis-selling. Under these guidelines, selling products that do not align with a customer’s needs, providing incomplete or incorrect information, selling products without explicit consent, or making one product a mandatory condition for availing another product will all be considered mis-selling.
If mis-selling is proven in any case, the bank will have to refund the entire amount paid by the customer and compensate them for any losses incurred. Customers will also have the right to file a complaint within 30 days of receiving the signed copy of the agreement.
Strict Rules on Mis-Selling and Customer Consent
Under the new guidelines, banks have been completely prohibited from forced bundling. For example, a customer taking a loan cannot be compelled to purchase insurance from a specific company. If insurance is required, customers will be free to purchase it from any provider of their choice.
RBI has also tightened rules related to customer consent. Consent must now be explicit, recorded, and product-specific. On digital platforms, the default option must be set to ‘No’ to ensure that customers are not pressured into selecting any product. Additionally, key information such as fees, risks, lock-in periods, and exit penalties must be clearly disclosed.
Before selling complex financial products, banks will be required to conduct a suitability assessment based on the customer’s age, income, financial understanding, and risk appetite. They will also have to provide all necessary documents in the customer’s preferred language or regional language.
Tighter Control on Agents, Digital Practices, and Influencers
For the first time, RBI has brought Direct Selling Agents (DSAs) and Direct Marketing Agents (DMAs) directly under its regulatory framework. Banks will be required to maintain an updated list of authorised agents on their websites and ensure that agents have a clear identity distinct from bank employees. They will also have to follow a prescribed code of conduct and may contact customers only between 9 AM and 7 PM.
In addition, RBI has banned 11 types of dark patterns that influence customer behaviour on digital platforms. These include practices such as false urgency, confirm shaming, forced action, subscription traps, drip pricing, and disguised advertisements.
These rules will also apply to digital marketing partners and influencers, ensuring a more transparent and fair experience for customers.
What Does This Mean for Investors?
These new rules could create a more stable and trustworthy business environment for banks and financial institutions over the long term. To prevent mis-selling, banks will need to invest in better training, stronger compliance systems, and more advanced technology.
Institutions that adopt customer-centric and transparent business models may be able to build greater trust and strengthen their brand identity in the market. This could reduce reputation-related risks and improve customer loyalty over time.
For investors, this signals that the banking sector is gradually moving towards more responsible and sustainable business practices.
What’s Next?
RBI’s new guidelines will apply to all commercial banks, while separate regulations will continue to apply to Small Finance Banks, Payment Banks, Regional Rural Banks, and Local Area Banks. The rules will come into effect from January 1, 2027, giving banks approximately six and a half months to align their systems, processes, and sales practices with the new standards.
Over the long term, this initiative could play an important role in making the entire financial ecosystem more transparent and trustworthy. With better information and greater choice, customers will be able to make more informed financial decisions.
Additionally, by encouraging responsible business practices and improving coordination with other regulators, this step by RBI could further strengthen the reliability and stability of India’s financial markets.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
