RBI’s new rules put customers first in financial products sales

June 18, 2026 Finance Talk Valli Sarvani

Financial institutions play a vital role in helping people access credit, savings, insurance, and investment opportunities.

However, concerns about unfair sales practices have grown as banks increasingly market third-party financial products alongside their core services.

To address these concerns, the Reserve Bank of India (RBI) has introduced a comprehensive framework aimed at strengthening consumer protection.

The new rules will take effect from January 1, 2027, and will significantly reshape how banks and regulated entities sell financial products.

A major reform is the ban on compulsory bundling. Banks can no longer require customers to buy insurance, mutual funds, pension products, or other third-party offerings to secure loans or access banking services.

Moreover, if a product is needed for risk management, customers may choose any provider instead of the one suggested by the lender.

The RBI has also formally defined mis-selling for the first time. The term covers situations where institutions promote unsuitable products, provide misleading information, fail to obtain clear consent, or make one purchase dependent on another.

Additionally, the definition aligns with standards followed by other financial regulators.

Customer compensation forms another key pillar of the framework. If mis-selling is proven, banks must refund the full amount paid for the product.

Furthermore, they must compensate customers for any losses arising from the sale, based on approved internal policies. Customers can raise complaints within 30 days of receiving the signed agreement.

For complex financial products, banks must now conduct suitability assessments before making a sale.

They will evaluate factors such as age, income, financial literacy, and risk appetite. These details must match the product’s risk level, charges, tenure, and complexity.

The framework also strengthens consent requirements. Each product will need separate approval, whether sold through physical forms or digital platforms.

In addition, banks must provide documents in regional languages or in a language understood by the customer.

To improve accountability, institutions must collect post-sale feedback within 30 days through independent teams. The results will support periodic reviews and better sales practices.

The RBI has also moved against digital “dark patterns,” including hidden charges, subscription traps, and forced actions.

Together, these measures aim to create a fairer, more transparent financial marketplace where customer interests remain at the center.

Image by Insurance Experts from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on April 05, 2024