New Delhi, 2026 — The Reserve bank of India (RBI) has issued strict new draft guidelines to curb mis‑selling of financial products, including insurance policies, National Pension System (NPS) schemes and other third‑party investment products. Under the proposed rules, banks and financial institutions claiming to sell these products must follow tighter conduct standards — or data-face penalties, refunds and compensation obligations.

The draft guidelines — part of the Reserve bank of India (Commercial Banks — Responsible business Conduct) Amendment Directions, 2026 — are open for public feedback before being finalised, and are expected to come into effect from 1 July 2026.

What Counts as Mis‑Selling?

According to the RBI’s proposed norms, products sold to you can be considered mis‑sold if:

• They are inappropriate or unsuitable for your age, income, risk profile or financial knowledge.
• You are misled with incorrect, incomplete or deceptive information.
• You are pressured to buy insurance, NPS, mutual funds or similar products without fully understanding them.
• Products like insurance or NPS are bundled forcibly with other banking services you didn’t ask for.
• The bank uses dark patterns or deceptive design tactics online or offline to trick you into buying.

Even if you signed the documents, the regulator says that doesn’t automatically mean you gave real informed consent — and banks can still be held accountable.

Major Changes and customer Protections

📌 1. Full Refund Required

If mis‑selling is proven, banks must refund the entire amount paid for the product. They may also have to compensate you for any financial losses you suffered because of the mis‑sale.

📌 2. Suitability Checks Mandatory

Banks must now assess before selling whether a product truly suits your financial situation — including age, income, investment knowledge and risk tolerance.

📌 3. No Forced Bundling

Banks cannot force you to buy an insurance policy or NPS subscription as a condition for loan approval, account opening or any other service.

📌 4. Separate Explicit Consent

If multiple products are offered together (e.g., savings account + insurance), you must explicitly consent to each one separately.

📌 5. Dark Patterns Are Banned

Deceptive marketing or app interdata-faces (such as hidden choices, misleading prompts or fake urgency) intended to manipulate your decisions will be prohibited.

How customers Can Protect Themselves

✅ Check suitability: Ask if the product is actually right for you, not just sold to you.
✅ Review terms: read all documents and ask questions about fees, benefits and risks.
✅ File complaints early: If you suspect mis‑selling, register a grievance with your bank or financial institution within 30 days of signing the agreement.

Why RBI Is Taking Action

The banking regulator has repeatedly highlighted how aggressive sales tactics have pushed customers into buying unsuitable or unnecessary financial products — sometimes leading to financial loss or distress. The new guidelines aim to restore trust and fairness in financial services, making sure products like insurance policies and pension schemes are sold ethically and transparently.

Experts say these changes could significantly affect how banks and other financial intermediaries market and sell products such as insurance, NPS, mutual funds, credit cards and more — especially where commissions and sales targets have traditionally driven pushy selling behaviour.

When Will the Rules Take Effect?

The RBI is currently seeking feedback from industry stakeholders and the public. Once finalised, the new mis‑selling rules are expected to begin from July 1, 2026, and banks will have to comply fully with the norms thereafter.

In short: Under the RBI’s new norms, selling fake or unsuitable insurance, NPS, mutual funds or other financial products could lead to full refunds, liability for customer losses and stricter regulatory penalties against the selling banks — making consumer protection stronger than ever.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.